Political, Legal and Social factors impacting two businesses

Topics: Airline, Factor analysis, Leeds Pages: 5 (2054 words) Published: November 3, 2013
Political, legal and social factors impacting LLC and IAG
The following report will consist of some of the social, political and legal factors that could potentially affect Leeds City College and International Airlines Group as a business. I will also go over which factors are having the most significant impact on the business and how the businesses are trying to adapt and change in order to try and negate the impact of these factors and how they may capitalize on some. International Airlines Group like many businesses in the current economic climate has seen a dramatic change in the way they have to do business due to several social factors. The most prominent of the social factors is the alteration in consumer buying habits due to the recession, as many people have a lower amount of expendable income due to the rise in cost of living prices such as food and energy bills combined with lower wages and high level of unemployment. The reason that this makes this social factor the most severe for IAG is that while most businesses have to deal with this change a large part of the British Airways customer base is that of business clients. Therefore due to businesses looking to cut costs to help with lower revenues many are no longer willing to pay for employees to travel first class and turn to the budget airlines. For example BA released a statement to investors regarding the future of the business ‘What we have been living through in the last two years is the deepest downturn this industry has ever faced. The International Air Transport Association (IATA) is forecasting revenues for the industry as a whole will fall by 15 per cent’ (British airways, Q1, 2010). In order to accommodate for the shift in the market due to the social factors IAG has taken to a ‘Cost driven recovery’ which refers to them relying on cutting costs in order to deal with the sharp decline in revenues that the airline industry has seen. While many were sceptical as to the success of this cost driven recovery and the severity of the cuts IAG has seen ‘underlying profitability improve in the third and fourth quarter because we moved extremely quickly to take cost out of the businesses’ (British airways, Q4, 2010). So while they have come up against adverse social factors they have managed to adapt to these changes and in fact have a far more efficient and cost effective business as a result. Another social factor that is impacting IAG as a company is the growing support for greener energy and thus more carbon efficient aircraft that do less damage to the environment and in some cases consumer may choose different methods of travel that are better for the environment. Which has led to a more competitive travel market especially in the European market as the Eurostar provides an alternative to air travel for holiday makers. Therefore further increasing the pressure on IAG as its target market and consumer base have more choice when travelling, which could result in even lower revenues for the business in an already struggling market. This also implicates a legal factor as Carbon emissions are not only a social factor as the EU has stated that all airlines flying two and from Europe must purchase a permit and pay a fraction of the carbon they emit in order to operate within Europe. Therefore this dramatically impacts upon IAG as its operation is based in Europe therefore they will be subject to this law which sees them having to pay for ‘15% of the carbon they emit’ (Guardian, 2011). Therefore this could significantly increase IAGs costs which would be detrimental to their recover and survival as a business and there is potential for this cost to rise even more in order to help reduce global carbon emissions as required under the 1997 Kyoto protocol. In attempts to prepare for this outcome of both the social and legal factors IAG has invested a lot in developing more fuel efficient aircraft and ‘a £597 million reduction in our fuel bill’ (British...
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