British Airways External Factors Analysis

This assignment examines the impact of external factors on British Airways' performance. It explores the influence of unfavorable economic conditions, global economic development, and European Union policies on the airline's sales, operations, and regulatory compliance.

INTRODUCTION
Business environment is the most important aspect as it includes both internal and
external factors which affect the development, performance and outcome of an organization.
Present report is based on British Airways which is the second largest airline in United Kingdom
in terms of passengers that it carries. Further, report covers the identification of different types of
organizations which are operating in a nation and contributing towards economic development of
the same. Furthermore, challenges which occurred due to fiscal and monetary policy on business
environment have been analyzed effectively. In addition to this, impact of working practices and
cultures of countries has been specified with respect to British Airways.
TASK 1
1.1
Organization can be defined as group of people that collaborated for the attainment of
specified goals and objectives. Some organizations have objective of profit while some
organizations work for welfare. There are different types of organizations that work in different
sectors. These are explained as follows- Public sector- The public sector corporation is governed by state or government of UK.
Main motive behind public sector is to maintain the balance in economy. It facilitates to
meet the expectations of stakeholders and deliver good quality of services to them.
Furthermore, the public sector organization generates employment in the nation.
Furthermore, British Airways is working for providing services to customers and creating
balance in economy of UK (Svensson and Wagner, 2015). Private sector- Private sector is another imperative part and main purpose of the same is
to make high profitability. It assists the corporation to work in the direction of growth and
success so as to meet the expectations of different stakeholders like shareholders,
employees and customers. This in turn can increase the customer base and would enhance
the productivity in the same direction (Wantao and Ramanathan, 2012).
 Sole trader- It is the single business entity where overall risk is taken by the sole trader.
He/she can work for the growth and development of the corporation. However, the main
purpose of sole trader is to increase profitability. Thus, main aim of all businesses is to
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increase the profitability and contributing towards the economy development. However,
non-profit organization merely works for the growth of country.
The mission, vision and objectives of British Airways has been specified as follows-
Mission & Vision
The mission of organization is to become the leading airline in world. It assists the
management to put efforts towards the upward direction of business. Furthermore, vision of
British Airways it to respond towards clients as well as customers (Kourteli, 2008). Vision and
mission statement of corporation enables the management to work to achieve the specified vision
and mission. In this way, company comes to know about the corporate strategies which need to
take place.
Objectives
The objectives of corporation are formulated in accordance with the vision and mission
statement. Here, company focuses on meeting rising demand of customers and bringing
modification in the services as per the feedback of buyers (Krasniqi, 2009). Further, to make
investment decisions to improve the service quality and other facilities are the firm’s short term
objectives.
1.2
Impact of challenges on stakeholders
The stakeholders play a major role in the completion of business activities because
operations of firm are directly or indirectly connected with them. Under this, shareholders are the
main party who are directly engaged with the operations of company. For example, economic
crisis created barriers which had direct impact on the shareholders because their rate of return
was decreased to a great extent (Didonet, 2012). On the other hand, debt crisis affects the
performance of firm in a negative manner because employees were not paid as per the set
standards. In this regard, employees get disappointed which ultimately has a negative impact on
their performance. Impact of challenges on stakeholders is enumerated below:
 Customers: Customers of BA expects qualitative services at fair prices in order to make
increase in their level of satisfaction. For this aspect, management of company provides
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various discounting offers to the customers. In addition to this, they aim to make
continuous improvement in the operational activities in order to enhance the quality of
services.
 Government: Regulatory authorities are interested in operations of business due to tax
purposes and corporate governance. For this aspect, companies discharge their tax
liability in proper manner. Further, they are committed towards their social and
environmental responsibilities.
 Suppliers- Due to the challenges company is not able to make timely payment to the
suppliers and sometimes they have to compromise with the quality to meet customer
demand. Management of BA believes in collaboration with the suppliers in order to attain
win win situation. For this aspect, they held regular meeting with the suppliers in order to
include them in decision making process.
1.3
British Airways is fully responsible towards its stakeholders and management formulates
different strategies to meet their needs and demand. Here, company fulfill its responsibilities
towards employees by providing them healthy working environment and appropriate salaries.
Similarly, customers are provided with services as per their requirement. It helps to enhance their
level of motivation and satisfaction. On the other hand, shareholders are invited in the board
meeting so as to incorporate their views in the decision making process. Furthermore, rules and
regulations laid by government are also implemented by the firm which determines ethical
aspects of company. In the same way, corporate governance is considered on the top most factors
of British Airways by which its overall productivity and profitability can be enhanced. For
example, company took strategic action in order to merge Iberia. This in turn has a direct impact
on the prospectus of shareholders (Krasniqi, 2009). Also, it increased the customer base to a
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great extent and in the same way; competitive edge of the corporation was created. Apart from
this, British Airways contact with suppliers to build long term relationship with them.
2.1
Economic system is the most imperative aspect for the allocation of resources. It is the
only factor through which corporation access to different sources for its smooth flow of
operations. There are several kinds of economies like free market, command/controlled and
mixed market. Here, British Airways operate in mixed economy which depicts that it is governed
by both private and public sector. In this regard, management of British Airways needs to follow
the standard set by government for example; employment and environmental standards.
Furthermore, company has authority to access different sources of income and employment so as
to ensure smooth flow of production. In addition to this, company can also select the range of
products in order to increase the customer base (Hamilton and Webster, 2015).
On the other hand, free market economy gives full flexibility to number of firms to select
their sources. Here, government does not put any kind of restriction on corporation bodies and
management takes all decisions in accordance with their convenience. On the other hand,
controlled economy is that where corporation is governed by regulatory bodies. Furthermore,
firm cannot take its decision by own. Thus, British Airways allocate resources as per the set
standards as well as regulations of government of country (Fernando, 2011). In the command
economy, supply and demand is made in accordance with the regulations of government. It is
because, regulatory authorities had complete control on the resources and supply is determined
by them for the satisfaction of demand in the economy.
2.2
The fiscal and monetary policies have direct impact on the performance as well as
operation of organization. These policies are considered by management of British Airways to
operation to business at global marketplace with high rate of return. The government of UK
formulates several regulations in the form of taxation, excise duty and other related affairs. On
the other hand, monetary policies create its impact on the business environment of British
Airways by changing interest rate. For example, recession decrease demand of services in the
marketplace because purchasing of power of buyers went down. Owing to this, company has to
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suffer from loss in the marketplace. In that particular time span, company was unable to meet the
expectations of customers as well as shareholders (Jones and George, 2003). Apart from this,
changes in tax structure of government have direct impact on the profitability of business. This is
because corporation needs to pay high tax and accordingly rate of return for he shareholder go
down. In addition to this, fiscal policies can have positive impact also in case of change in
political parties. On the other hand, appropriate monetary policies enable management to expand
the business in the marketplace and increase customer base in the same direction. Furthermore,
change in the monetary policies can bring sudden variation in the prices of products and services
which ultimately create dissatisfaction among employees as well as buyers of British Airways
(Sloman,2007). For example if rate of inflation is increased, then there will be decrease in
purchasing power. Due to this aspect, customer tend to prefer spend less on travel services. As a
consequence, profitability of business will be adversely affected.
2.3
There are several legal changes and regulatory policies as well as competition policies
which need to be actively followed by British Airways. Here, government imposes barriers by
increasing the prices of oil. Due to changes in the regulatory policies company also need to
increase fares. Furthermore, regulations are formed in order to protect the environment and
maintaining fair competition in the marketplace. In case of non-compliance of the set regulations
corporation can be fined for misconduct. On the other hand, competition policy states that each
and every organization operating in aviation industry need to follow the set standard so as to
ensure ethical conduct of business. For example, fine of £270m was imposed on British Airways
for price fixing (Legal information, 2015). It was to legal action against the come just because of
its misconduct in the marketplace.
Apart from this, legal changes are taking place to ensure security and well-being of
passengers. Accordingly British Airways changed its business environment and tool control
measures to ensure protection of passengers (Herberberg and Rieple, 2008). Furthermore,
regulatory authority set certain standard and form different laws which need to be followed by
the firm on right time. Therefore, all this factors facilitate to ensure smooth flow of production
and assists management of British Airways to meet requirement of stakeholders in an effectual
manner.
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3.1
The market structure has several sub part and has direct impact on the prices as well as
demand of services. These are explained as follows- Monopoly market- This the most strict kin of marketing strategy where single seller exist
in the market and charges prices as per own will. In this regard seller can exploit buyers
by charging higher prices. However, such kind of market has relatively high demand of
products and services where customer generally get ready to pay the high prices also
(Casile and Blake, 2002). Perfect Competition-It is the form of market where British Airways operates. Here,
number of buyers and sellers are operating in the marketplace. Here, British Airways
need to follow the standard set by aviation authority of UK in order to ensure fair
competition. Also, company formulates effective strategies to address issues of customers
or passengers. Similarly, company gets feedback from buyers to incorporate their views
to maintain good business environment (Ho, Wang and Vitell, 2012). Oligopoly market-This kind of market is operated by little number of sellers. They
generally focus on the quality of products and services in order to enhance the level of
satisfaction among ultimate user of services. This kind of market affected the operation of
European airline market in 1990s. At that time most of the corporations were merged
together.
 Duopoly – Duopoly is form of oligopoly. In this market form, there is only existence of
two producers. As a consequence, only two producers have control over the firm because
of their dominant position. In this market, management of British Airways is required to
collaborate with the dominating firm in order to earn good profits and survival in the
market.
3.2
There are several market forces which help organization to respond on right time
effectively. For example, demand of air travel services is increasing the market and customer
also updating their preferences as per the passage of time (Halbert and Ingulli, 2014). On the
other hand, government is continuously increasing the fuel prices which in turn force firm to
increase the fare. Furthermore, organization can also form several strategies to address issues of
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passengers and also comply the standard set by government. Apart from this, British Airways
adopted effective strategies to promote its services. However, at that Time Corporation can take
into account strategies of revelries and accordingly made the change sin the ad-campaign. Apart
from this, recession in the marketplace is also the crucial situation. At this juncture, British
Airways change its internal environment and address the need of passengers accordingly. Apart
from this, several other forces like technology, political parties and environmental issues also
affect the business environment (Miller and Cross, 2009). It enables management of British
Airways to change the operation of firm accordingly. For example, in case of technological
changes, British Airways try to cope up with the same. It aids to give rich experience to
customers and also create competitive edge of the firm in the marketplace. On the other hand,
country wise changing working environment generates need of change in the organizational
culture in accordance with requirement. This is also made possible by the British Airways so as
to retain customers as well as employees for longer time span.
Price elasticity of demand is a measure used to express responsiveness of the quantity
demanded of a service towards a change in its price. In this price elasticity of supply captures the
extent of horizontal movement along with the supply curve relative to the extent of vertical
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Illustration 1: Supply and demand curve

movement. Elasticity of demand and supply for British Airways is elastic in nature. Company is
providing supply in order to attain the point of equilibrium.
3.3
The working practices and culture of countries play active role in performance
management of a particular corporation. British Airways operates in several countries and
provide wide range of services. For example, when British Airways provide services in India
then it must pay attention on policies and regulation imposed by government. Also, employees
must be provided time to time training so as to improve the sales performance. Apart from this,
different external factors like political, technological and economical also has direct impact on
the business environment. Here, change in political party generates need of change in several
kinds of regulations like tariff and trade barriers (Legal information, 2015). This affects
performance of company in negative manner. On the other hand, economic policies of country
impact purchasing power of buyers which in turn company need to change its pricing policies on
time to time Furthermore; legal barriers are imposed country wise in relation to employment,
protection and other related terms. All these need to be considered by British Airways. For
example, company need to follow the safety standard strictly in Europe which are imposed by
European Union. In addition to this, issues related to slot capacity, route flights and new security
requirement are compiled by British Airways. Thus, working practices and culture of country are
considered by company. Social cultural factors also affect the working practices of company. It
is because, behavior of human resources is affected by their social attitudes. By considering this
aspect, company is required to provide services by assessing demographic services. In this
manner, they will be able to satisfy the customers more properly.
4.1
The global changes have direct impact on the British Airways because it operates in
number of countries. For example, World Trade organization and international civil aviation as
well as tourism bodies set the standard for the better as well as ethical performance of company
in the marketplace. This is because competitions are growing at rapid and accordingly
preferences of buyers are also changing. For example, because of price fixing corporation was
fined. This was occurred because organization did not follow the regulation laid down by the
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governing bodies (Hamilton and Webster, 2015). On the other hand, free trade is allowed to
British Airway in the sum of countries which leads to ensure its rapid growth and expansion at
global marketplace. In addition to this global warming assists British Airways or aviation
industry to reduce the negative impact on environment. At last, tourism bodies set some standard
related to protection and safeguarding of passengers which need to be taken into account by
management of British Airways. Also, accordingly internal policies are changed. In this regard,
innovative actions are taken by company to reduce the harmful radiations and follow the set
standard effectively. It facilitates to ensure long run growth of company with increased rate of
return and high customer base (Herberberg and Rieple, 2008). By making expansion in other
countries, company will be able to explore new market opportunities in order to earn high
benefit. Further, they can take benefit of low cost services in order to make overall reduction in
overall expenses.
4.2
There are factors which affect the operation of British Airways. These are explained as
follows- Cultural barriers-it is the most common global factors which affect the business
environment of an organization. Here British Airways operate in the number of countries
where management needs to assign skilled and competent workforce. However, cultural
barriers affect performance of company in negative manner. However, cultural diversity
of firm makes it possible to retain workforce for longer time span (Airline, 2015). International laws-Every country has different rules and regulations related to
employment, ethical conduct and international trade. All these affect business
environment to a great extent. Under this, company need to ensure that it follows the
practices laid down by the government of each country (Didonet, 2012). Technological changes-This is another most important factor which needs to be
considered at the time of providing the services to customer at global level. This is
because technology is the key aspect to meet expectations of passengers effectively in
comparison to competitors (Svensson and Wagner, 2015).
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 Economic effect -Unfavorable economic condition of country has direct impact on the
business. For example recent recession of UK has negative impact on the sales
performance of British Airways.
 Global economy – Global economic development has huge impact on the performance of
companies. It is because, management of the organization had to comply with the norms
provided by international regulatory authorities.
4.3
The European policies have impact on travel and competition of British Airways. This is
because UK corporations consider many of the regulations imposed by government of Europe.
For example free trade was promoted by EU which makes it possible for corporation to enhance
its scope at international level. Furthermore, EU took initiative to remove unemployment by
enhancing the scope of travel and tourism at global level (Wantao and Ramanathan, 2012). It
facilitates British Airways to cover large market areas and meet expectations of customers in
right manner. European Union also supports the appropriate work culture and invited cultural
diversity in all corporations so as to generate positive attitude among people and retain them for
longer time span (Kourteli, 2008). Apart from this, EU supported that aviation to trade in Euro. It
helped British Airways to reduces the amount of loss and recover its business to a great extent.
This also gives benefit to travel industry and enhance the visitor’s base. In the same British
Airways's scope was increased at global marketplace. It facilitates to increase the profitability
and give immense support to British Airway so the corporation. It leads to deliver good quality
of services to passengers (Casile and Blake, 2002). EU had provided legislation for the
companies which is mandatory to be complied. In this aspect they introduced CO2 and fair trade
policy. In accordance with this policy company is required to provide qualitative services at fair
prices. In addition to this, they are required to consider environmental factors along with their
profitability. For this purpose, there practices must be concerned towards the emission of CO2
gases.
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CONCLUSION
The aforementioned report concludes that British Airways need to consider the
regulations imposed by several counties and accordingly several external factors are also
considered. The EU policies also provide support to British Airways to reduce losses and
increase the profitability. In this regard, company should be including the views and ideas of
customer in service modification. It can also be said that, EU regulations should be strictly
followed by British Airways in order to increase the customer base. Furthermore, internal and
external environment of company need to be assessed on right time. It will be determine good
working environment and successful running of business. Thus, WTO and EU are two most
supporting factors for the growth and development of British Airways at global level.
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