ECONOMIC ENVIRONMENT

Economic Environment

Economic Environment

Organization Summary

It is one of constant innovation and change. It requires greater depths of understanding and ability to structure analyze research and solve those business problems that have not been encountered before. Organizations whether they are working under the umbrella of Government, family or Joint venture have to show manoeuvring according to the changing global scenario (O' Leary 2000 20-22). Organizational structure is a system of authority, reporting, and task relationships that define the form and functions of the organization's activities (Barkley 2001 25). The structure determines how the parts of the organization fit together. An organizational chart is, in effect, an outline or skeleton of the organizational structure. Every organization needs a structure to order and coordinate its employees' actions and achieve organizational goals.

PEST Analysis: The Indian Airline Industry

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firm's control and sometimes present themselves as threats.

Political Factors

In India, one can never over-look the political factors which influence each and every industry existing in the country. Like it or not, the political interference has to be present everywhere. Given below are a few of the political factors with respect to the airline industry:

The airline industry is very susceptible to changes in the political environment as it has a great bearing on the travel habits of its customers (Schwartz Divitini and Brasethvik 2000 222-240). An unstable political environment causes uncertainty in the minds of the air travellers, regarding travelling to a particular country.

Overall India's recent political environment has been largely unstable due to international events & continued tension with Pakistan.

The recent Gujarat riots & the government's inability to control the situation have also led to an increase in the instability of the political arena.

The most significant political event however has been September 11. The events occurring on September had special significance for the airline industry since airplanes were involved. The immediate results were a huge drop in air traffic due to safety & security concerns of the people.

International airlines are greatly affected by trade relations that their country has with others. Unless governments of the two countries trade with each other, there could be restrictions of flying into particular area leading to a loss of potential air traffic (e.g. Pakistan & India)

Another aspect is that in countries with high corruption levels like India, bribes have to be paid for every permit & license required. Therefore constant lessoning with the minister & other government official is necessary.

The state owned airlines suffer the maximum from this problem. These airlines have to make several special considerations with respect to selection of routes, free seats to ministers, etc which a privately owned airline need not do (Flowers 2007 14). The state owned airlines also suffers from archaic laws applying only to them such as the retirement ...