Business Environment of British Airways

This assignment examines the business environment surrounding British Airways. It delves into factors impacting its performance, such as industry competition, economic trends, technological advancements, and regulatory landscape. The analysis aims to identify potential business opportunities for expansion by considering untapped destinations. Additionally, it explores strategic challenges facing the airline within a competitive global market.

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Different types and purpose of organisations....................................................................1
P2 Different size and scope of range of business...................................................................2
P3 Interrelationship of various functions running in an entity and their link with hierarchical
objective structure..................................................................................................................8
TASK 2..........................................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

Illustration Index
Illustration 1: MSME sector in UK..................................................................................................4
Illustration 2: Porter's Five Forces Model........................................................................................6
Illustration 3: Demand and Supply .................................................................................................7
Illustration 4: Organizational Structure of British Airways ............................................................9

INTRODUCTION
Business environment is an important factor that is considered while taking internal and
external judgements for the company. It can affect decision making process of the company by
interrupting in demand, supply, customer management, etc. British is one of the largest airline
company in UK covering 183 destinations all over the world. The report discusses various type
of entities such as profit, not for profit and non-governmental organisations. Further the report
ponders on range of business available in profit entities such as sole trader, partnerships etc.
Moreover, it focuses on various function of British Airways and the operational structure
followed by the company. In the end, a presentation is attached elaborating PESTLE and SWOT
analysis of British Airways.
TASK 1
P1 Different types and purpose of organisations
An enterprise is a social unit which is formed and managed to achieve collective goals.
Different roles and responsibilities are divided among the members in order to carry out different
tasks. Since, the businesses are prone to external market, they affect and get troubled by the
environment factors. There are various types of entities such as profit, non-profit and
governmental.
 Profit organisations: These entities are meant to earn profits where all the members
collect together to achieve the goal of profit maximization. The main motive is to make
money (Belás and et.al, 2015). The associations, that are considered to be a business, are
profit making such as insurance companies, restaurants, real estate companies etc. British
Airways in one of the example of profit corporation which has been established to earn
profits.
 Not for profit organisations: These type of institutions are not meant to earn profit but
to serve the society. The members invest in the corporations without any expectation of
return. They do not share any loss of profit as they further reinvest it into the business.
Few of the approved NPOs are granted with tax exemptions and the contribution made to
these NPOs are tax deductible as well. NPOs include charitable trusts, cooperatives and
voluntary entities formed to serve cultural, professional, religious and educational rights
of the people.
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 Non-Governmental Organisations: These are private sector companies who contributes
in the not for profits projects and work for the welfare of the society. The goals can be
education, training, preserving human rights etc. It can be accredited by UN or can gather
donations to serve distressed people. Some examples of NGOs are World Wide Web
(W3) Consortium, World Wildlife Fund (WWF), International Committee of the Red
Cross etc.
P2 Different size and scope of range of business
A business can further be in various forms such as sole traders, partnership and private
limited companies.
 Sole Traders: One person is the exclusive owner of the business who is entitled for all
the profits and have to bear all the losses. It is the simplest way to run any business as it
is not required to pay any registration fees, if you are working as a sole trader. However,
it is important to register yourself as a sole trader. He maintains the records according to
his own convenience in order to access receipts, payment and losses. He can also
maintain financial statements for better decision making. The person is liable for all the
debts. Also, it can be a risky option since it required a lot of investment and loss has to be
bore solely and wholly by the trader (Epifanova and et.al, 2015).
 Partnerships: In this type of entities, two or more people gather to achieve common
objective of the corporate. The partners share profit, losses, ideas, resources and skills to
achieve these objectives. The terms and conditions and profit sharing ratio is mentioned
in the partnership agreement which is prepared based on the mutual agreement between
the partners.
 Private Limited Companies: These type of companies offer limited liability and are
privately held. The number of shareholders are limited to 50 which restricts its
shareholders from trading shares publicly. The shares of private limited companies are
not traded in stock exchange. Since, the companies enjoy limited liability, the owners of
the company are not personally liable for debts of the firm.
Micro Small and Medium Enterprises
The organisation meant for earning profits can also be MSME that is, Micro Small and
Medium Enterprises. Different definitions are used for different reasons with regard to MSME.
For the purpose of research and Development Tax relief, HMRC considers SME as a business
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not having more than 500 employees and annual turnover does not exceed to £100 million. For
collecting statistics, The Department of Business defines SME as business not having more than
250 employees. In case of accounting purpose, Companies House considers that small business
should not have more than 50 employees and turnover not exceeding £6.5 million and medium
enterprise with less than 250 employees and turnover not exceeding £25.9 million. Other parts of
UK use the following structure for MSME:
Micro Business: employees < 10 and turnover < £2 million.
Small Business: employees < 50 and turnover < £10 million.
Medium Business: Not more than 250 employees and turnover not exceeding £50 million.
The government has adopted various schemes which promote trading and helps the
organisations which comes under the bracket of Micro, Small or Medium Enterprises. It helps
them to stay competitive in the market and grow. Based on the reports published in 2015,99.3%
of the businesses running in UK are SMEs, where 33% of the country's turnover is contributed
by this sector.
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The large companies enjoy high market share and brand image like British Airways.
Their main motive is to expand business nationally and internationally as they are sustainable in
nature. Medium sized corporations are profitable as well but they require expanding their
business to become sustainable and get high market share. On the other hand, small corporations
neither enjoys high market share nor they are sustainable. British Airways also regularly improve
its business practices in order to grow and stay competitive in airline market (Hamilton and
Webster, 2015).
Global growth and development of entities
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Illustration 1: MSME sector in UK
(Source: Adeoye and Elegunde, 2012)

Transactional corporations are registered and operated in more than one country. These
entities are also known as multinational companies. These corporations have headquarters in one
country and have wholly or partly owned subsidiaries in other countries. The main motive of
transnational entities is to grow and escape from the policies of imports in other countries. It also
reduces cost for the organisations. It pursues single interest in different international unit in order
to expand its business globally with further helps in profit maximization for the corporation.
However, International companies only involved in import and exports and do not have any
investment outside the home country. On the other hand, global companies are present in various
countries and enjoys a certain brand image in those countries as well. Generally, only one office
conducts and is responsible for the global strategy.
 Franchising: It gives right to individual or a group to use the business model of a firm
for a specific period. It gives right to use the trademark which in turn enjoys the brand
image of the franchiser. It is required to pay one time franchisee fee including the fixed
percentage of sales as royalty. Franchising is a better idea rather than opening own
business because it helps the franchisee to earn higher profits from the initial phase itself
and it does not require large investments.
 Joint venture: Two or more parties join hands to serve a specific task which is a new
project for the parties. All the partners in the joint venture are responsible for cost,
profits, loss and risk associated to that particular project. However, the parties enjoy their
own separate entity apart from the project they are doing together (Harrison, 2013).
 Licensing: An enterprise permits another company to manufacture its product under his
brand name in lieu of certain payment. It is basically transferring of rights from the owner
of the trademark to another entity. It is an easy method to earn and grow in the initial
stage of business itself as the licensee company enjoys the brand image of the licensor
company.
Industry and competitive analysis:
Industry analysis can be performed by using Porter's five forces analysis. The purpose is
to determine the competitiveness of the company in that particular industry.
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Market forces and economic operations
Scarcity and choice: The company always have limited resources to satisfy the needs of the
customers. It can produce a limited quantity and satisfy limited needs from the available
resources. Therefore, the economists decided to identify the scarce resource and satisfy most
important needs rather than fulfilling all the needs.
Supply and Demand: Supply and demand are interrelating and are important part of market
forces. The company maintains the inventory based on the demand available in the market. The
place where supply and dead meets in the point called as an equilibrium point (Siewiorek and
et.al, 2012).
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Illustration 2: Porter's Five Forces Model
(Source: Babatunde and Adebisi, 2012)

Income Elasticity: It measures the change in quantity demanded due to changes in the income
of the consumer. Higher the elasticity of demand higher will be the effect of change on the
particular product. The demand can be elastic or inelastic depending upon the nature of goods.
Necessities are considered as inelastic whereas luxurious goods are considered as elastic.
Assessing and meeting the needs of stakeholders
The stakeholders have interest in the organisation since, what shareholders will get in the
end depends on the yield earned by the company. Higher the profits, company will be earning,
higher will be the interest and dividends of the shareholders. Based on the financial performance,
investors invest in a company. They expect that competitive performance, good governance, and
future value for their investment. Managers expects to have authority and decisions making
power in their hands. Employees of the company required job safety, recognition and high salary
for the work performed by them. Lenders and creditors interest and loan repayment. In order to
fulfil all the needs of the stakeholders it is important for the company to do proper disclosure of
accounts in order to share actual financial position of the company. It is the responsibility of the
company to meet the stakeholders' expectation and work keeping their interest intact.
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Illustration 3: Demand and Supply
(Source: Bah and Fang, 2015)

P3 Interrelationship of various functions running in an entity and their link with hierarchical
objective structure
British Airways is one of the largest airline services in UK. It enjoys the largest fleet of
modern aircraft and provides its services to international destinations than any other airline
service in UK. The company has various in-house departments running which are ultimately
contributing towards the success of British Airways. Some functions of the company are listed
below:
 Marketing Function: Every company is required to have a good marketing plan to
attract massive customers which is turn helps in generating higher profits. The company
have been successful in maintaining high customer base by using appropriate
promotional tactics. It also conducts market research which helps the company to
understand the preferences of the customer in better manner.
 Finance Function: This department of British Airways helps in taking prudent business
decisions to achieve company's goals. It helps to measure the company's performance and
further helps in taking financial decisions for the company. It helps to assess business risk
involved, understand the financial objectives (Welford, 2013).
 Technological Function: British Airways have always been involved in providing high
quality technological features in its aircraft. The company keep upgrading its technology
in order to provide the best services to its customers. It helps maintain quality standards
and set benchmark for all the competitors available in the market. Further, It helps to
attract more customer which ultimately maximize profits of the company.
 Operations: It is the most important and core function of British Airways, that is,
transporting the passengers safely to their destinations. It includes providing the
customers with safe and comfortable journey while they are travelling with British
Airlines. It helps to satisfy the customers in better manner and it is also related to a
marketing technique called word of mouth. Satisfied customers will help to bring more
customers and hence fulfil marketing function of the company.
Mission of British Airways: To fly the customers safely and take care of the global
environment while conducting business.
Vision of British Airways: To become the world's most responsible airline company and set the
principles to achieve the set goals.
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Organisational structure of British Airways
It is important to have hierarchical structure, it helps to achieve profits. Further, it assists
to define roles and responsibilities of the employees and helps to determine their contribution
towards the success of the company (Wetherly and Otter, 2014). It has decentralised hierarchical
structure for its smooth functioning. British Airways have a Chief Executive at the top-level
management which further is divided into three subgroups. Customer and operation executives,
management board and reporting to the chief executives are the people responsible for various
other functions in the company. Customer and operations executive are further responsible to
conduct the function of communications, customer, engineering, flight operations and other
operations of the company. Management board of British Airways is responsible for finance,
marketing, strategic and business units. It also has a group of people responsible for investments,
legal, and industry affairs. They are also responsible for safety and security of customers and
employees.
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Illustration 4: Organizational Structure of British Airways
(Source: British Airways Management Hierarchy, 2017)

TASK 2
Attached in presentation.
CONCLUSION
From the above report, it can be concluded that it is important to consider all the internal
and external factors while taking decisions for a company. British Airways is involved in
providing airline services to its customers. The company has various organisational functions
such as HR, Finance, Marketing and operations to serve the entity's objective. It has
decentralised hierarchical structure for its smooth functioning. There are various political,
economic, social, legal and environmental factors that affect the business in both positive and
negative manner. The company can grow by considering business opportunities to expand its
business by covering various untouched destinations.
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REFERENCES
Books and Journals
Adeoye, A. O. and Elegunde, A. F., 2012. Impacts of external business environment on
organisational performance in the food and beverage industry in Nigeria. British Journal of
Arts and Social Sciences. 6(2). pp.56-65.
Babatunde, B. O. and Adebisi, A. O., 2012. Strategic Environmental Scanning and Organization
Performance in a Competitive Business Environment.Economic Insights-Trends &
Challenges. 64(1).
Bah, E. H. and Fang, L., 2015. Impact of the business environment on output and productivity in
Africa. Journal of Development Economics. 114. pp.159-171.
Belás, J. and et.al., 2015. The business environment of small and medium-sized enterprises in
selected regions of the Czech Republic and Slovakia. E+ M Ekonomie a Management. (1).
p.95.
Epifanova, T. and et.al., 2015. Modernization of institutional environment of entrepreneurship in
Russia for development of innovation initiative in small business structures. European
Research Studies. 18(3). p.137.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Harrison, A., 2013. Business environment in a global context. Oxford University Press.
Siewiorek, A. and et.al., 2012. Learning leadership skills in a simulated business
environment. Computers & Education. 58(1). pp.121-135.
Welford, R., 2013. Hijacking environmentalism: Corporate responses to sustainable
development. Routledge.
Wetherly, P. and Otter, D. eds., 2014. The business environment: themes and issues in a
globalizing world. Oxford University Press.
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Online
British Airways Management Hierarchy. 2017. Available through:
<http://www.hierarchystructure.com/british-airways-management-hierarchy/>. [Accessed
on 1st July 2017]
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