The Known Unknowns: Exploring the Impact of Competition Policy on Business

The provided assignment content consists of various academic texts, articles, and books on competition policy, international human resource management, business environment, regulation, employment, and the economy, among other topics. The sources include Pearson Education publications, journals such as Academy of Management Review and Power Systems, IEEE Transactions on, as well as online documents from government websites and research institutions.

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION......................................................................................................................1
TASK 1......................................................................................................................................1
1.1 Identify the purposes of different types of organisation...................................................1
1.2 The extent to which an organisation meets the objectives of different stakeholders.......2
1.3 Responsibilities of an organisation and strategies employed to meet them.....................3
TASK 2......................................................................................................................................4
2.1 How economic system attempts to allocate resources effectively...................................4
2.2 Challenges due to fiscal and monetary policies on business environment faced by
British airways in the last one decade....................................................................................4
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the
activities of a selected organisation........................................................................................5
TASK 3......................................................................................................................................6
3.1 How has the market structure of the airline industry impacted the pricing and demand
for airline seats.......................................................................................................................6
3.2 Illustrate the way in which market forces shape organisational responses using a range
of examples.............................................................................................................................7
3.3 Judge how business and cultural environments shape the behaviour of a selected
organisation............................................................................................................................7
TASK 4......................................................................................................................................8
4.1 Discuss the significance of international trade to UK business organisations.................8
4.2 The impact of global factors on British Airways.............................................................8
4.3 The impact of policies of the European Union on British Airways.................................9
CONCLUSION........................................................................................................................10
REFERENCES.........................................................................................................................11

INTRODUCTION
Business environment is an integral part of efficient and effective business
management. Moreover, it include several forces that shape the product line and business
segment. Here, the report is inculcating about business environment of British Airways and
briefing varied purposes for which different organizations exists and specifically the scenario
of British Airways has been discussed to determine its purpose to operate in the market.
Moreover, all types of organizations have their stakeholders towards which they have varied
responsibilities. In this regards, the below discussion is about strategies used by British
Airways for fulfilling the requirements of its stakeholders. Also, the paper is explaining
national environment of UK to analyse its influences on company’s operations and functions.
Furthermore, global factors together with its impacts on business strategies of airlines is
being assessed and the content is summarizing by elaborating European Union’s regulations
effects on the activities of BA.
TASK 1
1.1 Identify the purposes of different types of organisation
Organizations includes individuals group who share sole purpose and engaged in some
business operations. Companies conduct their business in different manners with distinct
purposes. The following is the description of three main types of corporations:
Private sector companies are run and managed by individuals and their group with the
purpose of enhancing sales, business growth, increasing share in the market and to earn more
profits. Some common examples of private sector firms are franchise, partnership firms and
sole traders (Cavusgil and et.al., 2014).
Public sector firms are managed and run by government bodies or government. These
organizations stand with a purpose of using public money effectively for community’s
benefits and to offer important public services at affordable rates. Some common public
sector companies are Social security, heath service, universities, police, defence, etc
(Cederholm, 2014)
Voluntary groups or third sector companies are not run or managed by specific entity but
make responsible someone for its adequate operation. These type of organization purpose are
to support some particular type of individuals like physical handicap, orphans, etc (Clayton
and Hilz, 2015).
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Hence, organizations are established for different purpose and particularly British
Airways provides its services in the market for raising shareholders capital and to dominant
travel industry. The purpose of BA can be clearly understand through its mission, vision,
short and long term objectives as follows:
Mission – British Airways is dedicated for offering year round flights at low fare to
worldwide destinations along with quality cargo services and professional maintenance.
Vision – The Company is thriving to get dominancy in world travel for creating largest
network route in the globe and inspire its flight for all (Davies and Ormosi, 2013).
Objectives – British Airways performs its business operations with the following objectives:
To remain the premium customers first choice for international flights;
To offer quality services along with improve online services;
To continue expansion of top-tier cities list by airline partnerships;
To meet needs of customers.
1.2 The extent to which an organisation meets the objectives of different stakeholders
The following are four main internal and external stakeholders of British Airways and the
manner in which company meets their respective objectives:
Internal stakeholders
Employees – BA is a leader of airline industry and is therefore basically concerned with
active involvement of its every stakeholder. The company’s most significant internal
stakeholder are employees, as they support in meeting business objectives. Also, in this
relation, the airline has been following engagement strategy for improving relations with staff
members. The company has developed a forum in which workers can engage formerly with
the business to enhance their welfare. Moreover, the company has established the Trade
Union Council for creating a culture of active involvement and dialogue. The airline also
attempts to offer good place of work for its staffs by active engagement and consultation
(Edwards and Rees, 2006).
Investors – These are main stakeholders who add to the organization development. BA
applied an effective corporate governance as well as has developed an investor day where
they provided with opportunity to discuss their problems. Additionally, the organization for
its investors produces a comprehensive annual report for keeping them well informed. Also,
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it applies public reporting standards and financial accounting as a manner to promote
transparency. Moreover, the company has an effective strategy of governance for promoting
fiduciary responsibility and ethical behaviour (Gillen and Hazledine, 2006).
External stakeholders
Community – The Company supports conservation of surroundings as an important part of its
environment sustainable tactic. In the same way, it also attempts for lessening carbon
footprints to enhance fuel efficiency. Moreover, the organization adds into education by
introducing learning programs for community. British Airways effectively engaged in
projects of conservation at the places where it performs its business operations. Additionally,
the airline has comprised group of community around Heathrow for the security forums and
safety of industry (Godfrey, 2008).
Customers – These are most important external stakeholders of organization. Hence, a
customer focused strategy is followed by British Airways that aims to fulfil the requirements
of all class of customers. The particular strategy is aligned with the company’s core mission
that is to provide excellent services to customers. This is performed by airline for enhancing
its presence in main markets throughout the globe. Also, it focuses on providing quality long-
haul services that perfectly meet the customers’ expectations. Moreover, market segmentation
strategies are followed by BA to focus on customer’s satisfaction and experience (Harrison,
2013).
1.3 Responsibilities of an organisation and strategies employed to meet them
British Airways employ its strategies to concentrate on its long and short term purpose,
ensuring effective resource allocations and adequate operations for the shareholders benefits.
The main responsibility of company is to serve various stakeholders interests who have
influence on the business activities. The business model of British Airways is structured on
the basis of control and information for its running plus growth according to regulation and
laws hence serving expectations of legal and government bodies. Also, the company is
responsible for hiring best manpower and offer them several benefits to maintain their level
of interest with the business. The coordination of their skills and knowledge for excellent
performance will satisfy their expectations in type of rewards and increased return on the
investment made by investors (Hillary, 2000).
Besides above, the company ensure regular involvement with its stakeholders for
concerning their issues and enable them for continuing their sustainable development and
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growth. For fulfilling its corporate social responsibility the company has developed a website
“onedestination” for communicating with all stakeholders to discuss on issues related to CSR
to enable an open communication forum for them. Also, the organization has several
responsibilities towards community well-being. In this regards, the company attempts to
make profit by considering the purposes of its investors and shareholders. Additionally, at
present the organization is working towards fulfilling community need as well as
environment by a CO2 offsetting scheme approved by government where raised money is
used for supporting the renewable energy utilization all around the globe. Also, the company
is supporting local societies in nations where it operates by offering cargo service, free flights
and donations (Irons and Shapiro, 2011).
TASK 2
2.1 How economic system attempts to allocate resources effectively
The role or method of production and distribution which takes place in the society at a
given platform i.e., market refers to an Economic System. The basic source from which the
result or output is produced is known as Resources. Typically, resources are man, material,
capital as natural resources and knowledge, machine, or other assets as manmade resources
that are transformed to produce benefit. The resources are limited which must be utilised in a
manner which gives the maximum benefit to the society (Kanter, 2003). In the event of
scarcity of these resources, administration has to decide the proper allocation of available
resources. There are three basic question to the allocation of resources as what to produce,
how to produce and how much to produce. Mostly, the decisions are based on marketing
mechanism. The resources are allocated to meet the buyers demand on the basis of what
people choose to buy. Certain types of economic systems are capitalism, socialism,
communism, mixed economy etc. Generally, mixed economy concept is followed in which
number of industry are managed and owned by state. Also, private industries are given liberty
to operate large number of industries by posing some level of intervention with the objective
of effective utilisation of resources (Metcalf, 2015).
2.2 Challenges due to fiscal and monetary policies on business environment faced by British
airways in the last one decade
Fiscal and monetary policies are installed and fixed to result in the betterment of trade,
inflation or many other economic factors. Such policies affect different industries at different
level. Fiscal policy affects demand curve by the increase or decrease in government spending
though increase or decrease in tax rates (Metcalf, 2015).
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Monetary policy affects the aggregate demand for goods and services by reducing
interest rates and investment spending through increase in money supply and vice versa.
Recent monetary policies adopted by federal government are sure to have effect, but how it
will impact employment, growth and prices in British airways are still unknown. So far, there
seems a little change in the spending habit of consumers; travellers will have fewer available
resources to travel by air for pleasure and comfort during economic shortfall in the nation’s
economy (Nordhaus, 2009).
Deregulation is one of the fiscal policies that have impact on airline industry. Since
deregulation in 1979, substantial growth has been shown in the airline industries. Over 200%
new carriers resulted in jobs to thousands of employees in various parts of the nation.
Average ticket prices remain unchanged until today since 1979. This increased new
connecting flights through this new open sky policy, increasing passengers, minimizing
opportunity cost.
Taxes levied on air carriers and excise laws are another fiscal policy which has affected
the business environment of British airways. Such taxes and fees collected by government are
allocated to the improvement in the various services provided at the airport to the passengers
including security, airpark facilities etc. These fees and taxes collectively represent
approximately $52 or say 26% of a standard 200-dollar round trip airline tickets (Air
Transport Association, 2005). This association also explains that such taxes and fees resulted
in the reduction over 129,000 jobs resulted many carriers into bankruptcy. Because of the
reaction on price increment there is little movement of funds to meet the demand (Price,
2007).
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the
activities of a selected organisation
The main aims and objectives of competition policy are to promote competition; built
markets work better and contribute towards the increase in individual market’s efficiency and
better competitiveness among different industries. This policy aims to ensure
 Technological innovation
 Effective price competition
 Promoting interest of consumers
This policy and other regulatory mechanisms have major effects on the activities of a selected
organisation. There are four pillars of such policy such as:
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 Antitrust & cartels – This includes removal of agreements which try to control or
restrict the competition through different barriers such as price-fixing agreements.
Also, cartels reduce the power of market giants. This affects the activities of an
organisation because it is one of the top industries (Rios, McConnell and Brue, 2013).
 Market liberalisation – This means introducing new competition in the market. This
pillar does not have a much effect as an organisation is a well-established organisation
which may not be affected by new competitors.
 State aid Control – This includes the new rules and regulations set by government in
the market. This may restricts unwanted trading of goods and services. This affects
the activities as the government may restrict such activities undertaken by given
organisation (Aguilera and et.al., 2007).
 Merger control – There are certain rules and policies which restricts the mergers
which reduces the power of growth through mergers and acquisitions. Some activities
having less profit requires merger with the high efficient companies for increasing
their profit.
TASK 3
3.1 How has the market structure of the airline industry impacted the pricing and demand for
airline seats
The airline sector is dominated by some airlines including British Airways that operate in the
Oligopoly market structure, which comprise following features:
 Dominated by large enterprises;
 High fixed costs and entry barriers involved in airline business, for example purchasing
of aircraft that makes it critical for new players to enter into the industry;
 Organizations selling homogeneous commodities, i.e. homogeneous services
comprising flight frequencies, inflight services, ticket booking and same destinations
(Behn, 2003).
In the above structure of market, British Airways set less price for putting threat to
potential new players. Moreover, it shows their willingness and ability to safeguard market
share plus enable the organization to enjoy position of price leader in the market. The
demands for airline seats follows “kink” demand curve, as below the price demand is high
elastic and inelastic when demand is more than the current price. If British Airways lowered
its prices than competitors will also follow this trend because of increase in demand. But if
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the company will going to increase the price than rivals will not do the same, which would
definitely result in fall in income corresponding to less demand (Bowen, 2002).
3.2 Illustrate the way in which market forces shape organisational responses using a range of
examples
Market forces refers to supply and demand affecting the price and quantity of products
or services. The company’s marketing activity influences the equilibrium of supply and
demand of airline services and thus have significant impact on profitability and reputation of
business. The ability of British Airways to judge demands of the market enable them to
supply services effectively to keep clients satisfied. That will also help in increasing profits as
British Airways would have calculated the suitable profit margins for being able to sell the
services in cost-effective ways (Button, 2009).
For example, the airline industry of UK is highly competitive and key players are
investing huge amount in bringing inflight entertainment and new seat technology as
provided in Airbus A380. This had resulted in advent of premium-only carriers as compared
to the British Airways traditional model of providing two cabins with a premium and one
economy cabin. On the other hand some carriers are only focusing on providing low cost
airlines. British Airways will require to constantly involve its researchers to determine the
market forces and effectively meet the consumer demands (Day, Hobbs and Pang, 2002).
3.3 Judge how business and cultural environments shape the behaviour of a selected
organisation
Business environment are uncontrollable and affect the functions of an organisation.
They are the set of different conditions such as economic, political, legal etc. Business
environment have two components. One is internal environment which includes 5M’s that is
men, machine, material, money and management. Other is external environment that is socio-
economic factor, geo-physical factors etc (Dunn, 2002).
There is an intense influence of culture on organisation. Particularly, in United States,
there is culture of “rugged individualism”. Everyone has to care of him/herself. Culture has
their unique set of values, beliefs, and way of doing the business. The particular activity
undertaken by an organisation may or may not be accepted by the culture of the society
where it operates. Every organisation should produce the goods and services keeping in mind
the cultural environment (Hechavarria and Reynolds, 2009).
There is a great impact of Business and Cultural environment on organisational
behaviour. Business operation of any company depends on the business and cultural
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environment of the company in which it operates. Business environment is different for all
the companies. The business environment which is suitable for a particular undertaking may
not be suitable for another undertaking in same area. There are two kinds of business
environment one is economic and other is non-economic environment. The economic
environment includes economic policies and economic conditions. Whereas, non-economic
environment includes natural, demographic, technology etc. All the above mentioned
environmental factors influence the behaviour of selected organisation in one or the other
way (Hooper and Greenall, 2005).
TASK 4
4.1 Discuss the significance of international trade to UK business organisations
The international trade concerns with the exchange of capital, goods, and services
across borders of foreign regions. International trade is very significance for British Airways
as that would help the organization to reduce dependency on UK market by bringing up more
opportunity in global market and growth in market share. The global operations of British
Airways are significantly affected by international organizations like WTO and other civil
aviation and tourism federations. British Airways global operations consist of providing
passengers with international freight services, deployment of aircraft carriers across
international territories, business aviation and other commercial services, besides purchasing
products and services from international airports plus suppliers of aircraft carriers and fuel
(Hunter, 2006).
Increasing globalization trend around the globe have contributed in boosting the
mobility of persons across countries and the organization provides services for more than 200
destinations in the world. Further, the international trade increases global income which
results in more international tourist travel and higher shipment of goods for which air
transport has a comparative advantage of cost-effectiveness. British Airways with increasing
economies in air transport is able to further reduce their fares at competitive levels (Marston,
2001).
The International Civil Aviation Organization has been formed in 1944 to supervise
international operations of aircraft by putting regulations, frameworks, and procedures for
standard operations of civil flights at international level. International standards and
recommended practises are received by British Airways, besides, ICAO helps in providing
technical assistance through various training programs plus facility of air navigation and
traffic controls (McDowell, 2004).
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4.2 The impact of global factors on British Airways
Global factors that have significant impact on British Airways includes Social factors
like terrorism, war; political factors, economic factors such as international tariffs and taxes.
For example, post 9/11 terrorization is the major factor which causes dramatic reduction in
airlines business in particular British Airways which major revenue comes from operations in
European and USA destinations.
Another area which affects British Airways is the international price changes of oil
which have huge impact on operations and profitability plus market share. Reduction in
prices helps to reduce expenses and greater cost effectiveness, as the airline is able to charge
lower fares by which tourism increases as more people are willing to spend for holidays. On
the other hand, oil prices increment would raise the cost of materials which adversely affect
the revenue and profitability of the organization (Simon, 2000).
Economic factors refers to the exchange rates, economic growth globally and the
business setting prevailing in the airline industry. International tariff and taxes have
significant impact on the firm as they would be difficult to compete with local players if
tariffs are higher. Similarly, exchange rates affects the revenue of global operations where
sudden change in exchange rates of Euro may affect the financial position in the balance
sheet of global business. Similarly, political factors refers to political instability like when the
government changes, the policy related to trade, and economy also changes. For example,
one government may be more liberal than the other one may be more restrictive which have
significant impact on global operations of British Airways (Smale and et.al., 2006).
4.3 The impact of policies of the European Union on British Airways
The policies of European Union has substantial impacts on the commercial activity as
well as operational standards along with structure of the market, entry, competition, and
consolidation of aviation business. The increase in hub-networks has been resulted in
improved connectivity within European countries and between Europe and other continents.
Moreover, the route flying rights within European continents and outside are determined by
the agreements with EU bodies. Within the EU, a single internal market is present for air
transportation with liberal pricing system and free access to EU destinations for airlines. This
single market is also called as the European Economic Area (EEA) comprising the EU,
European Free Trade Area countries and Switzerland (Tepelus, 2005).
EU regulations also governs Airport slots by providing guidelines within the framework
of International Air Transport Association. Merger regulation is another area in which EU air
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transport regulates the operators for the purpose of the operation of the agreed international
air services under bilateral air services agreements. For example, in 2010 EU commission
approves the merger of Iberia with British Airways and the merger entity is competing in
various markets like passenger short haul and long haul services, and cargo or ground
handling services. Fare settings and Safety are other major concerns regulated by EU. EU
regulations also developed security standards by assessing threats to the business and
development of policies for the protection of staff members, passengers as well as assets of
British Airways (Simon, 2000).
CONCLUSION
The above report is concluding that stakeholders are considered as important part of
company that can influence business operations both directly and indirectly. Due to this, BA
has employed several strategies for meeting expectations of its all stakeholders that are
engaged with the organization. Also, decisions in relation to effective resource allocations are
taken by company’s management by evaluating economic conditions of prevailing business
environment. Besides this, the organization activities are influenced by varied monetary and
fiscal strategies that is implemented by management to balance competition level and stable
market conditions. Furthermore, Civil Aviation Organization greatly influenced the activities
of British Airways for controlling overall costs of business.
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