The big enviroment of Virgin Essay Example

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Impact of External and Internal components on the Industry



The rapid and random changes that occur in their external and internal business environments are surprising many companies. The current situations of environments that business gets from the various changes have increased because of e-commerce that has become more relevant. A good example is whereby Amazon started to sell their books online a year before even Barnes even though of starting their business online (Schermerhorn, 2010). The changes in resources and leaderships are considered the most vital components of an internal environment while general, and competitive changes are used to define the external environment of business (Schermerhorn, 2011).

Statement of Problem

The two categories of the environment have a significant impact on the company’s organization, and their influence can influence degree of success of the company or even the formation significance of the company (Schermerhorn, 2010). The document will look at the influences that component of the internal and external environments causes on the performance of various businesses. For these considerations, the paper outlines the impacts of external and internal environments on Australian airline business (Schermerhorn, 2011). The general environment includes socio-cultural factors, economic, political, demographic, and technological components. However, the specific components include customers, regulators, partners, rivals or competitors, and suppliers.

Two external components

External components refer to all components that affect general business even though the effects vary. They include economic status of the company, social, cultural status, politics, and demographic trends in a particular country. For this case, two components of the external environment will be considered. Therefore, economic and political components will be considered (Schermerhorn, 2010).

Definitions of the external environment

Economic component refers to a country’s economic stability, inflation rates, deflation rates, exchange rates, unemployment rates, savings rates, gross domestic rates, and the labor availability rates. All these chunks of the economic components have a great impact on business (Schermerhorn, 2010). Some theorists have recorded in their definitions that when inflations rates of a country are high, there are chances that the business will record a decrease in their sales because even the revenues collected will have no significant value to their operations (Capon, 2009). In addition, political component refers to a scenario whereby, business performance also depends with a country’s legal system, and the willingness or attitude towards enabling business operations and encouraging entrepreneurship skills among its people (Schermerhorn, 2011). This also includes current philosophies and the way they define business operations, and then the antitrust laws that have enabled regulations to favour operations of their businesses (Schermerhorn, 2010).

Impact of each component of each environment

Inflation rate of the economic environment

Since its inception, the aviation industry has faced many challenges some of which have extended to affect well being of the industry, and the human resource working in the industry. However, in the most recent years, there have been developments whereby the industries have been facing various challenges such as high costs of fuel, and high rates of laying off employees. While the unemployment rate has remained a challenge for many countries, Australia most unemployed age ranges between 15 years and 21 years. The inflation rates and the effects of the economic crisis that occurred in 2008 went ahead to affect the Australian whereby, it affected its employment rate, at some point the industry was forced to lay off some workers and employ new or use automated systems (Capon, 2009).

Due to the recession that occurred in 2008, the rate of inflation increased, and the industry started to experience high costs on fuels, and high costs of maintaining its infrastructures. For example, there are chances that a recurrent fuel price development has changed operational standards of the airline industry (Schermerhorn, 2011).

The high rates of inflation dates back in 2008 have affected the industry. The cost of travelling from one destination to the others has increased, and the overall requirement of increasing the costs has made many people look for optional means of transport. Furthermore, some have looked for great opportunities to accomplish their tasks online without travelling. As such, the industry strategic movements and evaluator strategies have become a big challenge for the industry (Capon, 2009). Resources are acquired through outsourcing or local finding, but because of the global inflation rates, the company fails to obtain a secure source of resources because almost all nations have been affected flow of ideas, and resources allocations (Schermerhorn, 2010). When the prices are high to travel, targeted people will have a tendency to find for optional sources of transport means such as sea, or road, in order to save some amount for other accomplishments. Apart from increased costs to travel, people have shunned away from using the airlines industry. Baggages fees have also rocketed, as well as the costs on mergers have also changed this mean that the capacity of the airline industry to hold a sustainable means of transport for its people has greatly reduced. Consequently, there have been needs to change the cost patterns in order to attract people for the services (Schermerhorn, 2011).

Legal Regulation laws on airlines industry (Political environment)

ACCC has recently authorized coordination between several airlines industries such as the Qantas, American lines, Emirates and the Virgin (Nancarrow, 2013). The ACCC has not also restricted entry of Tiger airways, and VA into making collaborations with the joint ventures. The entry of VA will make Virgin hold a 60% share in Tiger Australian airlines. These arrangements have been established and agreed upon by the involved countries even though their performance will rely on agreement terms with the government and aviation authority of Australia. An agreement has been made between the airline competitors, but there are chances that the industry will involve cartels, contract terms, and an understanding that will tend to lessen the competition between the airlines (Nancarrow, 2013). This is because the ACCC has the full mandate to authorize the agreement, and if one airline defaults the agreement, the ACCC has the mandate to question the allegation and may give a verdict or way forward for the matter (Capon, 2009). The best think is that, it will lessen the competition between the airlines. In addition, the benefits generated will be available to different stakeholders including the passengers.


The external environment has component that may sabotage operations and performance of a company or business, especially when a sustainable and strategy is not applied. Economic condition of the world or country in which a business has a significant impact on the business operations and the problem even extends further, when inflation rates become evident or when rates of unemployment are realized. The paper has clearly identified that, the inflation rate which is a component of economic environment and then external environment affects the way an organization manages its resources and how they obtain the resources, and the situation in a business becomes worse when political condition are also versatile.


Capon, C. (2009). Understanding the business environment. Harlow: Financial Times Prentice Hall.

Nancarrow, D. (2013). Competition regulation in the Australian airline industry. Retrieved from airline-industry

Schermerhorn, J. R. (2010). Management. Hoboken, N.J: Wiley.

Schermerhorn, J. R. (2011). Management. Hoboken, N.J: Wiley.