Potential Absorptive Capacity in Aligning Internal and External Rates of Change

The provided content consists of various articles and books that explore the role of potential absorptive capacity in aligning internal and external rates of change, as well as long-range planning. It also touches on sustainable innovation, business models, and strategies for small and medium enterprises (SMEs) to cope with continuous change. Additionally, it discusses the impact of Brexit on UK-Europe travel and the goals and objectives of British Airways.

Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1................................................................................................................................................1
1.2................................................................................................................................................2
1.3................................................................................................................................................3
2.1................................................................................................................................................3
2.2................................................................................................................................................4
2.3................................................................................................................................................4
TASK 2............................................................................................................................................5
3.1................................................................................................................................................5
3.2................................................................................................................................................6
3.3................................................................................................................................................6
4.1................................................................................................................................................7
4.2................................................................................................................................................7
4.3................................................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Analysis of the business environment is one of the important task which helps in
determining performance of the organization. There are number of factors of the external and
internal environment which may influence business operations in positive as well as negative
manner (Haigh and Brubaker, 2010). The current research is based on business environment
analysis of British Airways (BA). It is an organization of the airline industry of UK and has
strong financial performance in the market. The present report will discuss objectives of different
types of organization. Further, it will raise the understanding about the nature and characteristics
of the national environment in which BA is operating its business. Along with this, study will use
appropriate tools and techniques for analysing the behaviour of organization in their specific
market context. There are number of global factors which are also affecting the business
activities of BA and these factors are also describing in the following paragraphs of the report.
TASK 1
1.1
There exist several kinds of organization, each has its own specific purpose, strategies,
policies and structure needed for its effective functioning. No matter whatever type of
organization it is, there shall be specific purpose of the establishment for which it has be formed.
Enlisted below are the distinct kinds of organization possessing specific purpose: Private limited companies: Main purpose of private organization is to make profit and to
establish the corporation in such a way that no one else can overtake it. Virgin group
LTD is also a private organisation, it usually raises its capital via issuing shares, total
number not exceeding 50 shareholders (Hamilton and Webster, 2015). However, there
are several restriction on its shareholders such as they cannot public trade there shares to
others. Public Limited companies: These companies are formed with the purpose of serving the
needs of general public. Main kinds of services they render are banking, airways,
telephonic, etc. British Airways is also a leading company of UK providing airline
services. The purpose of public LTD is to cater funds through capital market and then
distribute the ownership among its stock holders.
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 Non profit organisation: These are formed for the purpose of providing free services to
the citizens. Major example of it is the National Health service of UK which is operated
by government fund (Botha, Kourie and Snyman, 2014).
 Franchising: With the use of contracts, any person or company can make the use of
brand name and product idea of the existing company. McDonald's is a franchise and its
main purpose is to minimise risk of being globally.
1.2
Vision and mission can be defined as a strength or ability to pursue the future. The
mission statement of BA is to emphasise on its customer and employees. The company desires to
be the world's largest global airline for which it has generated a strategy of alliances. On the
other hand, objectives are a form of statement of targets that need to be achieved within the
specified time frame. There are the short term goals to achieve the long term objectives of the
company (Wetherly and Otter, 2014).
In order to rum a business smoothly it is essential to keep the stakeholders of the
company satisfied. Enlisted beneath are some instance where BA has made its stakeholders
content: Employees: They are core assets of every corporation. BA aims to fulfill all needs and
wants of its employees. By means of providing fair wages, healthy and safe working
environment and providing equal opportunity BA aims to keeps its workers satisfied and
content. Moreover, it is recruiting new employees all across the world to maintain and
create diversity in workforce. Customers: The business earns profit and survives in the market because of its
customers. BA is a service industry and aims at providing quality services to all its users
(Craig and Campbell, 2012). Further, it has introduced a programme called customer king
for the business and first class travellers.
 Society: They are the major concern of a company. BA aims to provide employment
opportunities to the society and its also provides charity to maintain the support from
them. Likewise, the use of eco-friendly engines and cutting down Co2 gasses aids in
contributing to save environment.
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1.3
Each and every corporation has certain responsibilities towards its stakeholders in order
to meet expectations and fulfil their above mentioned objectives. The certain responsibility of
BA towards its stakeholders have been illustrated below: Responsibility towards customers: The company aims to provide quality services to its
customers for this purpose it applies to the CRM policy. A satisfied customers is the most
loyal one which will thereby increasing the overall productivity of the company. Towards Society: A company has various responsibilities towards the society in order to
run the business activities smoothly. For this purpose, airlines aims to contribute towards
maintaining and saving environment (Adeoye and Elegunde, 2012). Moreover, the
company is facing several challenges from the government in form of strict rules and
policies. Therefore, BA has undertaken several steps to comply by all the policies.
 Towards employee: The company's responsibility towards its employees is to provide
with a good working environment and health and safety benefits to them. For these
purpose BA has an effective HRM policies which provides safe and secure working
environment to them.
2.1
Every government has three distinct options of economic system to be followed. These
are usually devised for proper and equal allocation of resources in all sectors. Free economic system: Here, little or no government intervention is found in the
activities of organization. There exist only few number of companies and also the rules
and regulations are quite flexible. A strong competition can be seen between the
corporations in order to derive maximum resources. The company like BA can easily
produce large services by catering maximum of customers and generating demand for its
services (Boons and Lüdeke-Freund, 2013). Planned economy: Herein, the resources are allocated by the government which controls
the full economy. This is a types of autocratic system wherein the power lies in the hands
of government. The planning body plans and then distribution of various resources such
as land, labour, capital, etc. is being made. This is an ineffective system because the
government does not have full knowledge to decide upon the allocation process. It has
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several loopholes as it leads to surplus or shortage of resources. This is a threat to BA has
improper allocation of resources may lead to decline in its services.
 Mixed economy: This form of economic system usually can be found in Britain where
the government possesses little intervention in form of various policies such as monetary
and fiscal (Ben-Menahem and et.al., 2013). This system provides distribution of
resources with minimum wastage and the public enterprises can operate with ease. There
is no government intervention found in the activities of British airlines.
2.2
Fiscal and monetary policies of government are the measures to control the economy of a
country. These policies have a huge impact on the functioning of the organisation, the same has
been illustrated in the given points: Interest rates: It plays a crucial roles in managing the activities of an organization. The
government raise or lower down the interest rates through the monetary policies. The
high rate of interest indicates that BA fill face troubles in financing its capital. Moreover,
the consumption level of the customers will decrease resulting in shift from business
class to economic class seats or opting for cheaper fairs (Chadamoyo and Dumbu, 2012).
The contrary will happen in the interest rates are lowered by the government. Tax rates: The government increase of decrease the tax rates through change in fiscal
policy. A lowering of tax rate would result in companies profitability. BA can increase
the quality of services it provides to its customer and it can also invest its funds in
advertisement campaign to promote the airlines.
 Exchange rates: The changes in the exchange rate has a severe impact on the activities
of BA. A certain increase in the Pound will shorten the sales of the company in the other
country and the revenue derived from the sale of services in parent country will result in
profit (Richards and et.al., 2012).
Likewise there are several other policies such as reserve requirement, government spending and
many more which have an equal impact on the functioning of British airways.
2.3
Regulation and legal changes are the intrinsic part of every business organisation. Some
of the regulation and legal changes faced by the airline companies such as BA has been
described below:
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The company is operating its business in the European states, therefore, it is legal
implications of the establishment to abide by the EU affairs and norms. Along with that it has to
comply by the legislation and regulatory policies of UK government. It posses a direct impact on
all the operations of the British Airways which may either be in form of positive as well as
negative depending upon the type of mechanism. Several other bodies that affects the
functioning of organization are UK corporate and company affairs, civil aviation code of
conduct, European aviation norms, IATA and US civil aviation and corporate affairs (Nalley,
2016). All these have the following impacts on the company:
 regulating prices and its banding
 seating arrangements shall be compliant by laws
 Flying zone limitations
 and higher customer responsibility
Likewise, there are several competition policies which emphasises on amalgamation and control,
market liberalisation, antitrust and corporate trust and state aid control. The impact of these have
been enlisted below:
 High level of closed door markets and vigorous state control
 Special attention on the M&As and purchases made by the said company
 Privileges been given to local players, undue of subsidies and competitive advantage
(Hamilton and Webster, 2015).
TASK 2
3.1
Market structure of an organizations comprises, seller, customers and competitors.
Actions of every participant has direct influence on the whole structure of the market and
organization’s decisions. British Airways is a part of airline industry of UK so, it is operating its
business in Oligopoly market. In this market structure there are few number of sellers and they
are operating their business from long time so, they have huge cost advantage. Technological
advancement is one of the major reason because of them BA can bear the price war. So, cost of
the organization is generally low as compare to competitors. So, price decisions is based on the
cost of the services (Manning, 2013). But on the other hand output decision is always based on
strategies of competitors and demand of the customers. So, in case of the low demand of
customers BA decided to provides combine flights for two nations. It helps in reducing cost of
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the company which may help inn increasing profit also. Along with this, latest technology is also
one of the important factor which can affect the quality of the services and it has direct impact on
cost also. Therefore, technology is also one of the important factor which play an important role
in deciding price (Jones and Vagliasindi, 2013).
3.2
All those forces which can influence price, cost, demand and supply of the organization
are considered as market forces for British Airways. These forces have direct and indirect,
positive and negative impacts on activities of the organization. Analysis of the external and
internal environment of BA has reflected that technology, new entrant, substitute, number of
customers and sellers, price of competitor’s product are important market forces which can affect
BA. British Airways is operating its business operations in Oligopoly market in which only few
sellers provides airline services to customers (Moon, 2010). It has reflected low competition in
the market. But on the other hand, existing competitors such as Ray Nair are providing
qualitative services to customers and promoting its services at national and international level. It
can decline the number of customers of BA. In contrast, due to the technological advancement,
huge investment is required for entering in airline industry. So, threat from new entrant is very
low for British Airways. Along with this, rail, rode and sea transportation are the major substitute
services with comparative low price decline the sales of BA. Therefore, all these market forces
have direct influence on British airways and its business activities (Lihitkar, 2013).
3.3
British environment of BA includes economic and non-economic environment. Economic
environment of BA focuses on different policies, tax rates, interest payment and financial
reporting, etc. so, for operating business operations in economic environment BA follows
monetary and fiscal policies which affect the money supply and international trades of the
company. Along with this, as per the rules and regulations of government British Airways needs
to report its financial performance in front of administration. It can affect the tax payment and
interest rates of the company. BA is managing all business activities in mixed economic system
which plays important role in improving financial performance of the firm and effective
utilization of the available resources. Economic condition and purchasing power of the
customers of different nations may also influence the overall sales of the company (Hurn, 2011).
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On the other hand non-economic or cultural environment of BA includes values, beliefs,
level of education, literacy rates, tradition and customers of customers. All these factors can
influence the types of the airline services and quality of the services.
4.1
British Airways is operating its business operations in more than one country so, changes
in the trade regime have direct and indirect impact on organization’s operations. For example
changes in changes in rules and regulations of WTO and other international civil aviation have
direct impact on air transportation which can influence the international flights of the
organization. International trade means exchange of goods and services from one nation to
another for the business purpose (Ghannadian, 2006). BA offer airline services to the customers
of all over the world. So, global factors may influence business operations. For example, there
are some changes of WTO and civil aviation regarding sustainable air transportation. BA is
already following these rules for maintaining sustainable performance of the organization so,
there is no needs to do invest for implementing these changes. Therefore, it helps in increasing
the domestic competitiveness of the organization. Along with this, favourable global changes
helps in attaining high market share in international airline industry. It increases the international
opportunities for BA and reduce the level of dependency on the local market share and
customers. Due to the international trade BA can reduce the cost of production of the aviation
tools which may increase the profitability of the organization. International market opportunity is
one of the major benefits of the changes in the global factors (Dickinson, 2013).
4.2
PESTLE analysis is one of the effective tool for analysing the other factors which may
have positive and negative influence on BA. It includes number of political, economic, social,
technological, legal and environmental factors of the national and international environment
which may affect the organization’s strategy. Political stability of the different nation and
perception of population about the safety and security are considered as important factor which
may affect BA. Terrorism activity in nation may reduce the travel and tourism activity in that
particular country so, such types of inappropriate political activities may decline the overall
performance of the organization. Along with this, different economic factors such as changes in
the monetary and fiscal policy, fluctuation in interest and exchange rates, recession and inflation,
purchasing power of customers may have positive and negative impact on sales of the BA (Jones
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and Vagliasindi, 2013). Needs and requirements of different cultures people may affect the
quality of the services. In addition, technologies are changing day by day and for adopting new
technologies BA needs to invest huge amount of money in distinct projects which may decline
the performance of the firm due to the high cost. Airline industry is directly affected by the
unfavourable climate conditions because in inappropriate environment BA needs to cancel its
flight which may decline their performance. Along with this, changes in the global regime and
other aviation rules and regulations can affect the organizational policy of BA. Therefore, all
these global factors can affect the business operations of British Airways in positive as well as
negative manner (Moon, 2010).
4.3
EU is one of the major regulatory authority which introduces number of rules and
regulations for running business operations of UK organizations. EU has developed some rules
and regulations for aviation industry also. So, BA needs to follow all these legislations in
effective manner. Open skies agreement is one of the major EU policy which is favourable for
BA in improving air transportation between UK and US. Changes in the travel regime can create
situation of negotiation on the travel trade and long term migration (Lihitkar, 2013). There are
number of policies such as visa free travel, EHIC leads increment in the number of customers for
BA. On the other hand, EU has introduced aviation policy which focuses on reduction of the
carbon emission through the aircraft. Major objective of this policy is reducing the greenhouse
effect. EU can take action towards all those aircraft which can increase the emission of
greenhouse gases. Various emission measures may influence the manufacturing process of the
organization and increase the total cost of the company. In contrast, competition policy of EU
can change the air safety list, airline services, charges, pricing strategy, etc (Brexit: the effect on
UK-Europe travel, 2016).
CONCLUSION
The above report depicts about the various purpose and types of organizations. It also
provides an overview of internal and external environment in which the said company operates
its business. Further, it has been demonstrated that the ability for operating business in varied
economic states pictures about the flexibility and elasticity in procedures required to face the
adverse situations in business (Botha, Kourie and Snyman, 2014).
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REFERENCES
Books and journals
Adeoye, A. O. and Elegunde, A. F., 2012. Impact of External Business Environment on
Organizational Performance on Food and Beverage Industry in Nigeria. British Journal of
Arts and Social Sciences. 6(2). pp.56-65.
Ben-Menahem, S. M. and et.al., 2013. Strategic renewal over time: the enabling role of potential
absorptive capacity in aligning internal and external rates of change. Long range
planning. 46(3). pp.216-235.
Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of-the-
art and steps towards a research agenda. Journal of Cleaner Production. 45. pp.9-19.
Botha, A., Kourie, D. and Snyman, R., 2014. Coping with continuous change in the business
environment: knowledge management and knowledge management technology. Elsevier.
British Food Journal. 115(1). pp.9–29.
Chadamoyo, P. and Dumbu, E., 2012. Competitive strategy and business environment
influencing performance of small and medium enterprises in the manufacturing sector:
The case study of manufacturing firms in Mucheke light industry.
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Dickinson, G., 2013. SMEs and the business reality of Estonia's tax regulation
environment.,International Journal of Law and Management. 55(4). pp. 273-294.
Ghannadian, F. F., 2006. Fiscal policy and political limitations in the European Union.
International Journal of Commerce and Management. 16(1). pp.41–50.
Haigh, M. M. and Brubaker, P., 2010. Examining how image restoration strategy impacts
perceptions of corporate social responsibility, organization-public relationships, and
source credibility. Corporate Communications: An International Journal. 15(4). pp.453–
468.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.

Hurn, B. J., 2011. Simulation training methods to develop cultural awareness. Industrial and
Commercial Training. 43(4). pp.199 – 205.
Jones, B. J. and Vagliasindi, M., 2013. Power Market Structure: Revisiting Policy Options.
World Bank Publications.
Lihitkar, S. R., 2013. Designing a prototype virtual learning environment for library and
information science students. Library Hi Tech News. 30(4). pp.13 – 15.
Manning, L., 2013. Corporate and consumer social responsibility in the food supply chain.
Moon, H., 2010. Global Business Strategy: Asian Perspective. World Scientific.
Richards, M. and et.al., 2012. How can we better understand current and future workforce values
in the global business environment?. Thunderbird International Business Review. 54(5).
pp.609-623.
Wetherly, P. and Otter, D., 2014. The business environment: themes and issues in a globalizing
world. Oxford University Press.
Online
Brexit: the effect on UK-Europe travel. 2016. [Online]. Available through: <
http://www.thenationaltriallawyers.org/2014/05/amended-petition-in-mercieca-v-
microsoft/>. [Assessed on 20th September 2014].
Nalley, J., 2016. The Goals and Objectives of British Airways. [Online]. Available through:
<http://www.ehow.com/list_7499971_goals-objectives-british-airways.html>. [Assessed
on 20th September 2014].
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