EU Policies and Their Impact on British Airways

The report highlights the significant impact of environment on an organization, emphasizing the need for regular analysis of internal and external environments. The internal environment refers to factors within the organization, while the external environment is influenced by outside market forces, including technology, social, economic, legal, and political factors. This helps organizations adapt their policies according to environmental changes, enabling efficient operation in the market.

BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose of different types of organizations......................................................................1
1.2 Extent to which an organization meets the objectives of stakeholders............................2
1.3 Responsibility of organization towards stakeholders and strategies to meet them..........3
TASK 2............................................................................................................................................4
2.1 Ways in which economic system attempts to allocate the resources...............................4
2.2 Impact of fiscal and monetary policy on organization.....................................................4
2.3 Impact of competition policy and regulatory mechanism on British Airways.................5
TASK 3............................................................................................................................................6
3.1 Market structure and pricing as well as output decisions.................................................6
3.2 Market forces that shape the organization’s response......................................................6
3.3 Impact of business environment.......................................................................................7
TASK 4............................................................................................................................................1
4.1 Significance of international trade to UK business organization.....................................1
AC 4.2 Impact of global factors on UK business organization..............................................1
AC 4.3 Impact of European Union Policies on UK Business organization...........................2
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Business environment is very complex in nature and it keeps on changing on continuous
basis. In this report, business environment is discussed in detail for which the firm, British
Airways, is taken into consideration. Moreover, an attempt is made to understand interlink
between vision, mission, goals and objectives of the firm. In the present report, stakeholders and
company’s responsibility towards them is discussed broadly. At the end of the report,
competition policy and European Union aviation policies are also discussed in detail in order to
understand their impact on British Airways.
TASK 1
1.1 Purpose of different types of organizations
There are many types of organizations and they have different purposes. These
organizations are described as below: Sole proprietor- These are those whose business is small in size. Due to small size, their
main objective is to enhance profitability level. Thus, their main purpose is to control the
cost of production and services in order to generate the economies of scale. Partnership- Such kind of business enterprise is to earn profit by making effective use of
resources that are contributed by different partners in an organization. Hence, both are
different from each other. Public organization- These are those companies that are owned by the government. Main
objective of these firms is to do welfare of the society (Ghannadian, 2006). As a result,
these companies time to time conduct employee welfare activities in an organization. Private organization- These are those organizations whose main objective is to earn
profit. In this regard, these firms attempt to utilize the resources in an efficient and
effective manner.
 Social organization- Social organizations are those whose main aim is to carry out
welfare activities that support needy people. These people may be crippled or
orphanages.
 So, it can be said that these organizations are totally different from each other in terms of
their objectives.
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Mission, vision and objectives of British Airways
Vision
Mission of British Airways is to become the premium airline in the
world. By doing this, it wants to establish prestigious image among
general public.
Mission
Mission of British Airways is to reduce the emission of carbon from its
planes. Its mission is supportive to achievement of vision. By making
environment protectionist image, company intends to create good
image among public (Gibbons, 2005).
Objectives Main objective of British Airways is to make it cost
efficient so that it can elevate its profitability level.
Short term objectives
In order to become cost efficient, up gradation of technology is
required. For this, heavy amount is also required. Hence, short term
objective of British Airways is to deliver outstanding performance to
the travelers. So, more travelers can be persuading to take service of the
mentioned firm. Ultimately, this will lead to increase the company’s
revenue.
1.2 Extent to which an organization meets the objectives of stakeholders
Stakeholders refer to those entities that support an organization in different ways. These
stakeholders are as follows: Employee’s – Main objective of every employee is to grow in his career. British Airways
understands this and carries training and development activities time to time. By getting
training, employee’s skills get developed and their efficiency level also gets improved.
As a result, employees get promotion to higher posts. Hence, British Airways help
employees in fulfillment of their objectives (Green, 2005). Creditors- These are those from whom business firms take loan. An objective of any
creditor is to receive the debt amount on time with full interest. British Airways
understand this and it makes payment of credit on time to the creditors.
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 Government- Objective of government is always to receive the tax on time from business
firms and to make sure that they are following all rules and regulations. British Airways
are paying tax on time and follow all the rules strictly. Hence, mentioned firms are
meeting the objectives of government.
 Customers- These people are making heavy payment for traveling through airplane.
Hence, they need quality service on travel (Jamali, 2009). British Airways is making
every effort to ensure that good quality service will be provided to the travelers. Hence,
mentioned firm is meeting the objectives of customers.
1.3 Responsibility of organization towards stakeholders and strategies to meet them
Stakeholders’ acts as the growth driver for an organization and due to this reason, there
are some responsibilities of British Airways towards them. Responsibilities towards these
stakeholders are explained as below: Employee’s- These are those people who give important part of their life to an
organization. British Airways accept this thing and it thinks that something must be done
for the employees. As a result of which the firm is distributing financial and non financial
incentives among employees (Kew and Stredwick, 2005). It is the responsibility of an
organization to make sure that life of employees will be safe at the workforce. In this
regard firm can provide various tools that support employees while working on machines.
Moreover, training can also be given to them in this regard. Creditor's- It is the responsibility of British Airways to make sure that timely payment
will be made to the creditors. In this regard, firm can follow a cash management strategy
under which it will plan inflow or outflow of cash. By managing cash, it will generate
sufficient amount which will help the firm in making timely payment to the creditors. Government- It is the responsibility of organization to maintain transparency in its
accounts. Moreover, it must also make sure that malpractices regarding funds will not be
done in company (Khalifa, 2012). In order to pay tax on time, British Airways can use
cash management strategy so that it would have sufficient amount to pay tax on time.
 Customers- It is the responsibility of an organization to satisfy the needs of customers.
Company can re-evaluate its service delivery mechanism and can add more services in its
service portfolio. By doing this, it can satisfy the needs to customers.
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TASK 2
2.1 Ways in which economic system attempts to allocate the resources
There are three kinds of economic systems and some are discussed as below: Capitalist economy- It is an economic system in which government does not govern
industries by its law. Industries with change in situation automatically take an action at its
own level. In this kind of economy, government does not make any interference in
resource allocation which means that companies have full access to resources and they
can use them as per their requirements. Mixed economy- Mixed economy refers to the economic system in which government
has some control on industries by imposing the rules and regulations. However, this
control is limited. But in such economies, there are some sectors that are heavily
controlled by the firm like railway and atomic energy (Mitra, 2003). In mixed economy,
to some extent, resource allocation is done by the government. UK has mixed economy
and British Airways is operating in this economic system. In UK, aviation companies
cannot form a cartel and cannot purchase slots by making the same. Hence, slots as an
income resource are strictly controlled by the government and distributed among various
firms in a proper manner. Hence, it can be said that government is controlling distribution
of resources in the UK.
 Socialist economy – In this kind of economy, there is a full control of government on all
industries. By making strict rules and regulations, governments try to make sure that
everything will go well in the industry. In such economy, it is very difficult for one to
enter in the industry (Nikolopoulos and Assimakopoulos, 2003). In such economy,
resources are allocated by the government. The ultimate aim of such practice is to make
sure that everyone would get equal opportunity to grow in the industry.
2.2 Impact of fiscal and monetary policy on organization
Fiscal and monetary policy affects an organization in many ways. Impact of both policies
on organization is described as below:
Monetary policy
It is a policy that is prepared to control the cash. Many times, in an economy, cash flow
becomes excess or deficit. In both the cases, problems come in existence for an economy. In
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order to handle such situation, monetary policy is used. In this policy, there are some instruments
like CRR, SLR and open market operations. All these three instruments are used to control the
money supply. Suppose central bank of UK increases the CRR rates then banks of UK will need
to put more cash with the central bank which is a part of deposits that banks take from people. As
a result, banks will have fewer amounts to be allotted as a loan to the business firms. Hence,
British Airways will find it difficult to take loan from banks (Williamson, Lynch-Wood and
Ramsay, 2006). This means that it will find it difficult to finance its operations. In the same way,
if through open market operations, central banks make purchase of securities from banks then
liquidity will be reduced in the market. As a result, banks will have fewer amounts to be allotted
as loan among business firms. Again, British Airways will find it difficult to take loan and to
finance its operations. This may also affect its growth rate because there will be less money for
investment in the business. Hence, monetary policy greatly affects British Airways.
Fiscal policy
It is a policy in which tax structure is determined. Under this policy, tax rates are reduced
and public expenditures are increased in order to revive the economy in case of recession. If tax
rates are reduced then tax liability in the firm will be decreased as well and it will use saved
amount for the investment purpose in business (Gharajedaghi, 2011). Hence, firm’s growth rate
will accelerate. Thus, fiscal policy also affects British Airways.
2.3 Impact of competition policy and regulatory mechanism on British Airways
Competition policy is a policy that indicates the way in which firms can compete with
each other. As per the competition policy of UK, firms operating in the aviation industry cannot
form a cartel for giving competition to the competitors. If such thing is done then it will be
considered as illegal and strong action will be taken by the regulatory authorities (Garriga and
Melé, 2013). Under such policy, firms operating in UK aviation industry can decide fares at their
own discretion. Moreover, in order to compete with the rival firms, company can increase its
passenger carrying capacity. It does not need to take prior permission from any regulatory
authority. In order to give stiff competition, firms can commence their airplanes on new routes.
This provision gives a lot of freedom to the aviation companies with respect to expansion of
business (Blocher, Chen and Lin, 2008). In this, firms do not need to take permission of any
authority for commencing the flights on new routes. Hence, competition policy is beneficial for
British Airways and it will positively affect the mentioned firm.
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TASK 3
3.1 Market structure and pricing as well as output decisions
Market structure refers to the competitors and nature of product sold by them in the
market. There are different market structures and their price and output decisions are discussed
as below: Perfect competition market- In this market structure, there are numerous firms that are
selling identical products. In this structure, people have plenty of knowledge about the
product. Due to similarity in product and numerous competitors, there is an intense
competition in this industry. Thus, in this market structure, there is a stiff price
competition. In this structure, pricing decisions are taken by looking at the competitor
pricing strategy. On output front, managers review their current sales. On that basis, they
estimate the output that they need to produce to meet the demand (Chumpitaz Caceres
and Paparoidamis, 2007). On the other hand, firms also make prediction about the future
demand for taking output decisions. Monopoly market structure- In this structure, there is a single company and due to this
reason, pricing decisions lie in firm’s hands which are individually operating in the
industry. Output decisions are taken on the basis of demand for the product. Monopolistic competition- British Airways fall in this category as well as in this, there
are few firms and cut throat competition is prevalent in this structure. Pricing decisions
are taken by looking at the competitor pricing strategy (Ayyagari, Beck and Demirguc-
Kunt, 2007). However, output decisions are taken on the basis of expectations about the
future demand.
 Oligopoly market structure- In this structure, there are few firms that have the control in
the entire market. Hence, pricing of product is done in the alignment to competitor’s
product price. Moreover, output decisions are taken on the basis of expectations about the
future demand of product.
3.2 Market forces that shape the organization’s response
There are many market forces that affect the organization’s response. Some of them are
as follows:
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Demand and supply- With change in demand, an organization needs to formulate the
strategy in order to capitalize the opportunities and to counter the threats (Nerur, Mahapatra and
Mangalaraj, 2005). Hence, this is the major force that shapes the organization’s response. With
passage of time people are preferring to travel through airplanes. Hence, due to this reason
revenue of the firms gets increased. It can be said that there are lots of opportunities that are
available to the British airways. Mentioned company by formulating a business strategy can
capitalize on available opportunity.
Technology- When any competitor changes its technology then the firm needs to take
immediate step for bringing changes in its technology base as well. If this will not be done then
firm may lag behind in competition. Hence, British Airways needs to pay due attention on this
factor. In past years British airways bring changes in its technology in order to make sure that it
will remain competitive to its competitors.
3.3 Impact of business environment
Following are the main components of business environment: Economic environment- It refers to the economic condition of country. If same is not
good then inflation and unemployment rate would get increased and GDP will fall. This
affects the demand from people. Hence, British Airways need to monitor this factor
closely. Economic environment is out of control for the firm and company by preparing
suitable strategies can earn profit even mentioned environment is not good from business
point of view. Social environment- It refers to people’s attitude, beliefs and value system. These factors
from any angeldo not create any negative image of aviation companies (Neely, Gregory
and Platts, 2005). Hence, British Airways do not have any threat from this front. Political environment- Ruling government is supporting the aviation industry by
preparing a business friendly policy. Hence, from here also there is no threat to British
Airways. Firm needs to prepare a tactics in order to capitalize opportunities that come in
existence due to change in the government aviation policies. Legal environment- It refers to rules and regulations that company needs to comply with.
Failure to do so may lead to imposition of penalty from government. Hence, firm needs
to follow all relevant rules and regulations.
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 Technology environment- It refers to trend in technology up-gradation. British Airways
needs to upgrade its technology on continue basis in order to remain ahead of competitors
(Ferrell and Fraedrich, 2014). If this will not happen, it will no longer enjoy
commendable position in the relevant industry. Due to these reason British airways is
continuously upgrading technology used in its airplanes. Hence, it can be said that firm
respond to change in business environment.
TASK 4
4.1 Significance of international trade to UK business organization
International trade is an essential activity for every business organizations. It is vital for
the economic progress of UK. International trade is concerned with the cross border transactions
within different countries. It is related to the exchange of capital, goods and services within
distinct parts of the world. Every country has different sets of resource availability. Due to this, it
is not possible to produce all kinds of goods and services within one country (Salzmann,
Ionescu-Somers and Steger, 2005). Significance of international trade in relation to UK business
organization arises due to following reasons. It helps the enterprise in making optimum
utilization of all available resources. The country may be able to import such products that
cannot be produced in the local market. In addition to it, organization can acquire such sources
that are available at higher prices in UK. Thus, it helps in getting competitive advantages by
reducing the production cost (Turban and et.al, 2007). Moreover, it helps them to increase their
revenue and profitability. Moreover, it ensures country's economic development and economic
progress by trading internationally. Due to increase in international trade business tourism is also
increasing in the UK. In future it will be a business segment from which British airways will earn
a higher amount of revenue. On other hand, British airways are also providing cargo service and
with increase in international trade demand for its cargo service will also increase. Hence, it can
be said that international trade has a lot of significance to British airways.
AC 4.2 Impact of global factors on UK business organization
There are different types of global factors that affect the UK business organization to a
great extent. It includes social, economical, technological, political, legal and social factors.
Economic factors include demand, supply, per capital income, consumers purchasing behavior
and their purchasing power. In case of inflation, demand tends to rise and vice versa. Moreover,
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the organization also requires improving and upgrading its technology on a regular basis in order
to get competitive advantages (Fiala, 2005). In addition to it, every organization requires to
follow the government policies. Therefore, changes in government rules and regulations also
impact the organizations. In case of liberalized government policies, it affects the organization
positively and vice versa. On the contrary, every country is established in society. Therefore,
social and environmental factors also influence the UK business organization (Max, 2015).
Under social factors, every business is influenced by the customer’s tastes, preferences and their
purchasing behavior. However, they also have to follow environmental rules and regulations so
as to ensure the environmental protection for the country's citizens. Most of these global factors
are not in firm control and due to this reason strategy formulation is only way that can be used to
perform better when global factors are not favorable to business.
AC 4.3 Impact of European Union Policies on UK Business organization
Each business organization of UK has to strictly follow the policies framed by European
Union. European Union framed different kinds of policies in UK. It involves taxation and
spending policies, UK laws, directions and regulations. Moreover, it also takes decisions to
encourage the business operations by providing subsidies and grants. In addition to it, EU also
makes competitive policy and free trade policy (Nerur, Mahapatra and Mangalaraj, 2005). Under
competition policy, EU tries to prevent the domestic organizations from other high level of
competitors. It prevents unfair trade policies in order to create monopoly in different industrial
sectors. On the contrary, free trade policy is designed to give permission from free removal of
goods between different countries. It helps in increasing the business revenues and high
availability of profitability to the organizations. Moreover, EU formulates policies regarding
working conditions, welfare and freedom of labor movements (Blocher, Chen and Lin, 2008). It
helps the organizations to ensure about business sustainability in the market. Thus, it can be
concluded that EU makes policies and improvements in it on a regular basis so that the
organization can survive for a longer time period. Due to improvement in liberalization policy of
the UK and Europe lots of opportunities comes in existence for the British airways. Now, it can
start flights on new routes and can enhance seat capacity without taking permission from any
authority. Hence, it can be said that European Union policies are positively affecting British
airways.
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CONCLUSION
From the present report, it is clear that environment impacts the organization to a great
extent. Therefore, it is necessary for all the organizations to make proper analysis of its
environment on a regular basis. It includes both internal and external environment. Internal
environment prevails within organization while external environment is affected by the outside
market factors. It includes technology, social, economical, legal and political environment. It
helps the organization to change its policies according to the environmental changes. Thus, the
organization is able to operate efficiently in the market.
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