Objectives of Virgin Atlantic Airline with the British Red Cross - Essay Example

BUSINESS MANAGEMENT al Affiliation 1 Comparison of the purpose and objectives of Virgin Atlantic Airline with the British Red Cross The objectives of Virgin Atlantic Airline are as follows: 1. To fly an airline that people love to fly 2. To fly an airline that people love to work. 3. To improve customer services for business and leisure travelers 4. To set new standards for the rest of the airline industry to follow All these will be done through ensuring that they offer the best business product in the air, grow their leisure business further and run an effective and efficient global airline. The objective of the British Red Cross is to follow the overall strategic goal of improving the situation of people who are at great risk from situations which threaten their survival. From the above objectives, the VAA and British Red Cross have an objective in common where they both serve the people gently and to make them satisfied of the services offered. Otherwise, their objectives tend to differ in a way that the VAA is a business organization trying to raise profits from the services offered while the British Red Cross is an organization trying to help people to survive hard situation. The target groups are different and the overall aims are also different. 1.2 Responsibilities that VAA has towards its stakeholders The airline has a responsibility of providing education and training to the young unemployed people. They can start aviation colleges, aeronautic engineering collages and such colleges to help the community and the government at large to grow. They can also benefit by employing qualified and skilled personnel who have been trained there. VAA has a responsibility of providing quality services to its customers. They can improve the services by increasing the comfort, the capacity of the air buses and the hospitality. They also have a responsibility of creating a good reputation to the shareholders and investors. This can be done through ensuring that the economic state of the company is maintained. This can also be done through making good use of the capital so as to obtain solid profitability to meet shareholder and investor expectations with stable dividends. (“Responsibility to stakeholders”. 2004) The airline has a responsibility of taking good care of the employees and staff. They should be provided with a good working environment, treated with fairness and rewarded for their performance since their hard work leads to the prosperity of the firm. It also have a responsibility of ensuring that they help to protect the environment by reducing pollution e.g. by the air buses. It has a responsibility of taking care of the business partners like the suppliers e.g through striving for mutual growth and prosperity. They should also pay taxes to the government and operate under the governing laws. 1.3 Has VAA fulfilled the responsibilities? VAA has been able to fulfill some of the responsibilities. Through this, it was able to maintain the economy and performance. Its success is seen in the following areas: VAA improved the services to the customers by expanding the airlines and enabling travel to many countries. Initially, the airline was intended to fly between London and Falkland Island. Later on it expanded and most parts of the globe were accessible through VAA. The impact is seen in 2012 where the number of passengers increased to 5.4 million making it the seventh largest UK airline in terms of passenger volume. They were also able to build partnerships with other businesses through supporting them and raising them from a scratch. This improved the image of the company and enabled it to expand internationally. They would sell their businesses and bring up other businesses. The company also tried to be environmental friendly when Branson tried to invest in renewable energy. They wanted to reduce the carbon emissions from the airplanes, although it wasn’t very successful. His major reason was to reduce the production of greenhouse gases. 2.2 Impact of fiscal and monetary policies on activities of VAA Through the monetary policies, the Bank of England introduces money in the circulation, thereby increasing the public expenditure which leads to increased travelers. This leads to the following: 1. Increased varieties of services 2. Increased job opportunities thus employment 3. High profit margins Through the fiscal policies, the services of VAA will be made more efficient because of the availability of trained personnel. VAA will also have to improve on the variety of services offered. 2.3 Impact of UK/EU competition and regulatory policies on VAA activities The competition and regulatory policies promotes trade within the UK and EU thus increasing the activities of VAA in the region. On the other hand, it does not promote international business beyond the regions thus limiting VAA activities beyond the borders of the region. (Furse, 2003). The competition and regulatory policies also help in improving the trade activities in the region thus enhancing the growth of VAA and its expansion within the region. These policies also help to enhance free operation of the airline in the region. 3.2 Effect of forces of demand and supply on pricing decisions and sales of VAA Increased demand leads to increased pricing. When the passengers increase, the travel pricing is increased. Increased passengers will lead to a need to increase the services and expansion. It will also lead to increased employment. All these will lead to an increased pricing to enable these changes. (Henderson, 1958). Reduced demand leads to layoff of workers, leading to reduced quality of services and reduced variety of services. Some of the planes will be grounded. This may lead to reduced pricing, with the intention of attracting customers. The pricing may also remain the same or rise for VAA to cater for normal operations and maintenance costs. VAA may also allow itself to incur losses to attract and maintain their customers, but to do this, they may approach banks for loans. (Henderson, 1958) 3.3a Impacts of business environment on behavior of VAA Economic factors 1. Competition Increased competition may lead to reduced pricing to maintain and attract customers and increased quality and variety of services, so as to maintain a healthy competition. 2. Government Interference Subsidies – The Government may decide to subsidize some services e.g. the buying of cars at a reduced price. This will enable VAA to introduce new services and/or goods to the existing. This in turn may lead to creation of employment opportunities. incentives – This is where the government introduces tax cuts and tax holidays. This motivates VAA to venture in the line of business being given incentives. 3. Consumers Consumer demands may change the behavior of VAA. If, for example, the passengers demand for an introduction of a particular service, VAA may be forced to introduce the service to suite the consumer demands. 4. Suppliers Fluctuation in the pricing of goods and services by other suppliers e.g. cleaning companies, security companies e.t.c. may affect the behavior of VAA like changing of suppliers or termination of contract. This may lead to reduction in the variety of services that were offered. (Worthington & Britton, 2006) Political factors 1. Political instability – This is likely to cause coup and wars. Wars in nations affects greatly the airline industry since people will not travel to war zones. It will lead to losses and may even affect the general operation of the airline by reducing the air travel. 2. Corruption – Embezzlement and misappropriation of funds causes government losses which in turn causes fluctuation. This may lead VAA changing the operation currency e.g. from dollars to euros. 3. Change of regime – After an electioneering period, a new regime comes in with new policies. The new policies may or may not oppress VAA and their services. The kind of policies will determine the behavior of VAA, whether oppressing or to their advantage. (Worthington & Britton, 2006) Social factors 1. Games and sports – During marketing, VAA may choose to sponsor a given game and sport to increase its publicity. 2. Education - Absence of skilled labour in the social environment will lead to the establishment of an aviation college by VAA where it will be obtaining skilled labour from. If the social environment has educated people and skilled labour is available, VAA will employ skilled labour from the environment and improve the quality of services offered. Technology factors 1. Rate of technology change – This may lead to improvising the technology in VAA, which is likely to cause unemployment and an increase in VAA spending budget in upgrading the technology. 3.3b Cultural factors confronting VAA 1. Language Language differs with countries and hence may be a barrier to communication. This may hinder communication between VAA and its customers. 2. Dressing Different countries have different ways of dressing. The dressing cultures of different countries differ and this may affect the business of the organization. 3. Religion Some religious cultures forbid other practices, foods, medicine e.t.c. This affects the operations of VAA 4.1 Benefit of VAA from international trade International trade brings together a number of states thus expanding markets for VAA. International trade offers a variety of goods and services. This exposes VAA customers to trading and working opportunities which in turn markets VAA. VAA offers its services to a variety of customers who are widely distributed. This creates more profits to the company. International trade exposes VAA to a wide variety of skilled and unskilled labour. This helps them to expand their business by opening up branches internationally. This also enables the VAA to offer quality services to its customers. (Ohlin, 1967) 4.2 Effects of global factors on activities of VAA Areas affected by war may hinder the business activities of VAA in the region. Calamities like drought and floods may also influence the activities of VAA since this will lead to migrations. It may also lead to hindrance in the business activity in the area if the airports are also affected. Climatic conditions in some parts of the globe may also limit the areas of travel of VAA. International trade activities also increase the activities of the VAA since many traders will need to travel to different countries for their businesses. (Keegan, 1989) 4.3 Impact of the European Union policies on activities of VAA The reduction in the obstacles of cross border trade and agreement This policy helps to improve efficiency in service delivery. It reduces restrictions in countries thus making VAA customers free. It also encourages customers to travel between the countries thereby increasing the profit margin of VAA (Erskine, 1991). The harmonization and approximation of technical and safety standards on large number of products This policy improves the efficiency of trade among the nations thereby increasing the customers to VAA hence increasing the profit margin which may lead to expansion of VAA activities in the region. Closer approximation of excise duties and other fiscal barriers e.g. VAT Closer approximation of excise duties and fiscal barriers encourages international trade in the region. This leads to improved international trade which leads to increased number of VAA customers. This will enable VAA to expand its services in the region. The removal of legal obstacles to trade (discrimination and purchasing policies) This helps to create free trade in the area which improves international trade and thereby leading to growth and expansion of VAA. ECONOMIC SYSTEMS Free Market If almost all the stores, factories, and firms in a nation are owned and operated by private individuals or businesses, then its system is called free market. The U.S. for example, is largely a free market economic system (Andersson & Miles, 1996). This is because many enterprises are privately owned. In this kind of economic system, the government has no control. There are private ownership rights for labor, assets and consumption goods. Firms and property are privately owned. There is unregulated market prices - no price, wage or interest rate controls. The role of the government is like the role of a referee. It enforces the rules but stays out of the game. The government enforces property rights, enforces contracts, prevents fraud, force and coercion, provides for local law enforcement, national defense etc. Market outcomes are not distorted nor political favors dispensed using political process. There is no form of central planning and therefore, there is decentralization of decision making. (Doyle, 2005) Command In a command economic system, the government is the main decision maker. One cannot open and run any kind of business out of his own independent decision. The decision of the goods and services to be provided are made by the government. In addition, the government produces and sells these goods and services. The government also produces decides how the talents and skills of its workers are to be used. A perfect example is Cuba. Almost all of the means of production are publicly owned - that is, owned by the government. Government planners decide the answers to the basic economic questions. The government plays an active role in the economic organization. The prices in this economic system are regulated by government. Private ownership may be illegal, or minimal. Here, the economy operates under central planning or political planning. (Doyle, 2005) Mixed A mixed economic system is an economy made up of some free enterprise and some government ownership. Here, some of the firms, factories and businesses are owned by the government while others are privately owned (Ananthan, Appannaiah & Reddy, 2010). This economic system has both free market and command economy. This kind of economic system is the best in resource allocation since some resources will be allocated be the free market while others will be allocated as in the command economic system. In a free market economic system, allocation of resources are as a result of individual decisions, willingness and ability to pay for them. For example, after finishing school, one may decide to work where he pleases, if there is a job opportunity. He is also free to venture into business of his own choice. Suppose that he decides to start a business, he will risk all the money that he has saved or borrowed hoping that he will be successful. The price that he charges for his goods or services shall be influenced by the prices that his competitors charge on the same item. The success that he will have will be determined by the demand of his goods by the consumers. He may do very well. However, if people do not want the goods or services that he is selling, he will most likely go out of business. In a command economic system, the government entirely dictates the allocation of resources in a nation. From this, we find that mixed economic system incorporates the resource allocation strategies for both command and free market economic systems. This makes it the most effective economic system in resource allocation. (Doyle, 2005) DIFFERENT MARKET STRUCTURES AND HOW THEY DETERMINE PRICING AND MARKET STRUCTURES Perfect competitive market Perfect competition market is the world of price-takers. A perfectly competitive firm in a perfect competitive market, sells a homogeneous product [one identical to the product sold by others in the industry]. It is so small relative to its market that it cannot affect the market price; it simply takes the price as given. Perfect competition market is a market under which no buyer or seller can affect unilaterally. (Fellner, 1949). In perfect competitive markets, the pricing and output decisions are determined through the following ways: 1. Large Number of Buyers and sellers One condition of perfect competition is that there should be operating in the market a large number of buyers and sellers. If that is so, no single seller or purchaser will be able to influence the market price, because the output of any single firm is only a small proportion of the total output and of the total demand. 2. Homogeneous Product The second condition is that the commodity produced by all firms should be standardized or identical. 3. Free Entry or Exit There should be no restrictions, legal or otherwise, on the firms entry into, or exit from, the market. In this situation, all the firms will be making just normal profit. If the profit is more than normal, new firms will enter and extra profit will be competed away; and if, on the other hand, profit is less than normal, some firms will quit, raising the profits for the remaining firms. But if there are restrictions on the entry of new firms, the existing firms may continue to enjoy supernormal profit. Only when there are no restrictions on entry or exit, the firms will earn normal profit and this will help in regulating the pricing of products (Sen, 2008). 4. Perfect Knowledge Another assumption of perfect competition is that the purchasers and sellers should be fully aware of the prices that are being offered and accepted. In case there is ignorance among the dealers, the same price cannot rule in the market for the same commodity. When the producers and the customers have full knowledge of the prevailing price, nobody will offer more and none will accept less, and the same price will rule throughout the market. The producers can sell at that price as much as they like and the buyers also can buy as much as they like 5. Absence of Transport Costs If the same price is to rule in a market, it is necessary that no cost of transport has to be incurred. If the cost of transport is there, the prices must differ to that extent in different sectors of the market. 6. Demand Curve of Perfect Competition Market is Completely Horizontal Demand curve looks horizontal to a perfect competitor. The industry demand curve has inelastic demand at the market equilibrium. However, the demand curve for the perfectly competitive firm is horizontal (i.e. completely elastic). 7. No Government Regulation Government does not intervene in the marketing functions. Pure competition differs from perfect competition in the sense that it excludes the features of Perfect mobility of resources and Perfect knowledge. (Kamien & Schwartz, 1982) Monopoly Monopoly is another traditional form of market structure. It is an extreme form, opposed to a competitive market structure. As opposed to monopoly, a competitive market is a market one with a large number of producers. The pricing and output decisions are determined in the following ways: 1. Monopoly is a case where there is only a one seller in the market. This makes the seller control the market. 2. Absence of substitutes: There is absence of substitutes for goods produced and sold. Buyers are left with no option but to purchase goods from the monopolist at any price set. This makes the monopolist to have complete control over market conditions. He sets his own prices and earn profits without fear of competition for he has no rivals. The Cross Elasticity of Demand is negligible or very low. (Kamien & Schwartz, 1982) 3. There is complete negation of competition. Monopolistic competition The pricing and output decisions of this market are determined by the following features of a monopolistic competition market i) Large Number of firms: Monopolistic competition has large number of firms operating under it. To add on that, there is freedom of entry. There are no restrictions of numbers or differences in market conditions. Each firm however differs from its rivals in various qualitative respect. ii) Close Substitutes: In monopolistic competition producers have very close substitutes of products. The products of one company, for example, may serve the same purpose as that of another firm. The difference may only be some variation in the product quality. (Kierzkowski, 1984) iii) Group: Firms, in monopolistic competition form a group. They can’t be referred to as an industry. The reason is that their products are dissimilar and not homogenous like in the competitive industry. iv) Product Differentiation: Products are differentiated under monopolistic competition. This is a unique feature of this form of market which makes it differ from a perfect competition. The main difference between these two is that products are not homogenous. Trade name, salesmanship, brand name, quality and others deliberately differentiate the goods produced v) Selling (Advertising) Cost Product differentiation and advertisement expenditure, together help the producer to keep some control over the market conditions and affect the demand curve shape. Whenever product differentiation is done, it is essential to inform buyers. Advertisement is the medium through which buyers can be informed about the superiority of that product. (Kamien & Schwartz, 1982) Oligopoly Oligopoly is a market characterized by the availability of a small number of producers who do act together in controlling the supply of a given good and its market price. Oligopoly is dominated by only a few large suppliers that are interdependent to each other before determining any pricing and decisions of investments. It can also be termed as a market condition where sellers are very few and an action of one of them will significantly affect price and have a very big impact on competitors. (Fellner, 1949) The following characteristics determine the pricing and output decisions of an Oligopolistic Market: This market is dominated by a small number of players with an ability of exerting control over market prices and supply. There are a few firms which sell branded products that can closely substitute each other. There are high entry barriers for other firms; they can be due to copyrights, patents, government rules or scarce resource ownership. Firms are not dependent on decision making. They are interdependent. Products can either be homogenous or heterogeneous. The sellers are not price takers but price makers. The few sellers dominate the pricing decisions mutually. The sellers are able to achieve a supernormal profits in the long run. The sellers can also achieve economies of scale. This is because, as the level of production rises for the large producers, the cost decreases per unit product thereby ensuring higher profits. REFERENCES Ananthan, B. R., Appannaiah, H. R., & Reddy, P. N. (2010). Business management (Rev. ed.). Mumbai [India: Himalaya Pub. House. Andersson, C., & Miles, D. (1996). Business management. Geneva: International Labour Office. Doyle, E. 2005. The economic system. Hoboken, NJ: John Wiley & Sons. Erskine, R. (1991). Business management. New York: Prentice Hall. Fellner, W. 1949. Competition among the few; oligopoly and similar market structures. ([1st ed.). New York: A.A. Knopf. Furse, M. 2003. Competition and the Enterprise Act 2002. Bristol: Jordans. Henderson, H. D. 1958. Supply and demand. Chicago: University of Chicago Press. Kamien, M. I., & Schwartz, N. L. 1982. Market structure and innovation. Cambridge: Cambridge University Press. Keegan, W. J. 1989. Global marketing management (4th ed.). Englewood Cliffs, N.J.: Prentice Hall. 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