The impact of the external factors on the British Airways Essay

The impact of the external factors on the British Airways - Essay Example The paper tells that the price and output in every industry are determined on the basis of the market structure. Market structure of an industry, in turn, is determined by the number of players in the industry which results in the level of competition in that particular industry. Market structure of an industry is defined by four basic factors. Impact of these factors result in the market competition and the price is determined accordingly. Furthermore, with the increasing level of competition, the output is determined for arriving at returns to scale with increasing efficiencies for profitability. Additionally, the differentiation is also attributed to product and service in order to refrain from price wars in the competitive environment. The market structure and power are also affected by other factors such as ease and entry in the industry, the ease of substitute, and the sensitivity of the demand etc. Similar to other industries, the airline industry is also driven by a pattern o f competition that has defined the market structure in the global aviation and airline industry. Change in the factors of competition has changed the market structure of the Airline industry. For example, Liang, in a paper, has referred to the Airline Deregulation Act in 1978, control over the physical equipment, strengthened frequent flyer program etc still resist in transforming the airline industry into a perfect competition industry from its oligopoly market structure. On the other hand, the impact of the low-cost airline has further increased the heterogeneity in the market structure. Borenstein & Rose, in a paper, have referred that with reduced entry barriers and increased government support to the industry, has led the many carriers to enter the industry and create a challenging competitive environment. British Airways have taken into account the factors that have impacted the industry.