External Business Environment of British Airways

This presentation discusses the external business environment of British Airways, including the structure and operation of the UK economy, current government economic policy and its impact on the service industry, income distribution, demographic trends influencing employment patterns, and analysis of social structures of people employed in British Airways.

EXTERNAL BUSINESS ENVIRONMENT

Structure and operation of UK economy
 UK economy is considered to be as the fastest growing and one of the largest
economies that features GDP rate. Thus, for operating the services in this economy,
there are various forms of market structure in which a company can perform their
business activities. Among all the forms of market structure, if the company selects
suitable market for operations then it directly influences the behavior and culture of
organization. The forms of market structures available in the UK economy are perfect
competition, imperfect, oligopoly, etc. British Airways operates its services under
oligopoly market as there are few firms and large number of buyers in this industry.
Further, when measured in size, UK economy is 5th largest national economy and 2nd
largest in EU and in nominal GDP, it is 10th largest in the world while 3rd largest in
EU. The economy of UK is the fastest growing in the G7 for 3 consecutive years.
Moreover, it is one of most globalized economies in the world. The service sector of
the UK contributes 78% of the GDP in the economy. This sector includes hospitality
industry, aviation, banking and financial sector, etc.

Contd.
 On the other hand, taxation rate of UK economy has been reduced to minimum extent
which is a very good sign of establishing new ventures in the country. Further, the
taxation payment has to be done to at least two different levels of government that is
local and central government. Moreover, in UK economy, there is efficient regulatory
framework which is also transparent. This encourages entrepreneurship with no
minimum capital requirement. Further, the labor market in UK is relatively flexible.
Moreover, the unemployment rate in UK came down to zero which has pushed the
growth of economy. Therefore, job security has been increased and this way inflation
rate came down. This is how the structure of UK economy has been formed and in this
way, economy of UK operates.

Current government economic policy and its
impact on service industry
 The economic policy includes trade, fiscal and monetary policies which are framed by
the government of UK. These policies have a direct and indirect impact on the working
of British Airways. Further, the fiscal policy laid down by the government is increasing
tax rates. This will impact the consumer’s demand because the prices of the airlines
seats and other facilities will get increase. Therefore, the demand may reduce which
will directly impact the profitability of the firm. Furthermore, the budget policy of
government also has an impact on the working of BA. The budget pass by the authority
may increase or decrease the prices of the products and services. Currently, the budget
has been reduced for the airline seats and in this way prices have been increased for the
same. This reduces the demand of the BA.

Contd.
 Further, the monetary policy also impacts the company in an indirect manner.
The interest rate of the UK is 0.5 percent and company can acquire loan at
least cost. Thus, there are many chances of expansion of this firm and they can
invest more in generating wealth. Thus, current monetary policy of the UK
economy impacts the British Airways in a positive manner. In 2015, 32.80%
surplus was there in Balance of Trade account. Thus, it can be said that BA
has produced the services more in UK rather than rendering it in other
countries.

Income distribution

Income, wealth, employment and occupational distribution
in relation to the provision of service operations
 The income was at top during 2009-2010 while in 2011-2012 it has fallen
down. Furthermore, the dotted line represents percentage of the total income
which are earned through pensions and investment. The solid line represents
the proportion of total income the employees of service industry receive after
paying off taxes to the government. Furthermore, the employment people in
hospitality sector is 2,441 which generate the turnover of £90.4bn.

Demographic trends influencing employment
patterns
Demographic factors include age, sex, nationality, annual income, background, colour,
etc. These factors put a greater influence on the pattern of employment in hospitality
industry. The main reason behind this changing pattern is that demand of the consumer is
changing due to which employment pattern has to be changed. The aviation industry seeks
to employ young as well as experienced candidates. It is because, young employees
provides creative ideas which will help in building innovative services for the changing
demands of consumers. On the contrary, it also wants to employ experienced candidates
so that they can implement those creative ideas as per the market trends. The age factor
has influenced the employment patterns in BA. Furthermore, gender is also one of the
factor which has impacted the employment pattern. For example, BA mainly hires female
candidates so that they can render services to the customers in an attractive manner.

Contd.
 This way discrimination get created which are against law. Aviation industry thinks
that female candidates can bring more market opportunities rather than male
employees. In addition to this, education also matters in this airlines. For this purpose,
educated employees are hired and this limit the employment of people in UK. As in
this sector, unskilled employees cannot be hired. Thus, employment has to be done by
inquiring about the educational background. If any person is having less education than
they can be hired for the purpose of cleaning, lodging, etc. This way discrimination is
done in this sector. Therefore, demographic trends impact majorly on the employment
patterns in British Airways.

Analysis of social structures of people employed
in hotel
 Analysis of social structure of people who are employed in British Airways have been
done. Social structure basically refers to as the interaction of employees who are
employed in the company with other staff members. It also involves building
relationships with their customers society. This further helps in establishing the long
lasting relationship with their customers. Further, the employment is done on the basis
that how interactive a person is in accordance with the customers. In BA, a candidate
with higher education is hired so that they should possess the knowledge of interacting
and building the relations with the society. Further, the employees of BA also possess
highest interpersonal skills which help them in interacting with the customers in an
effective manner which ultimately helps in increasing the repeat business.

Contd.
 Moreover, the company employs all those people who have highest qualification which
aid them in interacting with the people. Further, company also focuses on providing
training to the workforce in order to enhance the interpersonal skills among the
employees. This way social structure of the firm can be improved more. To gain
competitive edge among their rival companies, organization adopt wide range of
employees that render quality services to customers according to their class and
income. The structure in BA regulates the interaction among employees and customers.
The structure in this airlines provides guidelines to the employees within the cultural
norms so that cultural values and beliefs of customers never get undermine. The
guidelines within the cultural norms help in achieving the goals and aims defined by
the company.

REFERENCES

UK Labour market, 2014. [Online]. Available Through:
<http://www.economicsonline.co.uk/Competitive_markets/The_labour_marke
t.htm>. [Accessed on 15th Feb 2016].
 Chart of the Week: UK Income Distribution, 2013. [Online]. Available
Through: <http://www.economicvoice.com/chart-of-the-week-uk-income-
distribution/>. [Accessed on 15th Feb 2016].
 Economic contribution of UK hospitality industry, 2010.[Online]. Available
Through:
<http://www.bha.org.uk/wordpress/wp-content/uploads/2013/08/BHA-
Economic-Contribution-of-UK-Hospitality-Industry-Final-.pdf>. [Accessed
on 15th Feb 2016].

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