Changes in Services of British Airways as Per Prevailing Trend

The operational cost of British Airways (BA) is influenced by various factors such as economic conditions, technological advancements, and environmental policies. An increase in disposable income can lead to enhanced demand for services, while the adoption of new technology helps BA improve its core competence and customer satisfaction. However, environmental policies aimed at reducing CO2 emissions have resulted in significant capital outflow. Furthermore, policies such as anti-trust laws, industrial regulations, and EU policies have an impact on BA's operations.

Business Environment
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Purposes of various types of organization.............................................................................3
1.2 Impact of stakeholders on the business of British Airways...................................................5
1.3 Responsibilities of British Airways for their key stakeholders.............................................6
2.1 The role of economic system in resource allocation..............................................................7
2.2 Impact of monetary and fiscal policies on British Airways..................................................8
2.3 Impact of other policies on the functioning of British Airways............................................9
TASK 2............................................................................................................................................9
3.1 Impact of market structure on the pricing decisions of British Airways ..............................9
3.2 The impact of market forces on the operational activities of British Airways....................11
3.3 Impact of business and cultural environment on the behavior of BA.................................11
4.1 Significance of international trade.......................................................................................12
4.2 Impact of other global factors and policies on British airways...........................................13
4.3 Impact of policies made by EU............................................................................................14
Conclusion ...................................................................................................................................14
REFFERENCES ...........................................................................................................................15
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INTRODUCTION
Business environment refers to those micro and macro environmental factors that directly
impact the performance of organization in market. Here, the micro factors refers to internal
elements within the company like, employees, technology that influence its operations.
Thereafter, the macro factors refers to external elements like, customers, shareholders that
indirectly influence the operations of company (Fernando, 2011). In the present report, the
learning will be shown about the implication business environment in the functioning of British
Airways. The company is known as largest airline of UK providing its services in more than 183
countries. In the present report, impact of fiscal, monetary and competition policy on British
Airways will be highlighted.
TASK 1
1.1 Purposes of various types of organization
There are various types of organizations working in functioning at present with different
motives. They are detailed out below:
 Public companies: It is the organization that is allowed to sell its registered securities to
the general public. However, they can sell their securities through stock market. Public
companies manages their work flow by considering the growth of in capital to maximum
extent (Batra, Kaufmann and Stone, 2003). For instance, NHS is public company whose
aim is to provide effective medical services to citizens of UK.
 Private company: It is the organization that is privately owned by some individuals.
The main objective of functioning of private company is to grow their capital by
investing in other business so that good amount of return can be provided to the
shareholders of organization. For instance, British airways is private company whose
objective is to grow in different countries.
 Partnership company: It is company owned and operated by more than one individual
who also share their profits and losses (Bhatt, 2001). The main objective of partnership is
to increase the mutual interest or benefits of both the parties. For instance, John Lewis
partnership co is to provide retail services and increase its profits.
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 Charity or NGOs: They are those organization that operate for the benefit and welfare
of the society. The main objective of working of charities and NGOs is to help the needy
and poor by providing benevolent services. For instance, Age UK is charitable
organization providing welfare services to old age people.
 Sole proprietorship: It is a business enterprise owned and operated by specific
individual who is personally liable for its debts. The aim of sole proprietorship is to
increase revenue and minimize losses (Bojadziev and Bojadziev, 2007). For example,
Rusell Walker and Co is a sole proprietorship whose objective is to increase its profit by
providing accounting services.
British Airways is largest aviation company of UK in terms of its fleet size. The company
provides its valuable services in 183 countries. Following are the vision, mission and objectives
of company.
 Vision: The mission of British Airways is to provide global connectivity to its customers
by expanding its airline network. Further, the companies vision is to stay competent to
provide outstanding services to its customers (About us. 2010).
 Mission: The mission statement of organization represents that British Airways wants its
customers to feel safe, confident and secure when they are flying in BA. Further,
company wants to maintain its leading position in its home country; London.
 Objective: The key objective of company is to fulfill the needs of customer’s and
increase its margins. The company wants increase brand loyalty among its customers by
meeting the core needs of customers in best manner.
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1.2 Impact of stakeholders on the business of British Airways
Stakeholders represents those individuals and groups that impact or can be impacted with
the functions of organization. To ensure smooth functioning it is important for British Airways
to do stakeholders analysis before taking any business decisions. Following are the stakeholders
that play dominant role in influencing the performance of British Airways:
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Illustration 1: British Airways
(Source: About us. 2010)

Key stakeholders
 Government: The UK government plays an important role in influencing the operations
of aviation industry. It imposes regulations and policies which should be strictly
followed by British Airways to avoid penalties, legal suits and actions from government.
 Customers: The customers of company play a important role in influencing the
operations of company (Cabrera-Suárez, De Saa-Perez and García-Almeida, 2001). The
major concern of customers is regarding ethical services, value for money, quality of
services etc. It is important for company to consider the needs and preference of
customers to retain them in future.
 Employees: The human resources of British Airways help in attaining its overall
objective and ensure its growth and profitability in long run. Therefore, to retain
competent and qualified employees company should satisfy their needs (Child and
Möllering, 2003). Suppliers: The goods and services provided by suppliers are the key input of the
different processes of British Airways. To avoid more bargaining power in the hands
suppliers, company should try to maintain good terms with its key suppliers.
Impact of challenges on the key stakeholders
6
Illustration 2: Stakeholders
(Source: Hall, 2004)

 British airways is taking different steps to sustain increasing competition with Virgin
Atlantic. BA is adopting cost leadership pricing strategy which enables the customers to
services at low cost (Bojadziev and Bojadziev, 2007).
 The company organizes crew membership programs and give training and development
to its employees which increases their skills and help in retaining them.
 Meetings are held with key stakeholders to involve them in decision making process and
increase their involvement in company.
1.3 Responsibilities of British Airways for their key stakeholders
 Government: It is important for British Airways to pay tax, duties etc on time. For
instance, various government policies like, competition, equality etc should be adhered
strictly by company (Hall, 2004). Further, while expanding its business operations in
foreign countries or merging with foreign company permission should be taken from UK
government.
 Customers: In order to retain its brand loving customers, company should identify their
needs and preference. Thereafter, their complaints should be resolved and they should get
value for the money paid. For instance, company have designed a website where
customers can register their complaints, suggestions, share their experience with BA etc.
 Suppliers: It is important for company to timely settle the payment of suppliers.
However, company should have good communication with suppliers to develop good
terms with them (Capon, 2009). For instance, BA is depended on its suppliers or travel
agents like Expedia, cheap fights etc as mostly customer take help of these agents.
Further, company is depended upon its suppliers for getting fuel for airlines, refreshments
for passengers etc.
 Employees: British Airways should provide job satisfaction, security, healthy work
environment etc. to its employees (Dennis and Harris, 2003). At present company is
taking due care of its present and future employees. For instance, while recruiting
employees equal opportunities is given to both men and women.
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2.1 The role of economic system in resource allocation
The economic systems play a major role in the allocation of scarce resources to ensure
maximum benefit to the society. The various types of economic system are explained as follows:
 Traditional economic system: In this type of economic system, the present generation
continues to use the resources inherited by their forefathers (Faul, 2008). The main
objective of this system is maintain the customs, culture, value, religion and beliefs of a
nation. British Airways consider their traditional system for maintaining the cultural
values of London.
 Command economic system: As per this system, the resources are allocated by the
centralized authorities. Thereafter, the economic activities are controlled and managed by
the government authorities for better administration.
 Market economy: The major emphasis of market economy is on the purchasing
decisions of customer’s. Thereafter, the production decision depends upon the demand
and supply conditions prevalent in market. Here, in this economy the resources are in the
hands of private enterprises or individuals (Market structure, 2011).
 Mixed economy: This economy is aggregation of market and command economy. The
resources are owned by both government and private individuals. The mixed economy
system provides more flexibility. The British Airways operate in mixed economy,
8
Illustration 3: Market structures
(Source:Market structure, 2011)

company allocates resources according to the market forces. The company was
privatized in 1987 and after that there are less interference of government in the
operations of BA.
2.2 Impact of monetary and fiscal policies on British Airways
Monetary policies refers to interest rates set by the government of UK on loans, bonds
etc. taken by various organizations and individuals that further help in controlling the inflation
arte.. Fiscal policies represent the changes in tax rates which is majorly due to the policies made
by government authorities. The impact of these policies can be further explained as follows:
 Monetary policies: The recent monetary polices had positive impact on the functioning
of British Airways. With the aid of recent monetary policies government improved
market conditions. The government reduced the amount the banks of UK are required to
keep in reserve (Gabriel and Rosenthal, 2004). Therefore, bank are able to provide more
loans and funds to both business and individuals. Therefore, the spending power in the
hands of customers increased. More and more people started traveling to foreign nations
using services of British Airways. This further increased the proficiency of company.
 Fiscal policies: The fiscal policies represent the government spending policies that
impacts other rates like, tax, interest etc. According to the present fiscal policy, the
government spending on infrastructure development has increased (Vinten, 2002).
Therefore, government is investing more funds on building new airports, improving
security system at airports, promoting tourism and extra services for foreign tourist etc.
This has increased the flow of customers in UK which results into more customers for
British Airways.
2.3 Impact of other policies on the functioning of British Airways
There are serious impact of legal and regulatory policies framed by UK government.
They impact of one such policy is explained as under:
Competition policy: According to the competition policy, company is required to
maintain fair and healthy competition with its rival companies. Therefore, it lays restriction on
unfair trade practices like, negative publicity of rival, fixing prices with suppliers etc. Therefore,
to ensure healthy competition, government of UK deregulated aviation industry. This increased
the competition for British Airways as new firms like, Easy Jet etc. Therefore, company was
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forced to reduce its fare prices, launch low cost carriers etc. Further, British Airways increased
its promotional activities and also provided benefits like free refreshments to customers traveling
in BA (Competition policy, 2015). Further, the company was forced to pay penalty of £270m for
violating the competition policy as company was accused of fixing fuel prices with its suppliers.
Further, this resulted into destruction of market image in the eyes of customer’s. Hence, it can be
said that competition policy have serious impact on the functioning of British airways.
TASK 2
3.1 Impact of market structure on the pricing decisions of British Airways
There are various market structures that are functioning at present. They major types of
markets are described below:
 Perfect competition: It is the type of market where there are large number of buyers and
sellers selling homogeneous product and services. In this type of market demand is
directly influenced by the pricing decisions. For instance, increase in prices by one
company may increase the demand of products of rival firm. Therefore, due to high
competition among businesses, customers are benefited as they get the services in
affordable prices.
 Monopoly: It is type of market situation in which there is single producer and large
number of buyers. Therefore, it gives opportunity to producer to do price discrimination
10
Illustration 4: Types of market
(Source: Types of market, 2008)

and charge whatever he wants to charge. However, customers in this type of situation are
mostly exploited (Types of market, 2008).
 Oligopoly: In this type of market situation the entire market is controlled by few business
enterprises. Therefore, in this type of situation seller are few and buyers are more. The
seller firms sell differentiated products. However, the prices are determined by the
organizations are on the basis of quality of services provided to customers.
In this respect, it can be said that, British Airways is operating in oligopoly market. There are
few airline company providing air services like, Virgin Atlantic, Easy Jet etc. However, British
Airways is operating under non price competition with its rival firms. Further, company uses its
brand image for attracting its customers. However, the prices are set by company on the basis of
quality of services but still it align its prices with its rivals pricing policy to maintain in long run.
3.2 The impact of market forces on the operational activities of British Airways
The market forces have direct impact on the functioning of company in market. The
market forces refers to demand and supply elements. Further, these forces impact the
profitability of British Airways. For instance, during holiday seasons there is high demand of air
services among customers therefore, British Airways increases its prices to improve its margin
and start providing more services to enhance its profitability (Pugh, 2007). Further, the increase
in supply results into low demand and impact the prices too. Further, the resources of British
Airways remains un utilized and increase the operating cost for company. Therefore, to reduce
the operating cost, again the organization is forced to reduce its prices. Thereafter, the company
reduces its prices and increases its customer base.
In addition to the demand and supply forces, there are other forces like, competition that
impact the BA operations. Due to increasing competition, company is forced to give cost
effective services to customers (Taylor, 2006). Further, environment is also a major force that
impact the functioning of company. Therefore, to reduce adverse impact of its operations on
environment BA is doing intense research to find environment friendly fuel and processes.
3.3 Impact of business and cultural environment on the behavior of BA
Being a global company, British Airways is providing its services to diversified range of
customers of different cultural backgrounds etc. Therefore, it is important for company to give
proper consideration to business and cultural environment. Therefore, by providing its services
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company should ensure that its services does not hurt the sentiments of any of its customers. For
instance, while serving the lunch in BA the management should ensure that vegetarian customers
should not get vegetarian food only (Vikram, 2014). Any mistake in this respect can impact the
image of company in the eyes of customers. Thereafter, the manager of British airways should
design policies that are in best interest of customers. Further, services should be offered in such a
way that it matches the culture and traditions of country. For instance, while launching new
airlines in China, company can appoint local staff, air hostess etc. They will further help in
understanding the needs of customer’s and offer proper services. Therefore, the proper
knowledge of culture of country will help in increasing the business and ensure overall growth of
business enterprise.
4.1 Significance of international trade
International trade is important factor that help in ensuring the economic development of
nation. Therefore, after deregulation and liberalization policies, British Airways is able to expand
its business operations by indulging in international business. The major benefit of international
trade is that it has increased the market base for BA. Therefore, company can provide its services
to wide range of customers (Palmer and Hartley, 2006). Therefore, the company is able to
increase the customer base which also enhanced profitability of business enterprise. Presently,
company is providing its services in 183 countries with the aid of international trade policies.
This has increased the market reputation of company and it is well recognized among its
customers. Further, the international trade, increases the competition for company as it have to
face rivalry from local companies. Therefore, company provide affordable services which are
advantageous for customers. However, British Airways is required to operate its international
business within the guidelines generated by World trade organization.
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4.2 Impact of other global factors and policies on British airways
There are various global factors that impact the functioning of British Airways at
international level. They are explained as follows:
Factors Impact
Political Government increases service tax due to which
company have to increase its prices which
results in fall in demand.
Social The company is required to make changes in
its services as per the prevailing trend which
increases the operational cost of BA.
Economical The increase in disposable income can enhance
the demand of services (Faul, 2008).
Technological Adoption of new technology will help
company in increasing is core competence and
ensure greater customer’s.
Environment To reduce Co2 emission, BA is doing massive
research which is resulting into large amount
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Illustration 5: PEST Analysis
(Source: Fernando, 2011)

of capital outflow.
The policies that can impact the operations of BA are as follows:
 Anti trust policy: It is policy framed by government to reduce the power abuse done by
monopoly firms. Therefore, company cannot indulge in unfair and unhealthy trade
practices. Further, to avoid legal actions its important for British Airways to do make
power use of its power (Ayyagari, Demirgüç-Kunt and Maksimovic, 2008).
 Industrial policy: These policies represents the rules and regulations that should be
followed by every aviation organization. It includes environment rules like, reduction of
noise while landing or take off. In this respect, British Airways is doing research to
identify new technology that will reduce the sound. Likewise, company is taking
measures to reduce Co2 emission.
4.3 Impact of policies made by EU
 Due to deregulation policy competition increased, and British Airways has to reduce its
prices and increase services for customers (Competition policy, 2015).
 Due to violation of anti trust policy, British airways had to pay huge amount of penalty,
£270m to government.
 Due to equality policies, company is forced to give employment opportunities to both the
genders ; men and women. Further, disabled people should also be appointed by
company at fair wages.
 According to the WTO policy, British Airways have to pay proper amount of custom
duties and other charges. Further, it is required to help government in restricting the
number of visitors in UK for ensuring the security of nation.
CONCLUSION
Summarizing the entire report, it can be concluded that business environment have large
number of impact on the functioning of British Airways. Therefore, to remain competitive its
important for company to study its business environment properly before taking any business
decisions. The company should strictly follow industrial, competition and other policies framed
by UK government and EU.
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REFFERENCES
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