Sustaining Competition in Business: A Case Study of British Airways

In this report, the importance of adapting to a changing business environment is highlighted. British Airways (BA) is discussed as an example, with strategies such as establishing brand loyalty, continually innovating, adopting changes, and expansion and diversification being crucial for staying ahead in competition. The report concludes that BA has successfully adapted to the changing business environment by framing its strategies accordingly.

Business
environment
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TABLE OF CONTENTS
Introduction .....................................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Purpose of different type of organization..............................................................................3
1.2 Key stakeholders of British Airways ....................................................................................4
1.3 BA responsibilities towards its stakeholders.........................................................................5
2.1 Economic system in allocation of resources in context of British Airways .........................6
2.2 Challenges faced by British Airways due to change in monetary and fiscal policy .............7
2.3 Impact of regulatory,competition policy and legal changes on BA ......................................7
Task 2 .........................................................................................................................................8
3.1 Impact of market structure on price and demand for airline seats.........................................8
3.2 Different players and market forces shape organizational response......................................8
3.3 Impact of Working practices and culture of countries in which British Airways operates . .9
4.1 Impact of global changes in trade regime .............................................................................9
4.2 Global factors which may impact BA....................................................................................9
4.3 Measures to be taken by BA to remain competitive...........................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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INTRODUCTION
In present scenario, understanding the role and significance of business environment is
very important for organizations. Business environment is considered of some internal and
external factors which directly or indirectly affects activities of a company. In order to survive
in long run and earn adequate profit, it is required by every business to frame strategies after
analysing internal and external factors. This report is based on British Airways which is also
known as BA in short. In terms of fleet size it is UK's largest airline and in terms of passengers
carried it is second largest. This reports highlights the entire business environment analysis of
BA.
TASK 1
1.1 Purpose of different type of organization
Every organization has its own aim and objectives which it wants to achieve in the end.
Some of the businesses operates to earn higher profits whereas some aims at benefiting the
society. Different type of organizations and their purpose is discussed below as:
 Private organizations- Private organizations are those businesses who operates with a
main motive of achieving higher profits. Such businesses are owned by private
entrepreneurs, corporations, agencies or association (Purpose of business organization,
2015). Some of the core objectives of such business includes higher sales, profitability,
high market share, competitive advantage etc.
 Non-profit organizations- These are the organizations whose propose is to develop
society and operates for the welfare of public. These businesses always work hard to
eliminate the problem faced by society such as poverty, illiteracy, child labour etc.
 Public sectors organizations- The government is the one which operates with the purpose
of providing high quality of goods and services to people in market at a very convenient
prices.
Vision of British Airways
The vision of British airways is to deliver world class airline services and make every
moment of traveller memorable.
Mission
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The mission of British airways is to always encourage people to choose its services
wherever they fly.
Short term objectives
 lower down the cost of operations
 Increase the level of employee satisfaction
 Increases its employee base
Long terms objectives
 To become world's most sustainable airlines
 To become world leading airlines brand in the marketing-mix
 To take care of the environment and society under which it operates
 To enter some new markets around the globe
1.2 Key stakeholders of British Airways
stakeholders plays very important role in the growth and success of organizations.
Further these are the individuals and parties which have impact of the operations of business
(Wensveen, 2015). British Airways has some major internal and external stakeholders which are
discussed below as:
External stakeholder
These are the people and parties which are indirectly associated with the airlines. Some
of the external stakeholders of BA includes:
 Suppliers- These are the businesses which supplies various items to the airlines so that it
can carry out its operation effectively. Managing and maintaining good relationship with
suppliers is very essential for the success of business. The suppliers provided, water, food
fuel and other things to the airlines.
 Government- The government is also one of the major stakeholder of BA. It has been
found that the laws and polices framed by government are required to be followed strictly
in order to survive in long run (Bertillo and et. al., 2013).
 Customers- These are termed as the most important stakeholder of any organization. All
the operations and activities of British airways are carried out only to increases its
customer base and make them satisfied. The pricing policy and level of services have a
direct impact on degree of customers satisfaction.
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Internal stakeholders
These are the individual which are inside the business and have a direct impact of the
operations of organization (Israel and et. al., 2013). The internals stakeholders of BA are
discussed below as:
 Employees- These are one of termed as one of the biggest assets of British Airways. It is
very essential for the organization to have a team of highly skilled and productive
workforce. At the time of decision making it is required by the airlines to involve its
workers.
 Investors- These are the people and parties which has invested their money in British
Airways. The investors should be also involved in the decision making process and the
airlines is required to provided adequate return on their investment at regular intervals.
 Owners – Owners are the one which are responsibilities for the overall management of
airlines. They set out the short and long terms objectives and also frame the rules and
policies of the airlines (Lange and et. al., 2015). The owners want that their objectives
should be achieved within the desired time period.
1.3 BA responsibilities towards its stakeholders
Stakeholder are very important for organizations as they support during hard times, assist
in getting completive advantage and also help in increases the sales and profitability. British
Airways has some sort of responsibilities towards all its stakeholders which it has always
fulfilled. The employees are provided with better working conditions so that they love coming to
the workplace and enjoy their work (Carpenter and Sanders, 2006). Along with this, they are also
provided with the opportunities for growth and development. Training sessions are organized at
regular intervals so that the skills and productivity of workers can be enhanced. On the other
hand, the investors are provided with fair return against their invest made in the airlines. Further
they are also encouraged to give their views and opinions at the time of making policies and
strategies. The owners are provided with adequate profits so that they can plan for future growth
and meet the financial needs for the airlines. In terms of external stakeholders, BA always try to
make sure that the best and world class airline services are provided to its customers. the
organization also have some responsibilities towards government and it has always submitted its
financial documents and taxes on time (Worthington and Britton, 2009). In addition to this, BA
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has always adhere to the environment and other rules which have been developed by the
government. In case of suppliers, the airlines timely pay all its suppliers and also always
appreciate their efforts and views. Thus, it can be stated that British Airways is well aware of its
responsibilities towards all its stakeholders and it has been always successful in accomplishing
those responsibilities.
2.1 Economic system in allocation of resources in context of British Airways
Economic system is termed as the process in which organizations determines three main
factors which are what to produce, how to produce and for whom to produce. This decision is not
easy and companies are required to be very careful at the time of determining the above stated
factors (Tushman and O’Reilly III, 2006). There are various types of economy which prevails in
market and they are discussed below as:
 Private economy- High growth rate and high profitability are the two most important
features which an private economy offers. The private enterprises are the one who enjoys
the entire power of making decisions. It can be stated that such type of economy is very
suitable for organizations such as British Airways. One of the main advantage of this is
that it will support the airlines to grow and expand by offering high growth rate and
profitability. In this type of economy the resources are allocated on the basis of free and
self directed market forces. The problem of what to produce is determined on the basis of
customers preference. Further producers are the one which defines how to produce and
for whom to produce is defined on the basis of purchasing power (Wensveen, 2015).
 Conmand economy- The feature of such kind of economy is that there are some
government owned regulatory bodies which takes care of the activities and operations of
businesses (Tepelus, 2005). Instead of focusing on generating higher profits a
government economy always seeks for the ways through which development of the
economy can take place. If British Airways operates in such economy then it may happen
that it needs to lower down its prices and lower down its margin of profits. Government
has full control over the allocation of resources in a command economy. Further In this
type of economy what to produce and for whom to produce is decided on the basis of
government preferences. How to produce is determined by government along with all its
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employees. In command economies all the resources and economies are centrally planned
in effective manner (Papatheodorou and Lei, 2006).
 Mixed economy- It is one of the most common form of economy which exists in
marketplace. There are some set rules and regulations which are required to be followed
and to some extent the businesses are also provided with opportunities to operate freely
(Samy, Odemilin and Bampton, 2010). It can be stated that if the airlines operate in such
economy then it may happen that it have to lower down its profits margin and need to
make some changes in its pricing and other policies. In mixed economy resources are
allocated with the integration of both government and business enterprise. Factor such as
what to produce is defined government and customer preference. Producers and
government both determine how to produce. The last problem of economy is determined
by purchasing power of people in market along with government of the country (Fu and
Oum, 2014).
2.2 Challenges faced by British Airways due to change in monetary and fiscal policy
Fiscal policy and monetary policy are some of the most powerful tools which are used by
the government of nations to manage the economy. Further in fiscal policy, the government
determines factors such the taxation and spendings. It can be stated that the rate of tax and
spending of people directly affects the sales and profitability of organizations such as British
Airways (Papatheodorou and Lei, 2006). On the other hand, with the help of monetary policy,
government uses tools such as interest rates in order to maintain and manage the demand and
supply of money in a country. British Airways has faced many issues and challenges with
regards to monetary and fiscal policy in the last one decade. The recession happened few years
ago directly made impact on the sales and profitability of the airlines. Due to recession, most of
the people reduced their spendings on activities such as travelling. This had a direct impact on
the operation's and activities of the airlines. Other than this, the increased tax rate also
encouraged people to lower down the use of airline services. Further high interest rate also
started to create the barriers in growth and success of BA (Balmer, Stuart and Greyser, 2009). It
was observed that the recession was one of the most hardest time which the airlines have ever
seen its last few years. In order to over come from the same, the organization took some tough
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decision of lowering down the prices of its services so that adequate demand can be maintained
in market.
2.3 Impact of regulatory,competition policy and legal changes on BA
The main objective behind regulatory and competition policy is to encourage the business
to use fair practises at the time of competing with each other. In earlier time, there were limited
rules and policies and the businesses were free to use their own practises and means to operate
in market. Further with the passage of time, there has been many new policies introduced and
legal changes which has happened. All these things has directly impacted the operations of BA
and has forced the organization to change some of their process (Markides, 2006). Th regulatory
and competition policy had both negative and positive impact on BA. In terms of positive
impact it can be stated that, following the such policies have improved the brand image of the
organization. On the other hand in negative aspects it can be said that it has lower down the
profit margin because the organizations is forced to use fair practise and pricing policy.
Enterprise act 2002
The enterprise act was formed in the year 2002 with the main objective to make some
changes in the competition law of UK in terms of the process of mergers. This made a direct
impact on the operations of BA and it directly promoted an idea of fair trading.
Competition commission
The competition commission was formed in the year 1999 and it was a non
departmental public body which was having main responsibility of taking care of mergers and
markets. One of the main impact of this commission on BA was that the regulation forced the
airlines to have a healthy competition with other airlines in market. Other than this, it also forced
the organization to deliver services that can benefit economy and customers.
Office of free trading
The office of free trading was having the responsibility to take care and protect the
interest of people in market. It has also affected the practises and policies of the airlines by
forcing it to use fair practises at the time of delivering services. Along with this, it has forced BA
to improve all the health and safety standards used.
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TASK 2
3.1 Impact of market structure on price and demand for airline seats
 Oligopoly market- One of the major characteristic of this market is that it has few large
organizations. Further the size of every firm that operates in oligopoly market is so large
that all its operation's and activities affects the conditions prevailing in market. Other than
this, in terms of decision making, all the firms that operates in this market are
interdependent.
 Monopoly market- It is a type of market in which there is only one seller which sell
unique products. Further monopoly market have restrictions on the entry and exist of the
firms. The techniques of production are not disclosed by act a barrier for other firms in
developing and selling same product in market.
 Monopolistic competition- In this type of market there are many seller which sell
different products and services to people. The differentiation in products is determined by
the selling cost which is the cost incurred in manufacturing the product. Organizations
which operate in this market have freedom with regards to their entry and exit.
 Perfect competition- It is a type of market in which there are many businesses and they
offer identical products to people in market. This means that all the firms are offering
same kind of products. There is no restriction on the entry and exist of businesses in a
perfect competition market.
British Airways operates in oligopoly market and one of the main characteristics of this
market is that the competition level is not so intense. Further due to this characteristic, the
organizations have some sort of power to set the price of products and services that they are
offering. Along with this, huge amount of capital and financial resources are required to enter the
airline industry which makes it very difficult for other businesses to enter this industry (Samy,
Odemilin and Bampton, 2010). BA has always tried to improve the quality of their services in
order to gain high degree of customer satisfaction and competitive advantage over other market
players. One of the major feature of airline industry is that the services offered are very similar
and it becomes very difficult for airlines to maintain and manage the demand in market. Even if
businesses have a right to drive price of their services, BA do not charge high prices because if it
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do so then the customers will directly starts using services of other airlines. In addition to this, it
will have a direct impact on the demand of British Airways.
3.2 Different players and market forces shape organizational response
 Demand- demand can be defined as the desire and willingness of people in market to pay
price for a particular product or services. There are various factors which influences the
demand of BA services in market. One of the major factors is income level of people.
For instance is the income is high then people will be encourage to spend the money in
making use of the airlines services provided by BA. High income will generate high
demand of services.
 Supply- Supply is defined as the total amount of products and services which is available
to people in market. The major factors which influences the supply of services of British
Airways are price, cost of operations, technology, government policy etc. for example the
increase in tax duties will directly results in lowering down the supply of airline services.
 Elasticity of supply- The elasticity of supply highlight the fact that if the price of product
or services rise then the supply also increases. In order to measure the elasticity of supply
ratio of proportionate change in supply to the proportionate change in price is calculated.
This means that if the price of services provided by BA rises then it will directly
increases its supply.
 Elasticity of demand- It is the responsive change in demand of a particular product due to
change its price. This means that if the price of services provided by BA rises then it will
lower down the demand in market. On the other hand, decrease in price will result in
increasing the demand.
Every organization is affected by the level of competition in the market and in case of
British airways also it is same. Further it faces intense competition from Japan airlines and
Lufthansa. BA is always affected by the policies and strategies adopted by its competitors. For
instance, if any of the above mentioned competitors adopts a new marketing strategy then it is
required by British airlines to change strategies (Papatheodorou and Lei, 2006). Other than this,
if Japan airlines starts providing services at low price then in order to maintain demand of its
own services it will be required by BA to change its overall pricing strategy. It has been observed
that the above mentioned competitors have employed some sustainable practises in their
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operations. It made direct impact on the strategies of BA and encouraged it adopt such practises.
Thus, it can be stated that the different players and market forces directly shapes the response of
British airways.
3.3 Impact of Working practices and culture of countries in which British Airways operates
Businesses are affected by the working practises and culture of the countries in which they
operates. British airways carry out its operation in more than 160 countries of the world and it is
required to adhere to the working practises and culture of the countries in which it operates. Fair
employment practises and the laws related to wages (Fu and Oum, 2014). It has been found that
some of the countries have very strict laws and policies which needs to be followed and if these
laws are not followed, legal penalties and fines can be imposed on BA. On the other hand, it
order to carry out effective operations in various nations it is also required by the airlines to
respect and reflect the culture of the country. For instance, when people of UK travel with BA
they see the food, drinks and environment of the airlines as per their culture. It directly creates a
sense of satisfaction among them and also encourage them to repeat purchase.
 Political analysis - The industry in which BA operates is termed as a highly regulated
industry. Most of the times the operations and activities of the airlines are influenced by
the tight regulatory control of government. These regulation are applied to the routes
which British airways choose to fly.
 Economic analysis- The airline industry is very sensitive in terms of any kind of
economic downturn. Further BA has a great impact on its sales and profitability at the
time of recession which occurred in the year 2008. other than this, the increase in oil
price and other related products has lead to decline in the sales.
 Social analysis- With the decline in the economy, some of the important social factors
such as income level and standard of living has also declined. People are avoiding to
chose the services of airlines in order to go from one place to another. The volume of
businesses traveller has also decreased.
 Technological analysis- The changes in technology has taken the competition among
businesses in airline industry to next level. Further the changing technology has forced
BA to maintain a website in order to handle the queries and complain of customer via
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internet. Along with this , the airlines was also required to adopt new system such as
Arrivals management system, departmental management system etc.
 Legal analysis- There are many legal framework and laws which has affected the
operations and activities of BA. Further the organization was required to take care of the
health and safety standards at the time of delivering its service. British airways was also
require to carry out fair practises of employment.
 Environmental analysis- British airways is required to take care of the water pollution,
waste management, air and noise pollution at the time of operating. In the last few years
there are many environmental laws and practise which have been developed and BA is
required to adhere to these laws strictly.
4.1 Impact of global changes in trade regime
WTO and other international civil aviation and tourism bodies have put the trade barriers
in every country because of that free trade cannot be accessed between every country. This has
impacted the working of BA because in many countries BA have limited its operations and it
directly impacted the sales and profitability of this company (British airways, 2015). Also, a lot
of tariffs and customs have to be paid by the company at every airport which directly affect the
profitability and bring complexity in working. WTO has put such barrier in order to have fair
trading (Bertillo and et. al., 2013). Thus, BA follows all the regulations and policies of civil
aviation and of WTO which helped the company to gain a sense of trust and confidence from its
customers because BA are not involved in any unfair trade practices. It is only the impact of
global trade regime that the organization has started to reduce its absolute carbon emission.
Further it aims at reducing 50% of its carbon emission by the end of year 2050 which is very big
thing for an airline company. BA is also trying to lower down the noise pollution and it is
because of the global trade regime that it has started to invest in quieter aircraft which creates
less noise. Other than this, it is working on its waste management practises and have achieved
the objective of recycling 50% of its waste.
4.2 Global factors which may impact BA
There are many global factors which may impact the operations of British Airways. Some
of them are discussed as follows:
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Government Policies/Regulations: Government of UK and its policies affect the business of
BA. As it is already known that this company is publicly hold and government interference
is more in this company. Thus the policies and regulations of BA is highly influenced by the
policies and regulations of government (Worthington and Britton, 2009). If new pricing
policy is introduced by the government than BA has to adopt that policy and have to operate
its business accordingly. Similarly, the government policy and regulations of other country
also to be followed by the BA as it is providing services in other countries also.
Economic Factor: The global economic factor highly influence the working of British Airways.
The economic down turn and recession period have a high impact on BA because at that
time customer purchasing power will decline and people will prefer less to fly through BA
because relatively prices of BA is higher than other flights (Narangajavana and et. al., 2014).
Also, the inflation and deflation rate of every country is different and due to this foreign
exchange rates also get fluctuated and this may result in fluctuating profits to the BA.
Cultural Factor: This factor also have a high impact because the according to the country's
culture the policy have to be designed by the BA. For example, food served in flights should
be according to the country's belief. In India pork and beef should not be served and in US
pork should be served firstly.
International Policies: Tariffs and other customs at airport have different rates in different
countries. So accordingly BA should determine the international policies and work.
4.3 Measures to be taken by BA to remain competitive
British Airways is one of the leading brand in aviation industry which provides
satisfactory services to its customers. Thus, it should continue its fair practices in order to sustain
competition. There are various measures which can be taken by the company to stay ahead in the
competition. Some of them are discussed as follows:
 Establish Brand Loyalty: BA should make their customer loyal towards its brand. This
can be done by providing services in a more improved manner and taking regular
feedback from them to bring improvement and also to have repeat business from them
(Lange and et. al., 2015).
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 Continually Innovate: the company should bring innovative services and products in the
market to gain competitive advantage in terms of quality and services. This will aid the
company to remain competitive in this dynamic environment.
 Adopt Changes: BA should analyze its internal and external environment and assess the
future changes and make its workforce to adopt the coming changes. BA thus make this
changes as an opportunities to match their standards with the latest changes. (Israe and et.
al., 2013) By implementing the changes in its business, BA can get first mover and
advantage and also competition can be maintained.
 Expansion and Diversification: BA can also expand its business in other countries where
opportunities are prevailing. Further, BA could diversify itself and go into hospitality
industry then it could establish its hotels or restaurant in airport lobby only. Thus, it lead
to gain competitive advantage.
CONCLUSION
From the above report it can be concluded that, business environment has direct impact
on the operations and activities of organizations. BA is one of the leading airlines in UK and it
also operates in many other counties. It can be evaluated that the airlines operates in oligopoly
market and it is affected by the strategies of its competition. Other than this, it has always been
successful in the maintaining the working practices and culture of the nation where it operates.
Thus, it can be concluded that BA has always taken care of the changing business environment
and has framed its strategies according to the same.
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REFERENCES
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Narangajavana, Y. and et. al., 2014. Prices, prices and prices: A study in the airline sector.
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