Strategic Environmental Conditions for British Airways

To maintain their competitiveness, British Airways should continually monitor and adapt to changes in the business environment. This can be achieved by diversifying products and services across different countries, focusing on providing a high level of service to passengers, and being responsive to changing market conditions. By doing so, they can enhance their profitability and productivity, ultimately benefiting their customers.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION.................................................................................................................. 1
Task 1..................................................................................................................................... 1
1.1 Purposes of different types of organization...................................................................1
1.2 Extent to which organization meets objectives of stakeholders.....................................2
1.3 Responsibilities and strategies of an organization employed to meet them....................2
TASK 2.................................................................................................................................. 3
2.1 How economic system allocate resource effectively.....................................................3
2.2 Impact of fiscal and monetary policy on business.........................................................4
2.3 Impact of competition policy and regulatory mechanisms............................................4
3.1 Market structure impact on price and output decision...................................................5
3.2 Market forces shapes the organizational structure.........................................................5
3.3 Business and cultural environment shapes the organization..........................................6
4.1 Significance of international trade to UK......................................................................6
4.2 Impact of global factors on UK organizations...............................................................7
4.3 Impact of EU policy on UK business............................................................................8
CONCLUSION...................................................................................................................... 8
REFERENCES..................................................................................................................... 10

INTRODUCTION
Business environment is the aggregate of all those factors which influence a business
internally or externally. It includes analysis of mainly two factors i.e. internal and external
factors. This report is going to depict the purpose of different types of organizations and their
responsibilities and strategies. The report represents the way in which resources are allocated
effectively by taking British Airways into consideration. This organization provides airline
services internationally and has its presence at the global level. It was established by United
Kingdom government in 1972 to manage the two nationalised airlines: British overseas
airways corporation and British European airways.
Task 11.1 Purposes of different types of organizations
There are various types of organizations exist like partnership, sole proprietorship and
non-profit organizations. Different organizations have distinct purposes of working like some
organizations work for profit motive whereas others for non-profit motive. Product can be
developed or improved by taking feedback from consumers to increase the productivity
(Dettwiler, Lindelöf, and et.al, 2006). There are different forms of organizations as detailed
below:
Partnership: Partnership is a relationship between two or more than two individuals
to carry out a business. Its purpose is to benefit all the partners by its invested assets and to
strengthen the coordination and trust among partners.
Non-profit organizations: NPO’s are those firms whose motive is to benefit the
society. They may be in the form of trust, sport clubs, mutual societies and cooperative
societies. Their purpose is to help and benefit the people. They do not aim at earning high
profits but they provide help to people and reinvest the profits to attain goals.
Private organization: These are those organizations which are not owned and
operated by government. It works for the profit motive. British Airways falls under the
category of private organization. BA is the second largest airline in UK and has the largest
fleet size. By keeping in mind the mission and vision, company has accomplished their
objectives like improving and innovating their way of working (Yu and Ramanathan, 2012).
1.2 Extent to which organization meets the objectives of stakeholders
Stakeholders may leave a huge impact on business. It includes employees,
government, creditors and shareholders. The detailed analysis for stakeholders of British
Airways is presented underneath:
1 | P a g e

Employees: Employees are the most important assets of an organization. British
Airways offers free uniforms, cafeteria and discount facilities to its employees. Even they
provide incentives and promotions to motivate them. At the time of recruitment, more stress
is laid on E.Q. rather than I.Q. It is assumed that a person with better EQ can adjust properly
with other employees. It can be therefore said that British Airways is effectively meeting the
needs of its employees.
Shareholders: Shareholders are the real owners of organization. They invest in order
to earn attractive dividends. British Airways remains successful in providing proper dividends
to its shareholders. Even shareholders may apply for discount on airline flights. Shareholders
may get discount of 10%. This in turn indicates that British Airways attempts to meet all
kinds of requirements of shareholders.
Customers: Customers simply want to get the best for what they have paid. British
Airways take care of the customers’ needs and wants by providing quality services. They
focus on attracting the customers by providing various discounts and schemes. Moreover, the
organization adopts policy to refund money when flights get delayed (Murthy, 2014).
Government: In every economy, government has adequate level of control in all the
business operations. As British Airways is a private company so, government does not have
much involvement. However, organization needs to properly follow the rules and regulations
framed by government. They do not perform illegal practices.
Mission, Vision and short-long term objectives of British Airways
Its mission is to expand business and to enhance its brand value in different nations. It
also focuses on minimising the impact firm’s operations on environment like air pollution
and noise pollution.
Its vision is to become the most responsible airline in the world and to provide the
best services to customers.
Its short and long term objectives – Its short term objective is to bring improvement
in the service provided. They focus to beat targets on punctuality.
Its long term objective is to be the global premium airline in the whole world and to
meet the customer's needs and improve in customer services.
1.3 Responsibilities and strategies of an organization employed to meet them
British Airways has many responsibilities to be fulfilled so as to meet the objectives
of organization. They have to make everyone satisfied either it is shareholders or employees
2 | P a g e

or customers. The responsibilities of British Airways towards its stakeholders are stated
underneath:
Employees: Responsibility of British Airways towards its employees is to provide
proper and regular training. This in turn results in increasing the efficiency and effectiveness
of employees. British Airways should ensure that no discrimination is created among its
employees on the basis of caste, gender and creed (Kourteli, 2000). The organization should
take utmost care to satisfy the rights of its employees.
Shareholders: As British Airways is a private concern so, shareholders play a major
role. The organization should provide sufficient amount of dividend to its shareholders.
British Airways should focus on increasing the profit so as to create value for shareholders.
Their strategy is to attract the investors by providing free bonus shares to the new
shareholders.
Customers: The organization should offer quality services at reasonable prices so as
to satisfy the needs of customers. British Airways should understand the tastes and
preferences of customers in order to satisfy their needs. Their strategy is to provide great
customer service so that all the customers on different route would enjoy the service.
Environment: British Airways is also responsible towards keeping the environment
safe in which it is conducting operations. The organization should not affect the environment
by its high carbon fuel. They should focus on reducing the carbon emission. Their strategy is
to use low carbon fuel that will not affect the environment. Even they should focus on
eliminating the waste and scrap and should try to recycle the waste (Jain and et.al,2007).
TASK 2.1 How economic system allocate resource effectively
Economic system defines the structure of a country and manner in which resources
are allocated to different sectors of societies. Mainly there are three economies which are:
Market economy: Market economy is the economy where central and state
government do not have much control over the prices. In the absence of central plan, the
market is denominated by the supply and demand of product. Government only makes sure
that the economy is stable in nature.
Planned economy: Planned economy is one in which the government makes major
decisions like production, distribution and allocation of resources. British Airways does not
fall under the planned economy (Nandi, 2010).
3 | P a g e

Mixed economy: Mixed economy is a combination of planned and market economies
in which some areas are controlled by the government and others are flexible in nature.
British Airways fall under mixed economy.
Earlier, British Airways fall under public organization but after February, 1987, it was
privatised. Now, it comes under mixed economy where government has less involvement and
can only set the prices of air tickets. UK comes under the category of mixed economy where
resources are allocated by private and public sector. Henceforth, maximum resources in case
of British Airways are privately acquired. However, sometimes government allocates certain
resources in the form of grants.
2.2 Impact of fiscal and monetary policy on business
Fiscal and monetary policies are two important tools to affect the supply of money in
an economy. Fiscal policy involves changes in taxation and borrowing prices. It greatly
influences decision of management of BA. For example: If public authority increases tax
rates on air travelling, the administration of BA has to take restructure business policies
related to pricing of different services. However, in case of monetary policy, supply of
money is managed by the concerned authorities through change in interest rates (Role of
fiscal and monetary policies in stabilisation of the economic cycle, 2005). In this context,
monetary policy of government is having significant impact on the costing finance because it
controls monetary supply within country by altering interest rates. For example: If BA is
going to purchase new aircraft by assessing funds in the from bank borrowings then change
in interest rates leads significant impact of management decision when government increases
rate of interest. With change in policy, British Airways get relaxation from government.
These policies can impact purchasing power of customers of British Airways. This in turn
results in affecting the productivity of British Airways. Henceforth, it can be said that fiscal
and monetary policy affects the business of British Airways. The organization should
therefore decide its prices and formulate the policies in accordance with the government
norms (Green, 2005).
2.3 Impact of competition policy and regulatory mechanisms
Competition policy is formed by the government to make control on misuse of
monopoly power. Misuse of power can affect the market and can be against to the interest of
public. Competition policy leaves a big impact on British Airways. According to this policy,
many other airline firms get chance to enter into the market. British Airways faces high level
4 | P a g e

of competition. It is seen that competitors do provide point to point services at low cost.
However, no free meal was offered to customers that negatively impact their brand image.
As an effect, British Airways has improved its cost per revenue passenger mile which
confirms that company is operating cost effectively. UK competition policy is very tight and
BA has to follow these rules and regulations (Pettinger, 2007). If they do not follow that then
strict actions can be taken by the regulatory authorities.
In addition to that different element of regulatory mechanisms such as labor laws,
cyber regulation, environmental safety standards, taxation and monetary along with fiscal
policy are greatly influencing management policies and business operations. It encourages
BA for developing appropriate policies related to safety of passengers, pricing of different
services and application of eco-friendly technology (Svensson and Wagner, 2015). For
example, if public authority implements any changes in labor laws then management of BA
has to implement in human resources practices of the firm.
3.1 Market structure impact on price and output decision
Market structures influences the price and output decisions which are made by the
organizations. Here, the main goal is to increase profits and minimise the losses. Mainly,
there are four types of markets which are like:
Perfect Competition: In this market, there are large numbers of buyers and sellers
who sell a variety of products. In this market, identical products are exchanged and there is
no specific brand so, consumers can get substitutes of the product. Under perfect
competition, an individual firm selects the output and maximise profits (Svensson and
Wagner, 2015).
Monopolistic Competition: In this market, there are many sellers who sell different
products. So, a buyer can’t get a perfect substitute of the product. Firms may enter into the
market easily without much competition. As here, the products are slightly different from
each other, so the producer needs to divert customers’ interest towards their product.
Oligopoly: It is a market where some sellers have power to dominate others. In this
market structure, the entry is difficult and profit is purely dependent on the output.
Monopoly: It is a single selling market in which there are large numbers of buyers but
a single seller. There is no product differentiation as the producer is only one who produces
specific products which no other seller is offering.
5 | P a g e

Airline industry falls under oligopoly market which is a form of imperfect competition in
which only few firms operate in the market. They are price makers when they make any
decision; it is noticed by its competitors. Therefore, its rivals try to lower the prices which
ultimately increase the output (McLeary, 2000).
3.2 Market forces shapes the organizational structure
Market forces are mainly of two types i.e. demand and supply which shapes the
organizational structure. When the demand is high, British Airways can charge high prices to
the customers. Especially at the time of festivals and summer holidays, it can charge high
prices to increase its revenue. Generating high revenue may help in providing quality
services to customers. When the supply is low, British Airways can offer discount to its
existing customers as well as to potential one. It can be possible through research and
development process only that the organization can identify level of demand and supply
during the period. Consumers are priced heavily during high demand and vice versa. It can
be therefore said that the market forces shape the organizational structure. With the help of
this report, it is depicted that British Airways also focuses on market forces (Hannon, 2004)
Company spends a lot on research and development process just to eliminate the
loops and for providing quality of services to its customers. It has provided variety of
products by keeping in mind the needs of customers. They make their customers happy by
supplying right product in the right amount and without any delay. It is necessary to keep a
watch on the market forces to stay in touch with the new inventions. This in turn helps in
making changes according to wants and demand of customers. So, it is important to match
the demand according to their supply.
Apart from that the management of BA has to evaluate quality and specification of
competitor’s services and product. This assessment plays important role for developing of
new product along with the up gradation of existing services (Avlonitis and Indounas, 2004).
In addition to that by assessing views of consumers, airline company is able to improve
changes in business system along with service rendering process. Furthermore, different
government norms and policies have played important role for shaping organizational
policies and management operations.
3.3 Business and cultural environment shapes the organization
For evaluation of various external factors related to business and cultural
environment, PEST analysis is termed as most effective appraoch:
6 | P a g e

Political: It includes various government polices related to employee management and other
international trade regulation that influences policies of BA. It also influences management
decision related to busiess expansion and merger.
Social and cultural element: Culture defines principles or values which guides people to
behave in the desired manner in organization. It is a wider concept that defines the values or
principles of organization to perform business activities. The culture of business unit is
designed in such a way that it helps in the attainment of organizational goals. The business
unit operates in two types of environment i.e. economic environment and non-economic
environment. For example, British Airways has operations in various parts of the world.
Organization needs to maintain a balance by which needs of customers with different cultures
will be satisfied. Moreover, the business unit creates a platform whereby employees of
different cultures work together (Gibbons, 2005). The per capita income of UK is
comparatively higher to other countries. People living in UK can afford airline services but
those who cannot afford should have an option. So, BA has provided the facility of low price
seats i.e. economy class. People who belong to different countries have distinct background.
Henceforth, employees are trained in a manner that needs of all customers are satisfied. The
organization faces issues in relation to distinct set of consumers’ preferences. In order to
overcome the issue, British Airways emphasize on offering customized products to its clients
(Avlonitis and Indounas, 2004).
Economic: This factor is greatly influenced management decisions related to pricing,
business expansion and others. In this factor, management considers taxation, interest rate
and supply and demand of airline services.
Technology: By considering latest technology, the management of BA is able increase safety
and security of passengers. In addition to that it also supports managers for reduction in
consumption of fuel that would reduce service cost.
4.1 Significance of international trade to UK
International Trade is the exchange of goods and services between nations. It helps in
expanding our business as well as in improving the relations with other countries. Import of
goods helps in meeting the needs of those products which are not produced in the domestic
country. Even consumers may get variety of choices for the demanded products. It is through
cross-country exchange of products that the quality of goods can be compared across borders.
It is little hard to be self dependent all the time so it is necessary to interact with the other
economies in world (Ghannadian, 2006).
7 | P a g e

If they produce goods within their country then they are limiting their potential. For
example, if British airways will provide their services within nation then they will not be able
to explore themselves. They won’t be able to earn that much profit which they can earn by
expanding their business in different countries. If they want to accomplish their mission of
being the best in aviation industry then they have to connect with other countries. This in
turn will increase the productivity and profitability of British Airways. The increasing
profitability will enhance the interest of customers towards brand and it will also attract the
investors to invest in their company. It can be said that international trade proves to be highly
beneficial for British airways. The organization can expand its operations throughout the
globe and can achieve efficiency to a great extent.
4.2 Impact of global factors on UK organizations
Impact of global factors on British Airways can be found by analysing the legal,
economical, social and technical factors. Legal factors are related to laws and regulations
made by the government. It also includes different rules and regulation which have been
developed by international trade control authorities like WTO, EU and etc. These regulations
determine the process of international mergers and acquisition that assists managers of BA
while expanding business in oversea market. It helps international authorities to develop a
healthy and competitive environment in order to avoid monopoly situation in aviation sector .
For example: competition policy of EU controls different activities like mergers,
liberalization and ant-trust activities as well as price fixing (Leary, 2000).
Technological: In the present business world, there is rapid growth in technology and
equipment. It greatly influences technological advancement decisions of company such as
purchase of new aircraft and advancement of existing air fleet with new equipment.. In
global business every organization makes efforts for development and acquisition of new
technical equipment that helps BA in reduction of cost of services and increasing safety of
passenger. The use of Eco-friendly technology reduces the consumption fuel.
4.3 Impact of EU policy on UK business
Policies of European Union have a significant impact on businesses that operate in
United Kingdom. It is seen that European Union frames different set of policies and provide
significant subsidies to the business units. There are some policies through which
government can impact the businesses as mentioned below.
8 | P a g e

Employment Policy: European Union performs a very important role towards
country's employment. It is providing funds to train the people for performing jobs. Now-a –
days, UK government is trying to encourage people for doing business. The policy helps in
generating sufficient level of employment within country (Didonet and et.al., 2012).
Education and Training policy: The UK government is trying to enhance the business
life. They are making efforts to change the education and training pattern by adding
vocational subjects.
The liberalization policy of EU, 1997: It plays important role for growth and development of
aviation business EU. The deregulation of the EU’s airline sector has allowed new low-cost
airlines to emerge, driving down prices across the sector and it also plays important role in
expansion of travel and tourism business. As a result of this policy, In EU, more than 150
registered airline are operating business with the help of over 4,000 civilian aircraft (The
Added Value Of EU Policy For Airline Services And Air PassengerRights.2014). In addition
to that these companies are also offering scheduled passenger air services from 400 airports
to more than 800 million passengers each year.
CONCLUSION
The report emphasizes on evaluating external and internal environment conditions for
British Airways. The organization needs to focus on strategic management for enhancing
their profitability and productivity. To remain competitive, British Airways needs to keep
observing their plans on daily basis and to keep in touch with the changes regarding different
factors. Their concern should be on diversifying its products in different countries to perform
in the best and possible way for favourable outcomes and the most important thing is to
benefit the passengers in all aspects.
9 | P a g e

REFERENCES
Books and Journals
Avlonitis, J. G. and Indounas, A. K., 2004. The impact of market structure on pricing
objectives of service firms. Journal of Product & Brand Management. 13(5). pp.343
– 358.
Chavan, M., 2005. An appraisal of environment management systems: A competitive
advantage for small businesses. Management of Environmental Quality: An
International Journal. 16(5). pp.444 – 463.
Dettwilerand et.al., 2006. Business environment and property management issues: A study of
growth firms in Sweden. Journal of corporate real estate. 8(3). pp.120– 133.
Didonetand et.al., 2012. The relationship between small business market orientation and
environmental uncertainty. Marketing Intellegence and planning. 30(7). pp.757–779.
Fernando, A. C., 2011. Business environment: Pearson education India.
Ghannadian, F. F., 2006. Fiscal policy and political limitations in the European Union.
International Journal of Commerce and Management. 16(1). pp.41 – 50.
Gibbons, T., 2005. Competition policy and regulatory style – issues for OFCOM. Info. 7(5).
pp.42 – 51.
Green Jr, W. K, 2005. Market orientation: relation to structure and performance. Journal of
Business & Industrial Marketing. 20(6). pp.276 – 284
Hannon, P. D., 2004. A qualitative sense-making classification of business incubation
environments. Qualitative Market Research: An International Journal. 7(4). pp.274 –
283
Jain, T. R. andet.al., 2007. Business environment. FK publications.
Kourteli, L., 2000. Scanning the business environment: some conceptual issues.
Benchmarking: An international journal. 7(5). pp.406 – 413.
McLeary, F., 2000. Business & Economics. Juta and Company Ltd
Murthy, V., 2014. Learning from praxis: How high-profile winners and losers inform
business's extant theories on longevity, environment, and adaptation. World Journal
of enterpreneurship,management and sustainable development.10(1). pp.33 – 47.
Nandi, S., 2010. International Business Environment. Tata McGraw-Hill Education.
Svensson, G. and Wagner, B., 2015. Implementing and managing economic, social and
environmental efforts of business sustainability: Propositions for measurement and
structural models. Management of environmental quality: An international journal.
26(2). pp. 195–213.
10 | P a g e

Yu, W. and Ramanathan, R., 2012. Effects of business environment on international retail
operations: case study evidence from China. International Journal of Retail &
Distribution Management. 40(3). pp. 218 – 234.
Online
Pettinger, T., 2007. Monetary and fiscal policy in UK. [Online]. Available through:
<http://www.economicshelp.org/blog/113/uk-economy/monetary-and-fiscal-policy-
in-the-uk/>. [Accessed on 14th October 2015].
Role of fiscal and monetary policies in stabilisation of the economic cycle. 2005. [Online].
Available through:
<https://www.ecb.europa.eu/press/key/date/2005/html/sp051114.en.html>. [Accessed
on 14th October 2015].
The Added Value Of EU Policy For Airline Services And Air Passenger Rights. 2014.
[Online]. Available through: <http://epthinktank.eu/2014/02/04/the-added-value-of-eu-
policy-for-airline-services-and-air-passenger-rights/>. [Accessed on 28th January 2016].
11 | P a g e