Analyzing Business Environment Challenges

This assignment delves into the complexities of the modern business environment. Students are tasked with examining various factors influencing businesses, including economic systems, organizational structures, ethical considerations, and performance measurement. The provided readings explore these themes, offering insights into the challenges faced by organizations in today's dynamic landscape.

Business Environment

TABLE OF CONTENTS
Business Environment.....................................................................................................................1
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 M1 Determining the purposes of different types of organizations........................................3
1.2 Defining the Organization techniques to meet the objectives of different stakeholders.......4
1.3 The responsibilities of an organization to fulfill the needs of its stakeholders......................4
TASK 2............................................................................................................................................5
2.1 The economic systems that attempt to allocate resources effectively...................................5
2.2 Analyze some challenges due to fiscal and monetary policies on business environment
faced by British airways in the last one decade...........................................................................6
2.3 Impacts by regulatory, competition policies and legal changes in the airline industry.........7
TASK 3............................................................................................................................................7
3.1 The market structure of the airline industry impacted the pricing and demand for airline
seats..............................................................................................................................................7
3.2 Analyzing the market forces affecting the business of Airline industries.............................8
3.3 Identifying the impacts of cultural environment ...................................................................9
TASK 4 ...........................................................................................................................................9
4.1 The impact of global changes by WTO and other international civil aviation and tourism
bodies on British airways.............................................................................................................9
4.2 Global factors impacting British Airlines............................................................................10
4.3 Impact of EU policies on BA...............................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES .............................................................................................................................12

INTRODUCTION
Business environment is the sum total of all the external and internal factors that
influence the business of an organization. It can influence the working of the business by
affecting its functions via factors like employees, customers, management, supply and demand
and business regulations (Ahmed, 2012). It is also supports the business in finding out the best
ways or solutions to overcome these factors, in order to reduce their impact and achieve the
objectives of the organization. British airways, often shortened to BA, is a flag carrier airline of
the United Kingdom and the largest airline in United Kingdom based on fleet size.
TASK 1
1.1 M1 Determining the purposes of different types of organizations
As per the view of Bloodgood, 2008, it is necessary for an organization, to know where it
is going and in what direction to move in order to pursue such aims describing the primary
purpose of the company and define the mission statement of an organization are the main starting
functions of the management (Bloodgood, 2008). The purposes of different business
organizations are:
 Private sector organizations – The primary purpose of profit-organization is to generate
profit. The individuals owning the company have the power to decide whether to keep
the profit or to spend it.
 Public sector organizations – Its main objective is to create a social and economic
benefit for the community rather than profits. For e.g. British Airways is also a public
sector company whose objective is to render best services to the customers (Bose,
2008). However, BA has to take various actions to make cost base more efficient and,
also on improving its outstanding customer service.
 Non -profit organizations –These organizations provide particular service to the
community with an objective to work for the people and forbidding the distribution of
profits among the individuals owing them. Some examples of such organizations are
schools, museums, etc.
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1.2 Defining the Organization techniques to meet the objectives of different stakeholders
There are number of stakeholders of British Airways which are media, customers,
shareholders, employees, suppliers, regulators, governments, industry groups and associates,
other airlines, partner organizations, NGOs, travel market, international civil aviation authorities,
and communities (UK and abroad) (Craig, 2008). The organization techniques to meet the
objectives of main stakeholders are: Employees – British airways are progressive organizations which increasingly recognize
and motivate employees on achieving the organizational goals and their values, and are
willing to embrace change and improve customer services (Dent, 2012). The organization
tracks and record the opinions of the employees via all-employee confidential Speak Up
programme conducting Surveys and hosting get together. Customers – The British airways conducts a regular Think Customer Survey to gather the
information about the customer views and its reviews about the organization. Its main
aim is to focus on implementing changes as recommended by the customers as they are
the indicators/stakeholders which have vital impact on the future profitability (Dickinson,
2010). The customer reviews and comments help the organization to steer the product
investment decisions.
 Competitors – British airways monitors the performance of its competitors through
various techniques of analyzing the competitiveness. The organization conducts regular
audit to track the achievements of its competitors like Qatar airways and Emirates. It has
set of challenging goals, like increasing the proportion of waste recycling, improving the
efficiency of building energy, reducing the carbon emissions in the upcoming years to
overcome the comparative analysis from its competitors.
The challenges that impact various stakeholders are economic conditions of the country which
affect the organizations' ability to recruit and maintain the quality of the staff, to handle the
requirements of the customers by overcoming their needs, balancing the level of supply and
demand factor for maintaining the relation with the suppliers and the customers.
1.3 The responsibilities of an organization to fulfill the needs of its stakeholders
The responsibilities of the stakeholders of the organization are:
 Employees – British airways has the responsibility to create a respectful and healthy
environment for its customers and employees. In order to uphold the high standards and

values it focuses on health and well being of its colleagues (Fernando, 2011). As part of
this, they play vital role, with a well being designed to provide them with on-board
exercises to enhance the employees comfort. It provides employment to a diverse
workforce of employees from different backgrounds and culture. British Airways always
seek to build relationships with employees who share their values by
◦ Treating its employees with dignity and respect.
◦ It avoids the use or endorsing the use of child, bonded, prison labor etc.
◦ Providing a safe and healthy working environment.
◦ Take active steps to minimize the organization's impacts on the environment.
◦ Conduct an ethical manner or way of overcoming the limitations and drawbacks.
◦ Take suitable steps to work against corruption.
 Customers – The organization is focused on achieving the goals and objectives of
attracting attention of the customers (Fernando, 2011). Hence, British airways are
responsible for generating and conducting a set of appropriate services for serving its
customers. It keeps on enhancing its technology and bringing certain innovation in its
servicing styles. They are aware of the responsibilities and obligations for their
customers over providing them outstanding customer services.
TASK 2
2.1 The economic systems that attempt to allocate resources effectively
An economic system comprises various processes of organizing and motivating labor,
producing, distributing and circulating of the human labor chain, including products and
services, consumer goods, machines, tools and other technology used as input to future
production and the infrastructure within and through which production, distribution, and
circulation occurs in the market (Halbert and Ungulli, 2011). There are three kinds of economic
systems as per the current market situation which are basically adopted by the different
countries, they are: Free market economic system – The intervention of the government is kept at a minimum
level or neglected in the market system and all the economics resources comes under the
private sectors . Price mechanism determines as how much of goods or services would be

supplied according to the market demands. Most of the decisions are based on market
mechanism which consists of demand and supply of the products in the market. Centrally planned economy system – It includes the process of allocating economic
resources by the government and making all the plans as per the economic activities of
the country's market. This process does not involve private sector. In these systems, the
problems of unemployment would not be faced due to the government planning for
economic activities and the resources would be allocated based on the needs of its people
and different industries input (Jeffs, 2008).
 Mixed economy system – It is the system which is the combination of all the other system
in which both capitalism and socialism economic system are included. In this globalizing
world, most of the countries are obtaining this economic system which divides the
economic resources available in the country between private sectors and government
(Jones and Scott, 2011). For example, UK has adopted mixed economy system and
British Airways is a public sector firm which gets help from the government at the time
of recession or crisis to level the economic balance.
2.2 Analyze some challenges due to fiscal and monetary policies on business environment faced
by British airways in the last one decade
Fiscal and monetary policy changes, made by the government of the country, can affect
the businesses directly and indirectly. The challenges and the impacts of the fiscal and monetary
policy are:
 Fiscal policy impacts – It usually involves the changes made by the government in
taxation and spending policies. Lower taxes means more disposable income for
consumers and more cash for businesses to invest in jobs and equipment (Kale, 2014).
Stimulus-spending programs, which are short term in nature and often involve
infrastructure projects, can also help drive business demand by creating short term jobs.
Increasing income or consumption taxes usually mean loss disposable income, which,
over time, can decelerate business activity of British Airways.
 Monetary Policy impacts – The changes in short term interest rates influence the long-
term interest rate, such as mortgage rates. Low interest rates mean lower interest expense
for businesses and higher disposable income for consumers. This combination usually
means higher business profits. Lower mortgage rates may gave rise to more business

activity, which is usually good update for the airline's industry or company's like British
Airways as high business activity gave rise to more business clients and increase in
revenue through more air cargo services (Leon and Garcia, M, 2010). Lower rates also
mean more refinancing of existing mortgages, which may also enable consumers to
consider other purchases. High interest rates can have the opposite impact for businesses
like higher rates increase the value of the dollar relative to other currencies, which
lowers the import costs and increases the export costs for UK businesses.
2.3 Impacts by regulatory, competition policies and legal changes in the airline industry
 Civil Aviation Authority – the airline industry is a complex mix of a competitive and
regulated industry, several policy choices could affect its level of competition. A civial
aviation policy choice is the mechanism for allocating airport boarding gates and
facilities. Many airport commissions rely on non-market mechanisms to allocate these
scarce resources (Moxham, 2010). Changes in policies by this authority to allow for
competitive bidding for boarding gates and landing rights might encourage problems
among the airlines but it could might also encourage airport authorities to increase supply
when bid values are higher than costs.
 Competition policy – The effect on competition of airline alliances depends upon the
nature of the allied networks. However, an alliance can significantly reduce competition
on overlapping non-stop routes and overlapping connecting routes where the allied
airlines were once main competitors.
 Regulatory challenges – The changes made by the organization due to the government
alliances and policies. The alliances or the regulations, in particular global alliances,
could also have a wider impact on the international aviation policies. The rising number
of airlines alliances has rapidly expanded the airline industry in last few decades.
TASK 3
3.1 The market structure of the airline industry impacted the pricing and demand for airline seats
The main characteristic of the market structure is that it engage the airline industries in
price wars. When one airline company decides to cut fares or to increase the seating capacity of
the aircraft in order to cut the price of the fare, the other industries will usually cut theirs as well
(Riddle and Ayyagari, 2010). Price discrimination happens when a company or a group of

company is trying to grab a larger percentage of the market share. With the current market
structure, people feel some loyalty for various reasons (such as frequent flier program or
availability of certain flights), so becomes helpful for their preferred airline company when its
competitor offers a lower price tickets, so just because one company is selling at a higher price
doesn't mean they won't sell at all. However, if the price difference between the companies
having such market structure is great enough, as the customers would prefer the lower price
company and ditch the other higher price company. The best market structure for an airline
sector is an oligopoly market. As the airline sector has limited companies that compete in this
industry. Oligopolies are more competitive than monopolies (comprises the industries where
there is only one seller of the product), but it is less competitive than perfect competition (market
consisting many sellers for single products). In oligopoly market structure, each company is
affected by the impacts of price discrimination, to overcome this situation company should have
a brand loyalty (Riddle and Ayyagari, 2010).
3.2 Analyzing the market forces affecting the business of Airline industries
The Pestle methodology is a useful tool to analyze the current state of market forces
affecting the airlines' industry.
 Political – the political environment in which airlines are highly regulated and favors the
passengers over the airlines. This is because the global aviation industry in an
environment where passenger safety is paramount and where, the earlier tendency
towards monopolistic behavior by the airlines have made the political establishment
weary of the airlines and hence, they have resorted to tighter regulation of the operations
of the airlines. It also has a negative impact on the airlines companies like British
Airways in the UK industry when the recent pricing regulations laid out by the
government.
 Economic – The global airline industry never really recovered from the result of the 911
attacks (Wright, Marston and McDonald, 2011). The other debilitating factor was the
fluctuations in the price of the oils and engine oils due to the second Iraq war. All major
companies including British Airways in the UK airline industry reported massive losses
in recent global economic melt down.
 Social – The millennial generation's emergence into the consumer class has resulted
major social changes, more importantly in terms of service, where consumers have

become much more demanding. Similar to this, British Airways has also faces such
impacts which force it to reduce the fares of the tickets.
 Technological – Due to adopting the advance technology and intense competition in the
airline industry, it has become tough to survive in such environment.
3.3 Identifying the impacts of cultural environment
The cultural environment so created by the developed/developing countries, plays a vital
role in the business life-cycle of the airline industries (Conner, 2003). With climate change
entering the social consciousness, passengers are now counting their activities with the result that
they are more environmentally conscious. This has resulted in the airlines, like British Airlines,
being forced to adopt “green flying” and be more responsive to the concerns of the
environmentalists. Further, the social and cultural responsibility initiatives are becoming more
pronounced and more under investigation as consumers and activists turn a critical eye towards
the airlines and their corporate cultural responsibilities. The cultural learning and beliefs affects
the travel preferences of the passengers.
TASK 4
4.1 The impact of global changes by WTO and other international civil aviation and tourism
bodies on British airways
The impacts of globalization on British Airways can be attain by taking the example of
WTO's regulations and policies for aviation department in UK. The bilateral approach to regulate
the air transport in the form of 50/50 bilateral cargo sharing agreements can evaluate the impacts
on the revenue earned by the airline industry (Griffin, 2013). The alliance to reduce the carbon
dioxide emission globally, has forced the companies like British airways to buy the low cost
emission technology. The British airways is putting extra taxes (with name of Green taxes)on its
customers to utilize the investment for reducing the impact of emission. However, the global
agreements by the European Union over the carbon-trading scheme, have been taken into
aviation industry by 2011, in order to take positive steps for accomplishing this mission. The
regulations made to control the impacts of waste and the noise on the environment, for which
British airways is trying to practice and find out the ways like; using computers and tablets to
reduce the usage of papers, efficient and appropriate engine oils for the aircraft to avoid the noise
pollution.

4.2 Global factors impacting British Airlines
Businesses are highly affected by the global forces and trends, defining how organisation
needs to interact with its customers and respond to the competition. It majorly consists of some
ever changing external marketing forces. In reference to that, British Airways is equally affected
by certain government policies and regulations causing a direct impact on its revenue. This
mainly includes an increasing tax rates, due to which there is a rise in ticket rates. As the airline
industry is already a complex mix of competitive and regulated industry. Thus, such changes
directly and easily affects its level of competition with other airline industries (Ahmed, 2012).
Along with that, government regulations includes airport security which states fixing cameras in
airport, traffic control manages the traffic of aircraft and fuel emission, etc, which directly affects
BA in an increasing operational costs.
4.3 Impact of EU policies on BA
British Airways is affected by the policies of EU up to great extent. There are varied
policies under the context of travel, aviation and competition which need to be followed by BA
in order to run its operation effectively. Following are the impact of EU policies on BA:
 Travel Policies: There are certain policies and rights that been laid by EU for the welfare
of traveller. In case if one has denied boarding or canceled the flight due to overbooked,
then company has to either refund the amount or transport them to final destination. Due
to this, BA has to borne huge cost of operation that affects its profitability(Bloodgood,
2008). Beside this, company also need to refund in case if flight is delayed by more than
5 hours. From this, cited firm need to ensure that each flight remains on time on it will
certainly increase the cost.
 Competition Policies: Operation of BA is even affected by competition laws within EU.
This policy governs that companies are not competing in unfair means. Further, it ensures
that own rules are not been developed by company as it can affect healthy completion at
workplace (Bose, 2008). From this, BA is not develop its own rule and this somewhere
leads to shifting of customers to other company. Moreover, competition policy states that
company with dominant position does not squeeze competitor out of the market by
framing unethical strategies. From this, BA needs to develop fair and lucrative strategies
for retaining its customers.

 Aviation Policy: EU emphasize on carbon emission and air pollution, due to which BA
has to incur huge cost on maintenance and replacement of old equipment. This increases
the cost of operation and affects its profitability as well (Craig, 2008).
Hence, it can be articulate based on above discussion that BA is affected by varied policies that
been laid by EU.
CONCLUSION
The discussion so far leads to the conclusion that the global airline industry is now in a
impressive and improving phase. This has resulted in a wave of bankruptcies and closure of
airlines worldwide. Apart from this, the demanding fliers and competition from low cost airlines
means that full service airlines can no longer compete on price or the capacity (Dent, 2012).

REFERENCES
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