Global business environment refers to the uncontrollable local and international interactions that affect how businesses are operated (Baron, & Baron, 2013). The airline business is essential and contributes to the economic development of a country. The airline business is conducted from a global perspective and is therefore affected by the global environment.Some of the factors and drivers of the changes experienced in the airline industry since 2017 include safety of the airlines, sustainability, profitability, as well as passenger experience. The management teams at the airline industry have been faced with the changing aspects and demands of stakeholders within the industry since 2017. For instance, clients demand better customer service, while shareholders continue to demand more profitability. Important to note is that the business environment plays an essential role in achieving an organization's objectives (Mohamed & Lashine, 2013).
The PESTEL model is one of the models that can be used to describe an organization's global environment. The model is a framework that is used by businesses to analyze and monitor the external environmental factors which impact an organization (Yuksel, 2012). Some of the global environment aspects that affect the airline industry include political, economic, social, technological, environmental, as well as legal factors (Shilei, & Yong, 2014). Political factors relate to how and the degree of intervention by the government in a specific business. For instance, the U.S. government puts strict regulations on airlines that can fly to the country due to security reasons. As a result of the political factors, airline companies can be affected depending on the conformity required by a particular country. Economic factors include aspects such as interest rates, exchange rates, inflation, as well as economic growth of a specific country. For instance, when exchange rates and inflation is high, clients opt not to travel, which reduces the profitability of the airline (Shilei, & Yong, 2014). Technological factors include factors such as innovation and automation, as well as research and development. Clients in the airline industry prefer companies that are innovative, for instance, in processing bookings and tickets, which makes a company to have an added advantage. Legal factors such as laws, policies, and regulations contribute to the operation of airline companies.
Porters Five is also another model that can be used to analyze the global environment of a company in the airline industry. Some of the factors considered in the model include competitors, suppliers, customers, new entrants in the markets as well as substitutes (Yuksel, 2012). The factors play an essential role in determining the global environment portfolio of airline businesses.
The government has an impact on the structure and operation of organizations in various ways. For instance, the government has an impact on influence over interest rates. When the rates of interest increase, business people find it hard to borrow from banks and therefore making it hard for businesses to operate (Wild, Wild, & Han, 2013). Also, government regulations also affect the operation and structure of businesses in various ways. For instance, businesses permits and licenses are issued by the government, which has a huge impact on the structure of a business.
Changes have an impact on the business environment and organizations in various ways. For instance, changes in business help in increasing the efficiency of work processes as well as customer satisfaction (Hill, & Hernandez-Requejo, 2018). Changes in the business environment help organizations to explore new opportunities in the market.
Baron, D.P. and Baron, D.P., 2013. Business and its environment (p. 2). Upper Saddle River, NJ: Prentice-Hall.
Hill, C.W. and Hernandez-Requejo, W., 2018. Global business today. New York: McGraw-Hill Irwin.
Mohamed, E.K. and Lachine, S.H., 2013. Accounting knowledge and skills and the challenges of a global business environment. Managerial finance, 29(7), pp.3-16.
While L. and Yong, W., 2014. Target-oriented obstacle analysis by PESTEL modelling of energy efficiency retrofit for existing residential buildings in China's northern heating region. Energy Policy, 37(6), pp.2098-2101.
Yuksel, I., 2012. Developing a multi-criteria decision-making model for PESTEL analysis. International Journal of Business and Management, 7(24), p.52.
Wild, J.J., Wild, K.L. and Han, J.C., 2013. International business (p. 342). Upper Saddle River, NJ: Prentice-Hall.
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