Influence of Business Environment on British Airways

This report reviews the influence of the business environment on British Airways, a full service passenger airline. It includes a discussion on strategic analysis frameworks such as PESTLE analysis, Porter Five Forces Model, and Value Chain Analysis.

Individual Written
Report
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
The influence of the business environment............................................................................3
CONCLUSION................................................................................................................................8
REFERENCES:...............................................................................................................................9
Books and Journals.................................................................................................................9
Online.....................................................................................................................................9
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INTRODUCTION
The nature of the business environment is dynamic and that has an impact on the decision
making of the businesses. It is seen that the company has to analyse the business environment so
that they are able to operate smoothly (Cherunilam, 2021). This report is based on British
Airwards which is a full service passenger airline. The company has its headquarters in London
and the second largest UK based carrier (About British Airways, 2022). There is a discussion
related to the strategic analysis framework in this report. The frameworks help to analyse the
external environment of the business and take the right decisions that will favour them.
MAIN BODY
The influence of the business environment
The aggregate of all the forces and factors that are external to the control of an individual
business enterprise and have an impact on its functioning. There is a need of analysing the
environment in such a manner that business is able to take the right decisions that have an impact
on their functioning and growth (Möller, Nenonen and Storbacka, 2020). British Airways take
proper care of their external environment and take suitable actions according to the changes that
take place. The use of the following frameworks will help to understand the external
environment so that better decisions are taken.
PESTLE Analysis
It is a tool that helps to analyse the external factors that have impact on the business and
its performance. This helps the business enterprise to take strategic decisions based on the
changes that takes place in external environment. There are various external factors that have
impact on the operations of the British Airways and they are mentioned below:
Political Factors: It includes taxation, political condition, trade disputes, fiscal policies of
government, etc. There is direct impact of changes in the government policy on the working of
British Airways. At the time of Russian invasion of Ukraine, the flights were banned in Russia.
The political disturbance caused problems and the flights of British Airways were not allowed to
use the airspace and there were sanctions imposed. Due to this reason the cost of operations of
British Airways enhanced and the profitability showed a negative curve. The company has to
make changes in their routes and take decisions so that their operations are not hindered.
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Economic factors: Economical factors includes the exchange rates, interest rate, inflation
rate, employment rates etc. The Covid-19 pandemic causes problematic situation for British
Airways. There was wide spread of disease all over all the world and that is the reason
government imposed lockdown (Abu-Rumman, 2021). There were significant financial losses
being faced by British airways due to the pandemic situation and no passenger revenue. The
overall GDP of nation went down at the time of pandemic.
Social factors: Social factors include the behaviour of consumers, demographic factors,
segmentation of product, trends, consumer choices, responsibilities towards the society. The
business organisation must take care about the needs and preferences of the society so that they
are able to keep them satisfied. British Airways take proper care of the convenience of the
customers and provide customer centric services. They use the language in which the passengers
are comfortable. This helps them to carry on the operations in effective manner and satisfy the
needs of customers. British Airways assure that there is proper entertainment of their passengers
and this satisfy them.
Technological factors: There is regular update in the technology and that causes an impact
on the businesses and their operations. There is good technological advancement observed in the
UK that enhances opportunities for British Airways. The use of digital marketing is done by the
company in order to attract more customers to their services. They also use the latest technology
to collect post flight feedback from the customers and take measures. British Airways also invest
good amount of money in technology in order to ensure higher efficiency, better services, and
higher profitability.
Legal factors: Legal factors are the factors which includes the laws, rules and regulations
of the government, copyrights, laws regarding safety of the employees and the health laws and
taxation policies for import and export of the products (Nudurupati, Garengo and Bititci, 2021).
British Airways follow country specific laws so that they are able to operate smoothly and
manage their working. The company follows Employment law so that all the employees are
given proper protection and feel safe while working. They also follow the laws that are
applicable in airline industry so that they are able to operate without interference of government.
Environmental factors: There is need of taking proper care of the environment as the
company gets all the resources from environment. The environmental factors are the central
concerns for the British Airways. They work to minimise the negative impact on the
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environment and follow the model of sustainability. They work to bring carbon emission to zero
so that they can take care of environment. This helps them to enhance their brand image in
market.
All these factors are external to British Airways and have impact on the business
performance. It is seen that there is key role of studying each and every factor and taking the
business decisions accordingly. The company used latest technology in order to compete in the
dynamic environment. They also work to reduce the wastage of resources so that they are able to
keep the environment safe and healthy.
Porter Five Forces Model
It is the framework which is used to analyse the competitive environment of the
company. This tool helps the company to identify the strength and weakness. This tools
determine which factors are affecting the industry, how we can build the strategies against the
competitors, how profitability can be increase. Porter five forces in regard to British Airways is
as follows:
Threat of new entry- It indicates the entry of a new player in the market. New entrants
can easily take the business and can lower down the position of the company (Bruijl and Gerard,
2018). In airline industry, this factors have low impact on the firm because of huge cost of
capital required to start the business. British Airways is able to create good brand image due to
their years of experience and no new player can take away the market from them.
Buyers power- It defines the numbers of customers are there in the market for buying
the products. It indicates that buyers can easily switch to a new firm whenever they find the
product or service at low cost. In airline industry, this factor has high impact the switching cost is
low and the buyers have so many options. British airways must provide discounts, coupons in
order to attract new customers and retain the older once.
Suppliers power- This force indicates that the suppliers and their power. There is
moderate power of suppliers in case of British Airways. The oil suppliers supply the oil to
various industries and that is the reason the British Airways has to maintain relation with them.
This helps to get the supply on time and serve the needs and wants of customers in effective
manner.
Threat of substitute- This tool refers to availability of substitute product or service in the
market. Threat of substitute arises when a customers get option of getting same product or
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service in industry. The competitors are providing similar products to the customers and this
shows there is high threat of substitutes in airline industry. The company has to work on
providing quality services to the customers and gain lead over the competitors.
Competition in the industry- This force helps in identifying that how many competitors
are there in the industry against the brand. There is high threat of competition seen in airline
industry (Nam and Bao Tram, 2021). There are lot of competitors of British Airways such as
Virgin Group, EasyJet. British Airways provide quality services to the customers and this helps
them to retain the customers and gain lead over the competitors.
British Airways has to assure that they analyse all the threats present in the market so that
they are able to take effective decisions. It helps to carry on the work in effective manner and
attain lead from all the competitors present in the market.
Value Chain analysis
Primary activity
 Inbound logistics: The inbound logistics of British Airways are complex and include the
timely delivery of fleet of planes. They maintain good relation with suppliers and so that
they are able to deliver the services on time.
 Operations: It is one of the largest airline in UK. They provide their facilities in more
than 400 destinations and have huge scope. They provide quality services to the
customers.
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 Outbound Logistics: This is applicable to manufacturing companies and can also be
applied to airlines. They have their airports in more than 80 countries worldwide and
have effective handling of the baggage (Hamilton and Webster, 2018). They have good
information and communication system that helps to maintain their work.
 Marketing and Sales: They work to provide their marketing message to the targeted
customers in effective manner. The use of both the traditional marketing as well as digital
marketing is being done in order to attract more customers and reach them.
 Services: British Airways work to provide quality services to the customers. They also
provide post sales services to the customers so that they are able to retain them. The
feedback of the customers is also given consideration.
Support Activities
 Infrastructure: British Airways have their headquarters in UK and airport at more than
400 destinations.
 Procurement: They assure that the procurement is done in effective manner. The
inventory management is done in effective manner so that they do not face issues.
 Human resource management: The best and skilled employees are hired in the
organisation that helps them to carry on the work in best suitable manner (Khajeheian,
Friedrichsen and Mödinger, 2018). This helps them to attain effective position in market.
 Technological development: the use of latest technology is done by British Airways and
this helps them to carry on the operations smoothly. It also assists them to attract more
customers.
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CONCLUSION
From the above report, it has been concluded that there are regular changes that take place in
business environment. It is necessary for the businesses to check these changes and carry on the
operations by taking suitable decisions. The use of strategic analytical framework such as
PESTLE analysis, porter five forces and value chain analysis is done to take the best suitable
decisions for the business.
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REFERENCES:
Books and Journals
Abu-Rumman, A., 2021. Transformational leadership and human capital within the disruptive
business environment of academia. World Journal on Educational Technology:
Current Issues, 13(2), pp.178-187.
Bruijl, D. and Gerard, H.T., 2018. The relevance of Porter's five forces in today's innovative and
changing business environment. Available at SSRN 3192207.
Cherunilam, F., 2021. Business environment. Himalaya Publishing House Pvt. Ltd.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Khajeheian, D., Friedrichsen, M. and Mödinger, W., 2018. An introduction to competitiveness in
fast changing business environment. In Competitiveness in emerging markets (pp. 3-
11). Springer, Cham.
Möller, K., Nenonen, S. and Storbacka, K., 2020. Networks, ecosystems, fields, market systems?
Making sense of the business environment. Industrial Marketing Management, 90,
pp.380-399.
Nam, V. H. and Bao Tram, H., 2021. Business environment and innovation persistence: The case
of small-and medium-sized enterprises in Vietnam. Economics of Innovation and
New Technology, 30(3), pp.239-261.
Nudurupati, S. S., Garengo, P. and Bititci, U.S., 2021. Impact of the changing business
environment on performance measurement and management practices. International
Journal of Production Economics, 232, p.107942.
Online
About British Airways, 2022. [Online] Available through: < britishairways.com/>
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