Economic Analysis Forecast Macro Environment Airline Essay Example

Economic Analysis Forecast Macro Environment Airline Paper Overview In todays global economy, firms rely on the analysis of macroeconomic and industry data to develop performance improving strategies and increase their profitability. With this in mind, the following report consists of an analysis of the U. Macro environment, the airline Industry, and Delta Air Lines. It covers both a historic period from 1996 to 2000 and a current period from 2001 to the present. Even though there has been current significant Improvement in GAP, there are new concerns regarding deflation, the present jobless recovery, and the fact that production is increasing at a faster rate than demand. Subsequent analysis will focus on the changing factors that have lead to these results. When facing economic expansion or recession, the Federal Reserve Board (the Fed) relies on different measures to potentially Influence the economic environment. The Feeds current approach has been the opposite; It has expanded the money supply to lower the targeted federal funds rate In order to try to pull the economy out of the recession and generate sustainable amount of economic growth. Economic expansion (1996 2000) contributed to Deltas and the overall airline industry positive performance. On average, the airline industry contributed O. These macroeconomic events had direct effects over the airline industry. For example, increase in labor and fuel costs forced labor cuts in the Industry and the grounding of a significant number of aircraft. The different factors affecting the Industrys performance also have direct effects over Delta Air Lines. This is evidenced by the generation of profits during the expansion period (totaling LOS$ 4,040 million) and losses during the period of economic downturn (totaling US$ 2,934 million). We will write a custom essay sample on Economic Analysis Forecast Macro Environment Airline specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Economic Analysis Forecast Macro Environment Airline specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Economic Analysis Forecast Macro Environment Airline specifically for you FOR ONLY $16.38 $13.9/page Hire Writer With loss still remaining on their income statements, major carriers, including Delta, are searching for deferent ways o face the new low-cost competition. By analyzing past and current trends in the macroeconomic environment, In the airline Industry, and In Deltas performance, respectively, we highlight existing links between each. It Is Important to mention that our analysis focuses solely on the commercial aviation sector in order to satisfy Deltas informational needs.  Based on this research and analysis, our report is intended to provide an objective macroeconomic and industry forecast for the coming year and provide recommendations to Delta. The Macroeconomic Environment We now analyze the U. Agronomic environment during the historic and current periods. GAP Analysis To understand the changes In GAP behavior we look at its basic components (See Average Growth of Real GAP Components graph). These international economic problems caused the dollar to strengthen against foreign currencies, which in turn debilitated U. This deteriorating environment gave way to the current period, greeted by recession. Worries related to the war with Iraq, as well as persistent concerns about the course of economic activity and corporate earnings, created a high degree of risk aversion mongo Dustless executives Tanat constrained capital spending Ana null. I nose factors will be discussed in more detail in subsequent analysis. Inflation Analysis The general trend for inflation during both the historic and current periods has been to remain low. For example, in the airline industry, Internet fare bookings have decreased overall commission expenses. However, profit margins were contracted as rising costs created higher prices in a competitive market environment. Capacity Utilization In our previous analysis we mentioned the effects of increased productivity and market competition on inflation. These factors were fueled by the overall favorable economic conditions. After analyzing the differences and trends in the macroeconomic environment between the historic and current periods, we now focus our attention on the Federal Reserves role in the economy. Feeds Response To meet the goals of high growth, low inflation, and low unemployment, the Fed looks at the range of variables discussed in previous analysis. 5% in order to try to pull the economy out of the recession and generate sustainable amount of economic growth. The Federal Reserve also lowered the targeted federal funds rate in order o reduce the strain on the economy caused by international economic instability (Asia, Russia, and Latin America). As mentioned in the Inflation Analysis section, price increases have been low throughout this period due to: Decrease in overall spending Decrease in wealth due to poor stock market returns High unemployment rates Lower capacity utilization In the present, fiscal policy has provided additional support to consumer spending. At present, inflation, for the first time since the early sass, is as low as the Fed wants so low, in fact, that threes a remote risk of the economy tipping into a debilitating deflation. The macroeconomic environment has great impact over the strategies used by industries and firms. To illustrate this relationship, we presented in this section an analysis of the most influential factors in industry and firm decision making which are: real GAP growth and its components, inflation, and productivity. Our analysis also covered the inverse relationship that exists between the unemployment rate and both capacity utilization and consumer confidence. The next section focuses on the airline industry. Agronomic environment to the overall industry performance during the historic and current periods. Our main focus will be centered on the industry contribution to GAP, its competitive environment, pricing and economies of scale strategies, and its major costs. The Airline Industry All the macroeconomic factors we have analyzed have direct influence over the behavior of the different industries in the economy. In this section, we discuss the airline industry performance during the historic and current periods by emphasizing the relationship it poses with the macro environment. Traditionally, there has been a direct relationship between the growth of the economy and the growth of the industry. For instance, during the historic period, the industry and the economy were both characterized by decreasing unemployment, and as the GAP improved, the industry sustained profits. In the current period, the industry was badly affected by the existing recession, and even with the recent improvement in the economic environment, the industry has not been able to recover at the same rate as the economy. The changes in the macroeconomic environment have great influence over the industry mainly due to its principle characteristics: The current market structure AT ten Lorene Ministry Is centralize Day a null degree AT market incarceration with a small number of dominant, large firms although other producers are present. In the airline industry, the top airlines historically were American, Continental, Delta, Northwest, US Airways, and United, better known as the Big Six. Traditionally, entry of smaller firms into this market was moderately difficult due to strategies used by the Big Six such as: Cutting ticket prices below actual cost (predatory Holding gates and slots at airports so they can conveniently fly ion and out blocking smaller firms Holding long-term leases on gates and retaining dates currently onto in use to prevent their use by others Holding veto rights over airport expansion projects that might let ion new competitors Controlling critical ground-handling baggage services at dominant hubs; usually charging smaller airlines prohibitively high prices for using them The Industry Evolves Even with the long-standing structure of the airline industry, changes are inevitable. The most important challenge faced is the change in the industry competitive environment. As the airline industry entered the current period, it faced problems related to the general economic recession. The 9/1 1 terrorist attacks and the war with Iraq have led to further dampening effects on the industry. A new breed of carriers is gaining strength in this environment: low-cost airlines. Industry Performance and Contribution to GAP Historically, there has been a very strict correlation between how the airline industry performs financially and how the nations economy performs, measured by GAP. This indicates that the airline industry was a major contributor to the nations economy. During this period, airlines reported high net profits linked to the period of economic expansion discussed in the macroeconomic section of this port. Historical periods profits enabled airline carriers to rebuild their balance sheets from the Gulf War years. Unfortunately, from 2001 to the present, the industry has accumulated net losses. Although GAP figures had already been declining prior to 9/1 1, as the above graph indicates, the slowing economy and the bursting dot. Com bubble also negatively impacted the industry. This deteriorating behavior is once again consistent with the performance of the overall macroeconomic environment. At the present, the low-cost carriers are capitalizing on the debt of the major carriers. This capitalization, coupled with huge investments made by big firms during the historical period (See Aircraft Orders Options graph) to face increased demand, forced big airlines to improve efficiency through cost-cutting measures described in further analysis. The precipitous drop in traffic following the 9/1 1 attacks were mirrored by the industry sharp reduction in capacity fleets shrunk by 298 aircraft. Industry Costs Bleed Profits During the historic period, the effects of decreased demand and increased competitive pressures from low-cost carriers have made major airlines focus on cost management to improve their income statements, which have been yielding negative numbers since 2001. The largest expenses for the airline industry in both the historical and current periods include flying operations (29%), aircraft and traffic servicing (16%), maintenance (12%), and promotion and sales (11%). We begin by analyzing the industry largest expense: labor. More than 1/3 of the revenue generated each day is used to pay the workforce, causing airline labor costs per employee to be among the highest of any industry in the US. The graph to the left illustrates this relationship by comparing en average annual employee compensation In ten Lorene Ministry to Tanat In ten u private industry. The industry presented a steady increase in the number of employees from 1996 to 2000. This behavior is consistent with a moderate industry expansion and contributed to low unemployment rates. Following 2000, airline companies began to look for ways to improve cost management; they began cutting labor costs. When aviation experiences economic difficulties, those difficulties reverberate across the economy. For every Job in the airline industry, an estimated 1 5 jobs are produced in the broader economy. Nearly 100,000 airline employees along with roughly 400,000 others in the U. Fuel constitutes the industry second largest operational expense. During times of relatively moderate fuel prices, these costs averaged 10 to 12% of industry expenses. The industry is exposed to severe price escalation every one-cent increase in the cost of a gallon of Jet fuel costs the industry $180 million per year. Past fuel increases and recessions have had negative effects on the airline industry, and profitability has suffered as a direct consequence of the weakening economy. Within these costs, the main expense is omissions, which constituted 13% of the industry operating expenses in the historical period. Unfortunately for airlines, they are unable to raise their prices in response to these escalated costs due to the highly competitive environment characterizing the industry. This term relates to the fact that once an airline operates in a network of city-pair routes, the marginal costs of adding new routes are low. Demand for Airline Service While the partnerships mentioned before have improved supply issues by limiting domestic competition, carriers must still deal with other factors affecting demand. Economic Analysis Forecast Macro Environment Airline Essay Example Economic Analysis Forecast Macro Environment Airline Paper In todays global economy, firms rely on the analysis of macroeconomic and industry data to develop performance improving strategies and increase their profitability. With this in mind, the following report consists of an analysis of the U. Macro environment, the airline industry, and Delta Air Lines. It covers both a historic period from 1996 to 2000 and a current period from 2001 to the present Even though there has been current significant improvement in GAP, there are new concerns regarding deflation, the present jobless recovery, and the fact that production is increasing at a faster rate than demand. Subsequent analysis will focus on the changing factors that have lead to these results. When facing economic expansion or recession, the Federal Reserve Board (the Fed) relies on different measures to potentially influence the economic environment. The Feeds current approach has been the opposite; it has expanded the money supply to lower the targeted federal funds rate in order to try to pull the economy out of the recession and generate sustainable amount of economic growth. Economic expansion (1 996 2000) contributed to Deltas and the overall airline industry positive performance. On average, the airline industry contributed O. T hose macroeconomic events had direct effects over the airline industry. For example, increase in labor and fuel costs forced labor cuts in the industry and the grounding of a significant number of aircraft. The different factors affecting the industry performance also have direct effects over Delta Air Lines. This is evidenced by the generation of profits during the expansion period (totaling US 4,040 million) and losses during the period of economic downturn (totaling IIS$ 2,934 million). We will write a custom essay sample on Economic Analysis Forecast Macro Environment Airline specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Economic Analysis Forecast Macro Environment Airline specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Economic Analysis Forecast Macro Environment Airline specifically for you FOR ONLY $16.38 $13.9/page Hire Writer With loss still remaining on their income statements, major carriers, including Delta, are searching for different ways to face the new low-cost competition. . By analyzing past and current trends in the macroeconomic environment, in the airline industry, and in Deltas performance, respectively, we highlight existing links between each. It is important to mention that our analysis focuses solely on the commercial aviation sector in order to satisfy Deltas informational needs. Based on this research and analysis, our report is intended to provide an objective macroeconomic and industry forecast for the coming year and provide recommendations to Delta. The Macroeconomic Environment We now analyze the U. Agronomic environment during the historic and current periods. GAP Analysis To understand the changes in GAP behavior we look at its basic components (See Average Growth of Real GAP Components graph). These international economic problems caused the dollar to strengthen against foreign currencies, which in turn debilitated U. This deteriorating environment gave way to the current period, greeted by recession. ; Worries related to the war with Iraq, as well as persistent concerns about the course of economic activity and corporate earnings, created a high degree of risk aversion among business executives that unstrained capital spending and hiring. These factors will be discussed in more detail in subsequent analysis. Inflation Analysis The general trend for inflation during both the historic and current periods has been to remain low. For example, in the airline industry, Internet fare bookings have decreased overall commission expenses. However, profit margins were contracted as rising costs created higher prices in a competitive market environment. Capacity Utilization In our previous analysis we mentioned the effects of increased productivity and market competition on inflation. These factors ere fueled by the overall favorable economic conditions. After analyzing the differences and trends in the macroeconomic environment between the historic and current periods, we now focus our attention on the Federal Reserves role in the economy. Feeds Response To meet the goals of high growth, low inflation, and low unemployment, the Fed looks at the range of variables discussed in previous analysis. 5% in Order to try to pull the economy out of the recession and generate sustainable amount of economic growth. The Federal Reserve also lowered the targeted federal funds rate in order to reduce the strain on the economy caused by international economic instability (Asia, Russia, and Latin America). As mentioned in the Inflation Analysis section, price increases have been low throughout this period due to: ; Decrease in overall spending ; Decrease in wealth due to poor stock market returns ; High unemployment rates ; Lower capacity utilization In the present, fiscal policy has provided additional support to consumer spending. At present, inflation, for the first time since the early 1 adds, is as low as the Fed wants so low, in fact, that theres a remote risk of the economy tipping into a obligating deflation. The macroeconomic environment has great impact over the strategies used by industries and firms. To illustrate this relationship, we presented in this section an analysis of the most influential factors in industry and firm decision making which are: real GAP growth and its components, inflation, and productivity. Our analysis also covered the inverse relationship that exists between the unemployment rate and both capacity utilization and consumer confidence. The next section focuses on the airline industry. Agronomic environment to the overall industry performance during the historic and current periods. Our main focus will be centered on the industry contribution to GAP, its competitive environment, pricing and economies of scale strategies, and its major costs. The Airline Industry All the macroeconomic factors we have analyzed have direct influence over the behavior of the different industries in the economy. In this section, we discuss the airline industry performance during the historic and current periods by emphasizing the relationship it poses with the macro environment. Traditionally, there has been a direct relationship between the growth of the economy and the growth of the industry. For instance, during the historic period, the industry and the economy were both characterized by decreasing unemployment, and as the GAP improved, the industry sustained profits. In the current period, the industry was badly affected by the existing recession, and even with the recent improvement in the economic environment, the industry has not been able to recover at the same rate as the economy. The changes in the macroeconomic environment have great influence over the industry mainly due to its principle characteristics: The current market structure of the airline industry is characterized by a high agree of market concentration with a small number of dominant, large firms although other producers are present In the airline industry, the top airlines historically were American, Continental, Delta, Northwest, US Airways, and United, better known as the Big Six. Traditionally, entry of smaller firms into this market was moderately difficult due to strategies used by the Big Six such as: Cutting ticket prices below actual cost (predatory pricing)D Holding gates and slots at airports so they can conveniently fly ion and out blocking smaller firms Holding long-term leases On gates and retaining gates currently odd in use to prevent their use by others Holding veto rights over airport expansion projects that might let ion new competitors Controlling critical ground-handling baggage services at dominant[l hubs; usually charging smaller airlines prohibitively high prices for using them The Industry Evolves Even with the long-standing structure of the airline industry, changes are inevitable. The most important challenge faced is the change in the industry competitive environment. As the airline industry entered the current period, it faced problems related to the general economic recession. The /1 1 terrorist attacks and the war with Iraq have led to further dampening effects on the industry. A new breed of carriers is gaining strength in this environment: low-cost airlines. Industrys performance and Contribution to GAP Historically, there has been a very strict correlation Benzene how the airline industry performs financially and how the nations economy performs, measured by GAP. This indicates that the airline industry was a major contributor to the nations economy. During this period, airlines reported high net profits linked to the period of economic expansion discussed in the Agronomic section of this report. Historical periods profits enabled airline carriers to rebuild their balance sheets from the Gulf War years. Unfortunately, from 2001 to the present, the industry has accumulated net losses. Although GAP figures had already been declining prior to 9/1 1, as the above graph indicates, the slowing economy and the bursting dot. Com bubble also negatively impacted the industry. This deteriorating behavior is once again consistent with the performance of the overall macroeconomic environment. At the present, the low-cost carriers are capitalizing on the bet of the major carriers. This capitalization, coupled With huge investments made by big firms during the historical period (See Aircraft Orders Options graph) to face increased demand, forced big airlines to improve efficiency through cost-cutting measures described in further analysis. The precipitous drop in traffic following the 9/1 1 attacks were mirrored by the industrys sharp reduction in capacity fleets shrunk by 298 aircraft. Industry Costs Bleed Profits During the historic period, the effects of decreased demand and increased competitive pressures from low-cost carriers have made major airlines focus on cost management to improve their income statements, which have been yielding negative numbers since 2001. The largest expenses for the airline industry in both the historical and current periods include flying operations (29%), aircraft and traffic servicing (16%), maintenance (1 2%), and promotion and sales (1 1 We begin by analyzing the industrys largest expense: labor. More than 1/3 of the revenue generated each day is used to pay the workforce, causing airline labor costs per employee to be among the highest of any industry in the US. The graph to the left illustrates this legislations by comparing the average annual employee compensation in the airline industry to that in the US private industry. The industry presented a steady increase in the number of employees from 1 996 to 2000. This behavior is consistent with a moderate industry expansion and contributed to low unemployment rates. Following 2000, airline companies began to look for ways to improve cost management; they began cutting labor costs. When aviation experiences economic difficult Ties, those difficulties reverberate across the economy. For every job in the airline industry, an estimated 15 jobs re produced in the broader economy. Nearly 1 00,000 airline employees along with roughly 400,000 others in the U. Fuel constitutes the industry second largest operational expense. During times of relatively moderate fuel prices, these costs averaged 10 to 12% of industry expenses. The industry is exposed to severe price escalation every one-cent increase in the cost of a gallon of jet fuel costs the industry $180 million per year. Past fuel increases and recessions have had negative effects on the airline industry, and profitability has suffered as a direct consequence of the weakening economy. Within these costs, the main expense is commissions, which constituted 13% of the industry operating expenses in the historical period. Unfortunately for airlines, they are unable to raise their prices in response to these escalated costs due to the highly competitive environment characterizing the industry. This term relates to the fact that once an airline operates in a network of city-pair routes, the marginal costs of adding new routes are low. Demand for Airline Service While the partnerships mentioned before have improved supply issues by limiting domestic competition, carriers must still deal with other factors affecting demand.

British Airways

British Airways Introduction This report gives a comprehensive overview of the business organization processes of British Airways (BA). Several aspects of the organization’s structure, including the structural style, management style, leadership style, motivation style, organizational design, organizational control structures, and the organizational culture constitute this analogy.Advertising We will write a custom report sample on British Airways specifically for you for only $16.05 $11/page Learn More This assessment will be an interesting analogy of British Airways because the company experienced managerial and leadership changes in the recent past. For a long time, British Airways has been the national flag bearer of the United Kingdom (UK). The airline is the largest airline in the country, based on its fleet size and international presence. It operates in 160 destinations around the globe and has a market presence in more than 70 countries (Ganesh 1999, p. 269) . BA’s inception occurred after four small and large airline companies (BOAC, BEA, Cambrian Airways, and Northeast airlines) merged (Meyer 2007). Before 1987, the government ran British Airways, but in the same year, it was privatized as part of the British government’s efforts to seize control of most of its national corporations (McGowan 2011, p. 3). After the privatization, British Airways was able to expand its operations to new locations and new market segments. Currently, the airline is part of the one world alliance, which is an association of several airline companies including American Airlines, Cathay Pacific, Qantas and Canadian airlines (Meyer 2007). British Airways also operates under the International Airlines Group (IAG) and its association with this business outfit marks its participation in the London Stock exchange. Company Structure British Airways is a public limited company with three subsidiaries: British Airways city flyer, open skies and British Airways World cargo (Plunkett 2009). The BA city flyer is a franchise of BA and operates a domestic fleet of airlines in the European market (from the London city airport) (Plunkett 2009).Advertising Looking for report on air transport? Let's see if we can help you! Get your first paper with 15% OFF Learn More The subsidiary carries passengers, cargo and mail. Open skies is also a fully owned subsidiary of British Airways with operations in France and America. The subsidiary started operations in 2008. Though Open skies was rumored to offer only business class services (during its inception), it also offers economy class (which later upgraded to premium economy class in 2009) (Plunkett 2009). The subsidiary is however not part of the one world alliance (which its parent company (BA) is a member of). Since the aviation market is a competitive industry, BA was motivated by internal changes in the business environment (changes in consumer tastes and preferences ) and external forces (competition) to transition its ownership from a government-run corporation to a private-run corporation (Raktabutr 2007). For example, since BA was a government-run company, it was difficult to change its travel fares according to the market environment. In this regard, it was difficult for BA to compete with its rivals. This transition (from government to private ownership) marked the main legal change for BA but it also set-forth a series of other organizational changes such as organizational culture changes, corporate culture changes, mission statement changes as so on.. Model Application Lewin’s change model is widely applicable in BA’s company transition from a government-run organization to a private-run entity. As noted in previous sections of this paper, the transition from a government outfit to a private organization marked significant changes in the company’s structure. Lewins model explains that, organizations often undergo thr ee stages of transition: â€Å"unfreezing, movement and refreezing† (Cummings 2008, p. 23). These stages have different effects on the organization and their employees. British Airways underwent the three stages.Advertising We will write a custom report sample on British Airways specifically for you for only $16.05 $11/page Learn More In the unfreezing stage (as a response to market changes), BA had to unfreeze its operation patterns which were characterized by strong government control. This was a strategy formulated by the organization’s management to manage change. The second stage of Lewin’s model (movement stage) also occurred in BA’s transition because the organization’s management was determined to disseminate its ideas to lower-level employees. To support this transition, BA introduced a new set of programs such as the employee bonus system and the opening of a new airport terminal at the company’s main oper ating hub (Heathrow) to synchronize employee tasks with the management’s vision. The company also invested a lot of money in purchasing a new training facility at Chartridge house to improve the synergy between the company’s management and its employees (Raktabutr 2007). The last stage of Lewin’s model is the refreezing stage. BA transition is characteristic of this stage because it tried to cement its new organizational changes by creating a new behavioral system to support the changes. For instance, a new performance appraisal system, which was designed to recognize employee excellence (concerning customer service and marketing), was established (Raktabutr 2007, p. 12). By implementing these changes, it was expected that the company’s employees were going to be motivated to implement the new organizational changes to receive monetary rewards. To complement these changes, BA introduced new symbols that were printed on employee uniforms, company aircrafts , and other public places of display to symbolize the company’s new commitment (customer service). The motto â€Å"we fly to serve† was part of the new changes adopted by the company during this transition (Raktabutr 2007).Advertising Looking for report on air transport? Let's see if we can help you! Get your first paper with 15% OFF Learn More Leadership Control Styles Due to the sheer size and extent of BA’s operations, BA’s leadership has often practiced the autocratic leadership style (Northouse 2009). This autocratic leadership style is the main reason for BA’s poor performance between the year 1996 and the year 2000 (Raktabutr 2007). In fact, BA’s shares plunged by close to 40% during this period (Raktabutr 2007). Basic company values such as customer quality and service excellence eroded because of this leadership style as well. However, with the overhaul of BA’s operations, the company is now synonymous with the transformational leadership style. The company’s CEO, Willie Walsh, first introduced this leadership style because previous systems and procedures were not effective (Rivers 2010, p. 2). Some of the operational changes mentioned in previous sections of this study highlight the changes made by Willie Walsh after he took over the leadership of the company. The rigid h ierarchical leadership structure reduced to reflect the CEO’s vision of operating an efficient company. BA’s hierarchical structure is now very simple. It only has one level of distinction between the top-level management and the bottom-level management (Raktabutr 2007). This management structure supports the company’s transformational leadership style because it has made it easy to pass down the CEO’s enthusiasm of the organization to bottom-level employees. This management framework has also made it easy for the company’s CEO to have a â€Å"detail team† to help him realize the organization’s vision. After evaluating the transition from the autocratic leadership style to the transformational leadership style, we see that BA’s leadership transition is explained by the contingency theory of leadership. The contingency theory explains that prevailing environmental factors determine the type of leadership style to be adopted. Acc ording to the contingency theory, there is no leadership style, which is suitable for one organization (Rivers 2010, p. 2). Different situations demand different leadership styles. It is also from this basis that the contingency theory explains that organizational success does not only depend on the leadership qualities but also the loyalty and performance of the followers (plus the environmental support). BA was initially operating in a highly rigid environment dictated by little or no competition and a lot of government control. This situation supported the autocratic leadership style. However, when the market liberalized and the company was privatized, the company’s leadership style changed to transformational leadership (Rivers 2010, p. 2). This transition is explained by the contingency theory as described above. How Management and Leadership Styles Affect the Direction of the Business BA’s management and leadership styles are bound to affect the direction of the company because they are the main wheels behind the efficiency and productivity of the company. Furthermore, the realization of BA’s organizational goals highly depends on the leadership and management styles of the company (Management Study Guide 2008, p. 1). Considering BA operates in a highly competitive industry, there needs to be constant innovation and improvement of customer service. These elements require a constant change of operational processes but considering BA is a large organization, initiating change may be difficult. It is at this point, where management and effective leadership need exercising to ensure the company implements such changes. This analogy presents a guiding role for management and leadership styles because managers and leaders show the rest of the employees where the company is heading (Management Study Guide 2008, p. 1). Through effective management and leadership, employees are bound to get the confidence to undertake their tasks and ultimate ly realize the organization’s goals. This confidence materializes best if leaders and managers show the subordinates that their roles are crucial for the organization. Furthermore, optimum productivity occurs if management shows the lower-level employees how they can achieve such goals. Complementary to this role is the role of leadership and management to build morale among employees (Management Study Guide 2008, p. 1). A high morale materializes if a sense of cooperation develops between the employees and the management. Leadership styles and management styles create this synergy. Comprehensively, an organization’s direction is outlined by its leadership or management styles because both aspects determine the productive levels of the organization. In addition, an organization’s leadership style is likely to improve an organization’s level of competitiveness because it defines the blueprint of where the organization should be (viz-a-viz its competitors). Company Culture Types of organizational Culture Depending on the nature of organization, different companies adopt different organizational cultures. Tharp (2009) observes that there are four main types of organizational culture: collaborative, creative (adhocracy), control and competitive (market) cultures. The collaborative culture is a friendly and open type of culture. This type of organizational culture is very inclusionary and it perceives leaders as mentors or parents of one big extended family. In this type of culture, group cohesion is paramount and relationships are forged for long-term benefits (Tharp 2009, p. 7). Teamwork, participation and cohesiveness are also highly emphasized in this type of culture because there is a strong concern for people. The creative culture lays a lot of emphasis on innovation and risk taking because the philosophy of â€Å"thinking out of the box† is highly emphasized. Individualism is also encouraged and success is measured by being a leader among many (Tharp 2009, p. 7). The control culture is different from the creative and collaborative cultures because it defines a highly structured form of interaction between employees and their bosses. There is also a lot of emphasis on rules and procedures because stability is perceived to be the ultimate goal of organizations that adopt this culture (Tharp 2009, p. 7). Finally, the competitive culture focuses on job completion. There is a lot of push from leaders that run organizations that adopt this culture because the ultimate goal of such organizations is job accomplishment. The idea of winning is a major unifying factor for employees and managers (Tharp, 2009, p. 7). BA’s Organizational Culture After understanding the above leadership styles, it is important to note that, BA applies the competitive organizational culture. The competitive organizational culture was adopted after the company was privatized. BA’s emphasis now lies on being the best airl ine company in the region. For instance, after privatization, BA changed its corporate mission objective from â€Å"safety† to â€Å"competition†. This is a response to the competition in the aviation industry. Now the company focuses on being effective and high performing. Similarities between BA and Secondary Data Concerning the competitive organizational culture, BA’s organizational culture bears many similarities with secondary research information (regarding the competitive culture). In books, it is mentioned that the competitive organizational culture emphasizes a lot on success and accomplishments while British Airways also strives to show that it is succeeding. For instance, the company now focuses on posting good profits (De-Witte 2000, p. 501). This push to post good profits is part of a move to keep the company afloat, amid growing employee tensions and increased shareholder demands. Furthermore, existing literature outline that, leaders in organizati ons that adopt the competitive culture are hard-driving and demanding. BA’s leadership exudes these traits because it puts a lot of pressure on its employees to show results. Part of the pressure emanates from past periods of failure, which have seen BA suffer significant losses in revenue. Motivational Framework BA uses financial rewards to motivate its employees. This motivational framework is mentioned in earlier sections of this paper where BA’s bonus program was introduced to cement the company’s operational changes by focusing on customer service and quality. This motivational framework defines the scientific management theory, which was advanced by Frederick Taylor (Waring 1994, p. 1). The theory proposes that, people are mainly motivated by financial reward. The theory also maintains that, people are not naturally motivated to work, and they need rewards to boost their productivity. Complementarily, Maslow theory of motivation also outlines BA’s m otivational framework because it explains that workers strive to satisfy basic needs before they satisfy higher-level needs such as safety needs and self-actualization needs. Maslow’s theory categorizes worker needs on five levels as outlined below: (Waring 1994, p. 94) Incidentally, these needs are often satisfied through financial upgrades. For instance, if a worker has already satisfied basic needs such as food, shelter and clothing, they need more money to satisfy the next level of need (safety needs). This motivational dynamic therefore supports BA’s motivational framework because workers strive to improve their productivity to get more bonuses, and consequently satisfy higher-level needs. BA and the workers benefit here. Conclusion Weighing the findings of this report, we can see that BA’s organizational culture and processes are influenced by its transition from a government entity to a private entity. However, BA’s new organizational culture (bas ed on competition), is expected to increase the company’s odds of being an industry leader, as it was before. The competitive organizational culture (coupled with the company’s motivational framework) is set to increase the company’s profitability. The scientific management theory seems to affirm this success because it lays a lot of emphasis on guaranteeing company success if an employee reward scheme is employed. BA’s organizational structures therefore outline the blueprint for its future success. BA can improve its future profitability if it focuses on product innovation strategies to meet varying customer group demands. Most of BA’s competitors (such as Emirates airlines) are reaping huge profits from such strategic shifts. The product innovation strategy has also worked in other industries where a company understands its different customer groups and develops new products to meet these needs. Finally, to improve the company’s profitabi lity, BA needs to adopt more hedging practices. For instance, the unstable price of crude oil may significantly affect the company’s bottom-line. Hedging such a cost is likely to improve the company’s prospects of posting good returns. Such a strategy has worked with other airline companies such as Southwest airlines. BA’s success will be guaranteed in this manner. References Cummings, T. (2008) Organization Development Change. London, Cengage Learning. De-Witte, K. (2000) Organizational Culture. Michigan, Psychology Press. Ganesh, G. (1999) Privatisation Competition And Regulation In The United Kingdom:  Case Studies. London, Mittal Publications. Management Study Guide. 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