Evaluating Business Environment and Its Effects

In this assignment, the business environment and its impact on companies like British Airways are discussed. The policy change allowing airlines to start flights on new routes without prior approval has given companies more freedom and scope for growth. The conclusion drawn is that the business environment greatly affects a company's performance and firms need to evaluate it properly to form their business strategy. Strict rules and regulations in the aviation industry of UK mean that companies must comply with these rules to avoid legal action.

BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Purpose of different type of organizations............................................................................3
1.2 Extent to which organization meet objectives of different stakeholders..............................4
1.3 Responsibilities of an organization and strategies to meet them .........................................4
TASK 2............................................................................................................................................5
2.1 Way in which economic system attempt to allocate resources.............................................5
2.2 Impact of fiscal and monetary policy on the business firms activities................................5
2.3 Impact of competition policy and regulatory mechanism on business activities..................6
TASK 3............................................................................................................................................7
3.1 Market structure and price as well as output decisions ........................................................7
3.2 Way in which market forces shape organization response...................................................7
3.3 Business environment of British airways..............................................................................8
TASK 4............................................................................................................................................9
4.1 Significance of international trade to business organization.................................................9
4.2 Impact of global factors on the UK business organizations..................................................9
4.3 Impact of policies of European union on the UK business organizations..........................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
British airways are the UK largest airline company in terms of revenue and fleet size.
This report is prepared on the business environment and every attempt is made to understand it in
proper manner. In the report, different organizations are described and their purpose is also
explained in detail in the report. After that responsibility of the firm towards stakeholders is also
discussed in detail in the report. In the middle part of the report economic system and resource
allocation in them is explained in proper manner. Along with this, monetary and fiscal policy and
its impact on business activities is discussed in the report. At end of the report, European Union
policies are explained in detail.
TASK 1
1.1 Purpose of different type of organizations
Following are the different type of organizations.
1. Public organization- These are government owned companies and the main purpose of
these firms is to make sure that their employee’s are working in better conditions. In
other words, it can be said that purpose of these firms is to do welfare of the employee’s.
Hence, it can be said that purpose of these organizations are different form private firms.
2. Private firms- These are those firms whose main objective is to earn profit. They also
focused on employee welfare (Ballard, et.al, 2012). But maximization of profit is the
main purpose of these organizations then employee welfare. Due to these reasons private
firms are making every effort to earn more and more profit in their business.
3. Nonprofit organizations- The main purpose of these organizations is to do welfare of the
needy people that may be orphan, blind or impaired from listening. Thus, purpose of
these organizations is totally different from public and private companies.
British airways are the one of the largest airline company of the UK. The vision of the
British airways is to become a premium global airline in the world. In order to achieve vision
mission statement is prepared. The mission of the British airways is to become favorite airline
globally by providing excellent services to the customers (Wirtz, Schilke and Ullrich, 2010). In
order to achieve mission objectives are prepared and its main objective is to adopt carbon control
measures that lead to less emotion of carbon from its airplanes. The vision, mission and
objectives are prepared in sequence. Vision is long term plan which is to become global premium

airline in the world. This can be achieved only when firm provide high level of service quality.
Apart from this British airways also have some of the CSR towards its stakeholders. Due to this
reason it prepares its objective to reduce carbon emit-ion from its airplanes. Hence, these
statements will certainly help British airways in achieving its objective.
1.2 Extent to which organization meet objectives of different stakeholders
Following are the important stakeholders of the British airways. Creditors- Without funds no business can be run in proper manner and these are those
entities that provide loan to the British airways and help it in running its business. It is
responsibility of the British airways to pay loan on time (Scheer, 2012). Mentioned firm
understand this thing and it always try to pay its loan amount to the relevant creditors. Employees- These are those who work for an organization and provide service on the
behalf of firm. They spent a substantial part of the day in the workplace and due to this
reason it is responsibility of the firm to take care of its employee’s. In past few years firm
carry out many welfare activities regarding its employee’s. Hence, to large extent it is
fulfilling its responsibility towards its employee’s.
 Government- It is an entity to which British airways pay a tax which is due for a year
(Weske, 2012). Firm is paying its tax time to time and due to this reason it can be said
that it is meeting objectives of its stakeholder.
1.3 Responsibilities of an organization and strategies to meet them
Following are the responsibilities and strategies that can be employed to meet these
responsibilities are as follows. Creditors- The main responsibility of British airways towards creditors is to make timely
payment of debt amount to them. For this British airways can follow a cash management
strategy under which it will do adjustment in its cash inflow and outflow. By doing same
firm will make sure that debt will be paid to creditors on time. Employee’s- British airways responsibility towards its employee’s is to do proper
appraisal of their performance and accordingly give an increment to them (López-
Gamero, M.D., Molina-Azorín, J.F. and Claver-Cortés, E., 2011). In this regard top
management of British airways can use three 360 degree feedback systems in order to
collect data from all employees. In this analysis data regarding employee’s performance

from other people point of view is collected. Hence, by following this strategy employees
performance can be measured in proper manner.
 Government- It is responsibility of an organization to make sure that it is not involved in
the manipulation of accounts. In this regard British airways can bring transparency in its
system. By doing so it can make sure that its top management is not involved in
corruption.
TASK 2
2.1 Way in which economic system attempt to allocate resources
Following are the economic systems that are seen across the globe. Free market economy- It is an economy in which government does not have any control
on any industry regarding resource allocation. Entire resource allocation is leaved on the
market forces. These forces determine price of resources and their allocation among
business firms. Socialist economy- It is an economy in which there is hard control of government on the
companies that are operating in the public and private sector (Reinhardt and Stavins,
2010). Government laid down stiff control on resource allocation. In these economies
rules prepared by the government regarding coal allocation are followed when coal is
distributed among the business firms. Hence, it can be said that pattern of resource
allocation is different in case of socialist economy then free market economy.
 Mixed economy- In terms of resource allocation mixed economy is a combination of the
free and socialist economy. In some areas government impose rules and regulations
regarding resources allocation. These rules are imposed in those areas which have a very
high strategic importance to a nation (Lee, Sohn and Ju, 2011). Whereas, in some
industries resource allocation is leave on the market forces. UK economy is mixed in
nature and due to this reason it can be said that government to some extent have control
on resource allocation.
2.2 Impact of fiscal and monetary policy on the business firms activities
Monetary policy
It is a policy that helps government in controlling money supply. There are some of the
components of the monetary policy like CRR, SLR and open market operations. By making

changes in rates of these components money supply is adjusted in an economy. When CRR get
increased and securities are purchased through open market operations then banks give a less
loan. Hence, if this actually happens in the UK then British airways will find it difficult to
finance its operations (Aspara, et.al, 2011). If operations will not be financed then operations will
get delayed and will negatively affect firm activities and its profitability.
Fiscal policy
It is a different policy and under this firm boosts investment in a nation. The components
of the fiscal policy are tax, public expenditures and budget. Budget is prepared for long term and
under this planned investment is made in different sectors in order to boost their growth. Under
tax, rates are reduced in order to enhance income level of the firms. By doing so government
tries to increase investment capability of the business firms. On the other hand, there is a public
expenditure which is an instrument to boost investment in an economy (Gharajedaghi, 2011).
UK government is giving due importance to the public expenditures in order to bring economy
out of recession. Under this investment is made through public private partnership (PPP) model
in order to give opportunities to the companies to earn profit in recession. Changes in all these
components affect British airways profit and cash flows. Hence, changes in both directly affect
business activities of the mentioned firm.
2.3 Impact of competition policy and regulatory mechanism on business activities
Competition policy has a great impact on the business activities of the British airways. As
per competition policy, firms in the UK cannot form a cartel in order to give tough competition
to the rival firms. If same is done then strict action can be taken against the firms. As per
competition policy firms operating in the UK aviation industry can not involved in the dumping
activities (Teece, 2012). Dumping is a term that is used to capture market share in the specific
market. In dumping product is priced at a very low price. It may be below or nearby to cost of
production. China is involved in such kind of activities but due to lack of evidence no case is
filed against same in the UNO. UK prohibited practice of such thing on its land and due to this
reason it signed an agreement with WTO. This agreement is commonly known as the anti-
dumping agreement. UK government also formed a law under name Monopoly & restrictive
practice (Inquiry & control) act 1948 in order to curb dumping of products by the airline
companies that are operating on its land (Giesen and et.al., 2010). In the UK there are regulatory
authorities like EASA or CSA. Civil aviation authority is authority that implements rules and

regulations at ground level in the UK. British airways require complying with the rules and
regulations of civil aviation authority. Hence, it can be said that competition policy and
regulatory mechanism are very tight in the UK.
TASK 3
3.1 Market structure and price as well as output decisions
Following are the market structures that are seen across the globe. Perfect competition market- In this market structure there are numerous firms that are
selling similar products. The price and output decisions are taken on the basis of
competitor moves and demand for the product in the market. Output decisions are mostly
influenced by the demand factor but in case of price competitor pricing strategy are
analyzed by the firms and on that basis price of the products are changed by the
companies (Osterwalder and Pigneur, 2013). In this way price and output decisions are
taken in the perfect competition market. Monopoly market structure- In case of monopoly market structure there is a single
company and price and output decision lie in its hand. Output decision are taken on the
basis of demand for the product but price is fixed at own discretion. In this way price and
output decisions are taken in the monopoly market structure. Monopolistic competition market- In this market structure there are some of the sellers.
In this market structure firms determine their product price on the basis of competitors
pricing strategy. But sometimes they charged high price in order to create their distinct
image among the general public. Output decisions here also taken on the basis of demand
for the product in the market. In this way price and output decision are taken in this
market structure.
 Oligopoly market structure- In this market structure there are little number of sellers. In
order to compete with each other their form a specific strategy (Liu, Cao and He, 2011).
Here also output decisions are taken on the basis of demand for the product and price
decisions are influenced by the competitor moves. This is the manner in which price and
output decisions are taken in this market structure.
3.2 Way in which market forces shape organization response
Following are the market forces that shape an organization response.

 Demand and supply- It is one of the market force that affects organization response.
Demand and supply both keeps on changing continuously. Sometimes they create threat
and opportunity for the firms (Klapper, Amit and Guillén, 2010). British airways prepare
a strategy in order to respond to change in the mentioned market force. Customer’s perception- Customer perception plays an important role in sales of the
company product. In order to prepare customer perception positive firm is improving its
service quality with passage of time. This is the reason due to which British airways is
the one of the well known airline in the UK.
 Technology- It is the one of the market force that influence firms to large extent (Werther
Jr and Chandler, 2010). British airways know that it needs to update its technology time
to time. Due to this reason, it is continuously improving technology consistently.
3.3 Business environment of British airways
Following are the components of the business environment to the British airways. Economic environment- It refers to the economy health of the nation. It directly affects
people income level, unemployment and inflation rate. Revenue of the British airways is
directly linked to the growth of travel and tourism industry. Currently, inflation rate is
high and unemployment rate is also high (Hill, Cronk and Wickramasekera, 2013). Due
to this reason there is less demand in the travel and tourism industry. Consequently,
companies like British airways are facing problem in earning high amount of revenue in
specific duration. Social environment- It refers to the people attitude and belief. These two factors
influence people preference towards specific product. There is no threat to the British
airways from this factor because its product is not against people attitude and belief. Political environment- Political parties of the UK are fully committed towards the
growth of the UK travel and tourism sector (Hair and et.al, 2015). Hence, this component
of the business environment is favorable to the British airways. Legal environment- There is lots of rules and regulations in the UK aviation industry.
British airways need to follow this. Otherwise, strict action can be taken by the regulatory
authority against same.
 Technology environment- Airline companies are continuously improving their
technology and due to this reason there is strong pressure on British airways to improve

its technology base. Hence, there is threat from this component of the business
environment to the firm.
TASK 4
4.1 Significance of international trade to business organization
International trade has a lot of significance of to the British airways. In outbound tourism,
tour by the foreign professionals is one of the emerging sector in the UK travel and tourism
sector. With increase in trade this tour numbers will get increased. Apart from this, business man
tour in the mentioned nation will also get increased. Hence, it can be said that from this segment
British airways will earn a huge amount of revenue in future. On other hand, British airways are
also providing cargo services which is in great demand in current time period. This service is
used to transship goods from one location to another (Welter. and Smallbone, 2011). With
increase in trade demand for cargo service will also get increased. Hence, this will act as
emerging source of income for the British airways. Thus, it can be said that intentional trade has
a lots of significance to the British airways. Further, business ties of the UK will also get
increased with other nations of the world specially countries like India and China. These are
developing economies and with there is a huge potential of demand for all sort of products.
Hence, in future demand for cargo service will increase.
4.2 Impact of global factors on the UK business organizations
Global factors have a large impact on the UK business organizations. These factors are
prices of crude oil, sharp fluctuation in currencies and recession in the market. Due to recession
travel and tourism industry is growing at a very slow pace in the UK. This industry has a 10%
share in the UK GDP. Due to low growth of this sector companies like British airways is facing
huge problem in earning revenue (Cavalcante, Kesting and Ulhoi, 2011). Due to sharp
fluctuation in currencies global trade is not growing at a fast pace and due to this reason revenue
from cargo segment is low for the British airways. Hence, it can be said that global factors to
large extent are affecting British airways. In terms of tourism many countries like China,
Malaysia and Thailand are performing well and due to this reason some pressure is observed in
the outbound tourism in the UK. This is affecting revenue of the companies operating in the UK
aviation sector. Hence, positive change in these global factors is necessary for the UK business
organizations.

4.3 Impact of policies of European Union on the UK business organizations
European Union policies are positively affecting UK business organizations. EU is
following a liberalization policy. Under this policy, it is gives a lots of relaxations to the
companies that are operating in the Europe aviation industry. As per new policy, companies
operating in the Europe can increase their seat capacity without taking permission from any
regulatory authority (Zott, Amit and Massa, 2011). Moreover, they can start their flights on new
routes. Earlier before doing same firms needs to take prior approval from the authorities. But
after implementation of this policy companies no longer needs to do so. Hence, under this policy
companies are getting lots of free hands. Due to this reason there is a lot of scope of growth for
the companies like British airways.
CONCLUSION
On the basis of above discussion it is concluded that business environment to large extent
affects performance of the business firms. Companies need to evaluate business environment in
proper manner in order to form their business strategy. There are very strict rules and regulations
in the aviation industry of UK. Hence, firms needs to strictly comply with these rules in order to
make sure that no legal action will be taken by any authority against them. It is also concluded
that monetary and fiscal policy greatly affects economy and companies. Hence, firm’s needs to
formulate strategies in order to deal with economic environment are legitimate manner.

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Online
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