Understanding Market Structures and Business Environment

This assignment delves into the concept of market structures and their influence on business operations. Students will analyze various market types such as perfect competition, monopolistic competition, oligopoly, and monopoly. The assignment also emphasizes the role of the business environment, encompassing factors like government regulations, technological advancements, and economic conditions, in shaping business strategies and outcomes.

Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purposes of different types of organisation...........................................................................1
1.2 Key Stakeholders of British Airways....................................................................................2
1.3 Responsibilities of British Airways towards its stakeholders................................................3
2.1 Economic systems affecting the resources............................................................................4
2.2 Analysis of challenges due to fiscal and monetary policies..................................................5
2.3 Regulatory competition policies............................................................................................5
TASK 2............................................................................................................................................6
3.1 Market Structure of British Airways.....................................................................................6
3.2 Different Players and Market Forces.....................................................................................6
3.3 Impact of Working Practices and Cultures............................................................................6
4.1 Impact of Global Changes.....................................................................................................7
4.2 Impact of Global Factors.......................................................................................................7
4.3 Impact of EU policies on BA.................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment means the environment in which the organization is carrying on its
business, which affects its business both internally and externally. The organization functions
with the help of employees, managers, suppliers, management and ultimately the consumers.
Apart from these internal factors the environment is also affected by external factors such as
political, economic, social, technological and legal factors (Camacho, 2012). These all factors
together are known as business environment. Presenting here the analysis of current business
environment of British Airways including its business purposes, the environment in which it
operates, its behaviour in market environment and its ability to assess the significance of the
global factors that shape national business activities.
TASK 1
1.1 Purposes of different types of organisation
The organisations are categorised in mainly four parts in UK:
 Sole proprietorship concerns
 Partnership Concerns
 Companies
Presenting here the brief description of each type of organisation:
o Sole Proprietorship concerns: The sole proprietorship business is most common kind of
business in UK. About 20percent of sole proprietors in UK are indulged in retailing
business, another 20 percent in construction business, 10 percent in finance and another
10 percent in catering business (Iskanius, Page and Anbuudayasankar, 2010). The main
purpose of sole proprietorship is that it helps the proprietor in quick decision making in
according to the needs of customers. The proprietor has to bear all the risks and have all
the rights on the benefits earned by its business.
o Partnership concerns: Partnership concern means when two or more people carry on a
similar business and agrees to share all the risks and rewards equally or in any proportion.
The main purpose of a partnership is to share knowledge and ideas in such a way that a
common goal can be achieved (Nandi, 2010). All the rights and liabilities in a partnership
are written on a partnership deed prepared by the concern.
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o Companies: The company is a body corporate having separate legal identity. In the
present scenario British Airways is also a public limited company which is governed by
the laws in UK. Company can be further classified as limited or private limited company.
Company is formed with shareholders. The main purpose to form a company is to carry
on any particular business with a large sum of capital invested by its shareholders (Gani,
2011).
The British Airways is working with the following vision and mission to achieve its
organisational objectives:
Vision: The Company is running its business with the vision to become world's most
responsible airlines and performing its functions with the help of principles developed to achieve
its goals.
Mission: The mission of the company is to serve its customers in the best possible
manner so that the customers will be satisfied that they have been served with the service is
worth paying (Nimwegen and et al., 2008).
Long Term objectives:
 British Airways serves the customers in the best possible way because the customers are
the main source of profitability and for survival in the long run.
 They offer the best services in each and every possible way to its customers.
 The company is working with another long term objective to provide their services in the
big cities to capture a big market.
Short Term objectives:
 The British Airways is a privately owned airlines and willing to lead in this business in
UK.
 The company in short run carry an objective to meet its customers’ requirements and
improve the margins through generating new revenue areas.
1.2 Key Stakeholders of British Airways
The company must have the stakeholders which helps it in raising in the long run by the
knowledge of different stakeholders. The stakeholders should have a good relationship with
management of the company. The company has many stakeholders but out of them 5
stakeholders are very important and their contribution to the company is very prominent.
The key stakeholders of British Airways are as follows:
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 Customers: The customers are the big source of income for this company. The company
adopts various strategies and methodologies to keep the existing customers and gain
attention of new customers. Thus, customers have a great impact on the management of
this company. In case of company running in loss the customers plays an important role
to manage the company (Björklund, 2011). Employees: Employees play a vital role in an organization. In this company also
employees are the main stakeholders having the powers to attract and influence
customers. The employees and the management of the company do not have
coordination. Employees to get their wants satisfied conduct strikes many a time. The
company needs to overcome this weakness soon. Competitors: Since British Airways is a market leader therefore it has many rivals and
competitors. It has a direct effect on the decision making of the company. The turnover of
this company is £8.99bn in the year ending 31st March 2009 which is being followed by
Easy jet and Virgin Atlantic. To continue business with these competitors is a big
challenge for the company which can be overcome by adopting better planning and
strategies (McGovern, 2014). Suppliers: British Airways has so many suppliers but the biggest suppliers are Boeing
and Airbus. These two suppliers directly affect the interest of the company and vice
versa. British Airways has varies online suppliers also that are responsible for the sale of
tickets.
 Media: Media has very important role for the company especially in case of strikes. The
company has a good relationship with the media of UK (Dwivedi, 2009).
1.3 Responsibilities of British Airways towards its stakeholders
The management has following responsibilities towards its stakeholders:
 The company delivers a sustainable environment to its current as well as future
employees. The employees should be provided all the other facilities at their work place
which are required to them. For example, it conducts health and safety programs for the
employees.
 It is working in an effective manner with the suppliers and its customers so that the
organizational goal of the company can be easily achieved. Its main responsibility is to
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serve the customers in the best possible way (Atkinson, 2012). For example to provide
the customers with the tickets online with offers and gift vouchers.
 The aforesaid company is working in an environment which is pollution free and suitable
for the employees. The company has a minor impact on the environment. It conducts
pollution avoidance, green UK programs under its corporate social responsibility every
year.
 It invests in other projects too to contribute its efforts to the society in UK and overseas
for making the company more sustainable (Golub, 2013). It also has identified
performance goals which are diversified in four key areas such as workplace,
marketplace, environment and community.
2.1 Economic systems affecting the resources
An organization can be covered in any of these economic systems which are recognized by the
economists:
 Command economic system: This economic system deals with the economy in which
government has full control. The government has the power to make policies for the use
and distribution of resources. Government decides the pricing policy and wage system.
This company is not under this system, but if it has to survive in the command economic
system it has to follow the rules and regulations made by the government of UK (Shaikh,
2010).
 Market economic system: In this economic system the whole and sole power to take
economic decisions is of the business man only. Government has no influence on prices
and wages. It can be said as pure market economy where government has no concern
with the economic system (Xue, Shen and Ren, 2010). The said company is working in
this system where it chooses its market place and utilizes the resources and not affected
by government decisions.
 Mixed economic system: This economic system is the combination of both command and
market. If the company chooses to work in this economic system it chooses its market
strategy and government plays its role in deciding whether the strategy is as per the rules
and regulations.
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2.2 Analysis of challenges due to fiscal and monetary policies
1. Monetary policy: The monetary policy is related to the management of interest rates fixed
by the banks. During the past one decade the company is adversely affected due to hike
in the interest rates by the central bank. Its growth was hampered due to inflation. The
demand and supply ratio was also highly affected due to inflation (Johnson, 2006). The
company had taken loans from banks in past years and due to increase in bank interest
rates it had to pay higher amount of loan to bank, which lead to decline in the
profitability.
2. Fiscal policy: It involves change in tax rates and the expenditure policies. If the taxes are
lower that means the company's profits are saved, but in case of higher tax rates the
profits are used to pay more tax. In past few years the company had to face high fiscal
policy due to which its profitability was affected adversely. It had high expenditure
because of which profits were lower so they paid less taxes (Jordan, 2012). The company
was not having favourable balance of payments due which its economic structure was
hampered.
2.3 Regulatory competition policies
Presenting here the various competition policies which are regulated for the airline industries in
UK in context of British Airways: Antitrust and Cartels: In this policy the anti-competitive agreements are protested, so that
an environment of healthy competition can be established. It completely opposes the
policy of dominant market position. State Aid control: The competition policy of the company is such that it is not restricted
to a single market and it provides airline subsidies. Merger control: Competition in the airline business increases when two or more airlines
merge as a one and there remain the scope of dominant position (Elsevier, 2013). British
Airways is not merged with any other airline so that the question of dominant position
does not arise.
 Price competition: competition between these airlines and its suppliers can be for the
prices. There is an effective competition between the company and its suppliers
(Mendonça and Pires, 2010).
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TASK 2
3.1 Market Structure of British Airways
The company can be affected by following market structures
 Perfect Competition market: In this market many sellers are selling single product so the
competition level is very high. If the aforementioned company enters in this market it has
to provide the services to the customers at reasonable prices, so that the customers will
not move to other airlines providing similar services at cheaper prices.
 Monopoly market: In this market a single seller is available for multiple products. In the
airlines business monopoly does not exist. In case of this company if it has monopoly it
will dominate the market and it can raise its prices because there will be no competition.
 Oligopoly market: In this type of market few sellers dominates the industry (Tejvan,
2015). The given company is working in this market only, where it has few competitors
so the prices will be ineffective to other suppliers.
3.2 Different Players and Market Forces
In present time, customers demand has become quite dynamic and company need to meet
with the same in order to retain for longer. Presently customer is demanding for low cost airline
along with better connectivity to different destinations. However, same is not been supply by BA
in every context. However, it has modified the operation so that they can reduce the haul time on
grounds and offers services to customers with better connectivity. Also, it has risen the fleet size
in order to meet with the demand of quality and leisure travels. Through this, BA is able to attain
an edge within aviation industry by addressing the demand of customers up to certain extent.
Beside this, price elasticity of demand is elastic as change in price affects demand as well and
therefore company need to focus on this so that it can cater the attention of distinct customers
(Siklos, 2011). On the other hand, different players refer to competitors of BA that operates in
European region. In this regard, if competitor offers discount to customers as part of marketing
activity then BA also need to follow as part of remaining competent. This certainly affects
company’s profitability.
3.3 Impact of Working Practices and Cultures
BA is active in European continent that comprises of distinct culture and working
practices. The company develops its strategy accordingly so that it can meet with the expectation
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of varied customers. In this regard, BA offers better connectivity from London to whole world as
it is a business hub that caters the attention of distinct businessmen. Also, it needs to offer quality
and leisure travel facility considering the culture and working practices of businessmen of
Europe. For managing culture, company employs personnel from distinct culture so that it can
offer appropriate services to customers of different country (Flynn, 2015). Beside this, BA
schedules more inward flights to London during weekdays and outwards at weekend considering
the working practices. This helps the company in boosting its sales volume.
4.1 Impact of Global Changes
British Airway being an aviation giant engages in different set of activities such as
international trade and supporting to medium and small scale business. The company is giving
extreme support to SME in order to connect it with global customers as it is one of the key
elements of UK economy. However, globalization makes an impact on the business performance
of the aforesaid organization. Due to this, high extent of rivalry is witnessed by the company that
somewhere hampers its operational effectiveness. On the contrary, advancement in technology
helps the company in offering quality services in terms of better connectivity between
destinations, instant booking of tickets, choice of in-flight services and other related. In addition
to it, with the help of WTO (World Trade Organization), company is able to enter into restricted
market like UAE, Iraq, Kuwait and Middle East countries. With the help of it, company is able to
boost its sales and also able to increase its market reach (Welford, 2013). Beside this, BA is
focuses on reducing the carbon footprints so that air pollution can be reduced. Further, WTO
developed framework for trade that helps BA in functioning effectively at global level. Also, it is
able to develop products and services as per the needs and wants of the travelers.
4.2 Impact of Global Factors
For ascertaining the global factors and its impact on BA, PESTEL model has been applied
underneath:
1. Political and Legal Factors: With the stable political scenario in 27 countries where BA
operates, it is able to manage the operation in desired manner. Also, it has developed
relations with political parties of different countries that help in executing the business
without any flaws. Additionally, global organization like IMF and WTO developed
framework which supported in promoting fair trade and for this, liberalizes in tariff and
custom duties is done (Capros and et.al., 2011).
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2. Economic Factor: BA has been affected by economic downturn and high fluctuation in
the foreign exchange. This certainly affected the buying capacity of travelers and hence
BA loses its customer base majorly. This leads to rise in operational cost and decline in
profit.
3. Social Factors: The Company operates in different countries and faces issue with regards
to differences in the preferences and requirement of customers. Some of the travelers ask
for low cost airline whereas some seeks for high quality hospitality (Iskanius, Page and
Anbuudayasankar, 2010). Due to this, company faces problem in developing strategies
that best meet with the requirement of diverse customers.
4. Technological Factor: The Company has used technology up to great extent which helps
in delivering quality and smooth services to the travelers. Also, it aids in enhancing the
operational effectiveness by using highly advanced technology and equipment.
5. Environmental Factor: BA has focuses on carbon emission and applied efforts within
the context of declining carbon footprints in order to lead towards sustainability
(Camacho, 2012).
4.3 Impact of EU policies on BA
EU helps in developing framework where company can operate in favorable
environment. Also, it develops distinct policies with regards to travel, competition and aviation
from which BA is able to function without any barrier. In this context, EU focuses on
minimizing organizational waste within aviation sector and therefore BA abides by the same and
utilizes environmental friendly material and has also developed proper mechanism for waste
disposal. The company also works on reducing carbon emission and nitrogen so that sustainable
business practice can be followed (Jordan, 2012). In addition to it, EU focuses on customer’s
safety as well and developed law in this regard as well. Same has been followed by the company
and it has installed safety equipment in flight and on ground as well. This has affected the
company’s profitability. Beside this, BA makes shift for the employees in order to follow
employment act developed by EU. From this, employees are not ask to work more than 48 hours
a week. This leads to high pressure on management at the time of peak load and they need to hire
more number of employees for same profile (Nimwegen and et al., 2008).
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CONCLUSION
The British Airways is working in an oligopoly market so it needs to fix the prices as per the
customer requirements. It is well known for its quality services so it should maintain the same. It
can provide its employees with the better working environment, so that the employees can
contribute in achieving its objectives and goals. The company being the worlds one of the best
airlines should meet the corporate responsibilities so that it can fulfil its vision.
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Shaikh, S., 2010. Business Environment, 2/E. Pearson Education.
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Online
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