External Business Environment of 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.