Business Environment and Entrepreneurship

This assignment delves into the crucial relationship between the business environment and entrepreneurship. It analyzes various aspects of the business environment, such as competition, legal and regulatory frameworks, and macroeconomic factors, to understand their impact on entrepreneurial ventures. The task requires a comprehensive review of relevant literature and a critical evaluation of how these environmental influences shape the success or failure of businesses.

BUSINESS ENVIRONMENT
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Identification of purpose of different organizations..............................................................3
1.2 Identify stakeholders and impact of challenges to stakeholders ..........................................4
1.3 Responsibilities towards stakeholders...................................................................................5
2.1 Economic systems that allocating resources effectively........................................................5
2.2 Impact of fiscal and monetary policies..................................................................................6
2.3 Impact of competition policies and legal challenge on airline industry................................6
Task 2...............................................................................................................................................7
3.1 Impact of market structure on pricing and demand...............................................................7
3.2 British Airlines responses on competitors strategies and market forces................................7
3.3 Impact of working practices and culture on British Airline.................................................8
4.1 Impact of Global changes of WTO and International Civil Aviation....................................9
4.2 Impact of government regulations on British Airways..........................................................9
4.3 Explain the impact of EU policies on travel, competition and aviation on B.A. ...............10
Conclusion.....................................................................................................................................10
References......................................................................................................................................12
...................................................................................................................................................13
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INTRODUCTION
Business Environment is a combination of various internal as well as external factors that
influence business directly or indirectly (Klapper, Lewin and Delgado, 2011). These factors can
result in favourable as well as unfavourable effects on the business. In other words, business
environment is a set of social, economic, political, technological and legal factors that impact
business operations to a great extent. British Airways (BA) is the largest airline in the UK. It was
formed by UK government in 1972 to manage two nationalized and two regional airlines. After
that, from 1974, all four companies were merged into one that is British Airways. It is the second
largest airline company in Europe and also listed in Landon Stock Exchange (About British
Airways, 2016). This report is all about the vision, mission and objectives of BA. It also includes
the discussion about various stakeholders and challenges faced by them in the context of BA.
Report will also include explanation about economic system, fiscal and monitory policies of
Business environment followed by BA and how BA faces legal as well as political challenges.
Lastly, market structure of airline industry as well as global challenges faced by the organization
have been analysed.
TASK 1
1.1 Identification of the purpose of different organizations
Different types of organizations and their purposes.
 Sole traders – Under sole trader, decisions are taken by one person that is the main
founder or owner of organization with limited liability. Sole trader is responsible for the
ensuring the availability of finance and purpose of such business is to make maximum
profit (Botha, Kourie and Snyman, 2014).
 Partnership – This type of organizations are formed by minimum 2 and maximum 20
partners. The purpose behind opting partnership firm is that partners can share their skills
and workload. Along with this, partners can also enjoy the limited liability. Companies – It is a legal entity that is separated from its shareholders. Purpose behind
such type of organization is that it can raise large amount of capital and share limited
liabilities. A great example for this type of organization is British Airways (Cavusgil and
et.al., 2014).
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Mission and vision of British Airways
 Mission of BA is to develop good customer relationship and increase profit margins
through new schemes. Vision of BA is to carry business activities that result in overall corporate success
(Popescu, 2013).
Long and short term objectives of BA- Long term objective of BA- One of the long term objectives of BA is to become world's
leading global premium airline. This can be done by delivering outstanding services and
building relationships with consumers. Improving their presence in global cities along
with enhancing their margins through new revenue streams are also long term objectives
of the company.
 Short term objectives of B.A - Short term objectives of BA are to build leading position in
in the UK market and to launch advance fright facilities. In short term, BA aims to be
more specific for human aspects and job recruits as well as to make good relationship
with customers (Rainey, 2010).
1.2 Identify stakeholders and impact of challenges to the stakeholders
Stakeholders are the persons who have stake in the organization and share a vital interest
in the business activities of BA. Stakeholders can be employees, suppliers, directors etc. of the
organization. Employees- Employees are the primary stakeholders as they are involved in economic
transactions of BA (Grassl, 2012). Employees are the persons who want job security,
better salary etc. from the organization.
Effect of challenges on employees- Recession impacts employees by cutting down there basic
pay or sometimes in recession, employers can fire them also. Suppliers – Airbus and Boeing are the major suppliers of BA’s aircrafts. They provide
products and services that are used to deliver end products to the customers. Suppliers are
also primary stakeholders as they are involved in the economic transactions of
organization (Onyido, Boyd and Thurairajah, 2016).
Effects of challenges on suppliers – Increase in global passenger traffic is impacting suppliers.
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 Customers - They are also the key stakeholders of organization. In case of a large
company such as British Airways, customers are the main stakeholders as they carry
power of voting out directors if they are not working as per the legal terms and
conditions. Customers are the one who want from business to provide quality products
and services (Thompson and Van der Walt, 2010).
Effects of challenges on customers –When there is increase in inflation rate, it leads to decrease
the purchasing power of consumers.
1.3 Responsibilities towards stakeholders
 Responsibilities towards employees –Employees are the important pillars of the
organization, hence British Airways makes sure that it maintains culture where each
individual will be treated with respect. It also makes sure that all employees are provided
with good working environment (Onyido, Boyd and Thurairajah, 2016). For Example,
BA ensures safety measures that are to be taken for its employee’s safety as they are the
primary stakeholders of organization and they are responsible for operational activities of
organization to achieve the key target.
 Responsibilities towards customers –Main target of BA is to build good relationship
with consumers as it can lead to increase the level of customer loyalty. British airways
ensures about the health and safety issues of customers when they are on board. For
Example, one of its aims is to grow globally in a responsible way by taking care of
environmental as well as health and safety issues (Ibrahim and Primiana, 2015).
 Responsibilities towards suppliers – British Airways makes sure about the fair and
transparent tender process for its suppliers. It also ensures for timely payments to its
suppliers. For Example, British Airways is a member of SEDEX (Supplier Ethical Data
Exchange), a non-profit organization that takes measures to improve standards of supply
chain (Dickinson, 2013).
2.1 Economic systems that allocating resources effectively
Economic system includes various processes of production, distribution of goods and
services etc. It ensures resource allocation effectively. There are various types of economic
systems such as free market, centrally planned and mixed economic system.
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 Free market economic system – In this economic system, buyers and sellers exchange
product freely in the market as there is less influence of government (Adomako and
Danso, 2014). One of the important characteristics of free market economy is allocation
of resources that is affected by the decisions which are taken by the private players.
Under this system, decision of what to produce and how much to produce is in the hands
of private players.
 Planned market economic system – It is a system in which plans are made by
government itself. Under this economic system, allocation of resources are determined
through comprehensive plan of production.
 Mixed Economic System – It is a system which includes both social as well as
capitalization economic system. UK follows mixed economic system. In this, resources
are partly divided into private and public sectors. For example, in case of British
airways, wealth is generated by its airline business but government plays a vital role in
allocating resources by obtaining taxes from business as well as from workers of the
organization (Dickinson, 2013).
2.2 Impact of fiscal and monetary policies
Impact of Fiscal policies - With the increase in tax rates, there will also be increase in
fare charges of British Airways. This in turn will lead to decrease the purchasing power of
customers and they will opt for various other transportation such as railways, buses etc. On the
other hand, if tax rate goes down, customers will have more to spend.
Impact of monitory policy- It is a government policy used to boost up the economy
through lower interest rate and increase the money supply. Decrease in interest rate results to
increase in money supply. Increase in money supply will increase the purchasing power of
people. There will be a positive effect on British airways when there is decline in interest rate as
it will increase the purchasing power of its customers (Vaiman, Sigurjonsson and Davidsson,
2011). On the other hand, if there is increase in interest rate then it will lead to decrease in
money supply and this in turn will lead to decrease in the purchasing power of customers.
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2.3 Impact of competition policies and legal challenge on airline industry
Competition policies lead to the process of encouraging competition and ensure benefits
of customers. In order to increase competition in the airline industry, UK government has
introduced British Caledonian (Bcal), in spite of that British Airways has maintained dominant
position in the market (Thompson and Van der Walt, 2010). Along with this, privatization has
increased the number of competitors in the airline industry.
In addition to this, for promoting fair and ethical practices in the aviation industry, it is
essential for British Airways to focus on different competition policies. With this policies,
management of company will modify their services as well as prices of their tickets in
accordance with the rival companies that will further support in getting success in the aviation
industry.
TASK 2
3.1 Impact of market structure on pricing and demand
There are different market structures such as monopoly, oligopoly etc. Airline industry in
the UK follows oligopoly market structure. Under oligopoly market, there are few firms which
carry dominant positions in the market (Grassl, 2012). For example, in UK airline industry, there
are few major airlines such as British Airways and Air France which carry a dominant role in the
UK market. Oligopoly market structure affects pricing and demand in following three ways.
Companies react in two ways either they follow up other competitors or they simply ignore them.
In case, if British airways increases its prices then it is not necessary that France airlines will do
the same (Adomako and Danso, 2014). On the other hand, if British airways decreases its prices
then France airlines will follow in order to prevent any losses. On the other hand, if other
competitors decrease its prices then it will affect the demand of BA in oligopoly market
structure. Competitive firms collide with each other to fix at certain prices and distribute market
among themselves. They participate in an agreement in which they divide their markets to earn
monopolies. So, in case of airline industry, British airways and France Airlines are the two
dominant airlines in the UK (Didonet and et.al., 2012). They can collide with each other and
divide their markets to earn monopoly positions. Hence, this market structure influences BA to
fix its prices by participating in an agreement. Every company in such market follows their
dominant competitors and tries to match up with them. For example, If British Airways
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increases its price then other companies will also go for increasing its prices. On the other hand,
if BA decreases its price then other will also decrease its price (Dickinson, 2013).
3.2 British Airlines responses on competitors strategies and market forces
Although British Airways is the largest airline in UK since a decade, but it has some
tough inter players such as Virgin Airlines, British Midland, Lufthansa, Emirates, Jet Airways
and France Airlines etc. British Airways responds to interplay with different players by
following various competitive strategies in order to remain at dominant position in the market.
BA is focusing on offering customers a unique experience. It is conducting market research for
its customers to know them better. It has introduced mobile services for its business class
customers. BA is also focusing on organic growth. It also responds by acting towards its social
responsibilities. This is done by investing in Solena project to develop an alternative fuel for
aircrafts in order to reduce carbon footprints. BA is also focusing on its quality management by
investing on fleet, staff etc. in order to improve customer service.
British Airlines responses on change in market forces: Changes in market forces are related to
the changes in the demand and supply of products and services in the market.
 Change in Demand- Changes in demand occur due to changes in market conditions. For
example –Strike of railways will automatically increase the demand of air services. In
such case, British Airways can increase its prices to earn more revenues. Similarly, if
there is no strike of trains and demand for airlines remains constant or less then British
Airlines has to reduce its prices in order to maintain its revenue. There is inverse relation
in demand and price. For example- increase in price by British Airways leads to decline
in demand (Onyido, Boyd and Thurairajah, 2016).
◦ Change in supply- If there is increase in cost, supply curve will shift inward and if
cost decreases then supply curve will move outward. For Example – Increase in the
price of spare parts will lead to enhance the cost of aircraft and it will automatically
increase the price of air ticket and will decrease its demand. Similarly, if price of
spare parts decreases then it will decrease the overall cost of production and will lead
to increase demand. 3.3 Impact of working practices and culture on British Airways
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Impact of working practices of US on British Airline:
1. Working hours: In UK, British people works for around 9 hours a day and they are also
open for overtime but in USA, people only works for 8 hours a day (Didonet and et.al.,
2012). Therefore, British Airways has to opt US time standards while expanding its
business in US.
2. Management of activities: American employees distribute their time evenly between
business development and account management whereas British people spend 12 times
more on account management. Therefore, British Airways needs to change its working
accordingly.
3. Social Media adoption: There is almost same duration for using social media by both the
British people and Americans. Instead of British people, Americans use more of
Facebook (). So, British Airways can advertise its business through Facebook.
Cultural differences of United States of America and United Kingdom:
1. Along with language problem British Airlines may face other differences such as
attitudes, custom, opinions and reaction etc (Grassl, 2012).
2. Another issues faced by British Airways in US will be related to holidays every country
has there set of holidays which are slight different from other countries so as US has
different sets of Holidays which is to followed by British Airlines. Such as labour day,
Columbus day etc.
3. Another important thing which British Airways needs to keep in mind is the etiquette of
Americans their accent, gestures, etc. Americans life Friendly environment.
4.1 Impact of Global changes of WTO and International Civil Aviation
World Trade Organization (WTO) and International Civil Aviation (ICA) are considered
as global organizations that generally regulate the international trade. Global changes of WTO
and International civil aviation will directly impact on the operations of British Airways in the
aviation industry. Change within the policies of international civil aviation will also result in
changing the policies and structure of BA as ICA is a regulatory body that handles and manages
the activities of various organizations in the aviation industry (Dickinson, 2013). It generally
focuses on developing and planning the air transport to ensure safe growth. Therefore, due to
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different development policies, BA also has to make changes within their routes so that they can
develop and ensure proper air transport.
4.2 Impact of government regulations on British Airways
Changes in the rules and regulations of government affect British Airways by economic
and political factors.
 Political Factors –Political environment is directly related with government and changes
in political factors affect BA to a great extent (Klapper, Lewin and Delgado, 2011). For
Example – After the terrorist attack in America, US government launched new rule of
safety which includes Visa Waiver Program and travel authorization. Other than this,
passengers traveling to US are required to provide their advance passenger information to
government of USA. British Airways is required to fulfil all these demands which is
more time consuming process and affects British Airlines.
◦ Economic Factors– After liberalization and deregulation, there is increase in
competition level in the airline industry which is leading to price wars among various
businesses. In addition, this is leading airlines towards losses and customers towards
profits. British Airways is also reducing its fare prices in order to make profit
(Popescu, 2013). It is charging Air Passenger Duty from passengers who are flying
from UK airport. 4.3 Explain the impact of EU policies on travel, competition and
aviation on B.A.
EU policy effects British Airways on the basis of travel, aviation and competition.
 European Union (EU) rules on competition- It is designed for fair and equal business
conditions. Under this, British Airways or any other airline which plays a dominant role
in the airline industry cannot fix prices and can’t dominant small or new competitors. As
per the EU rules, a dominant or large company such as British Airways cannot merge
with small company without approval of European Commission (Competition, 2016). EU
Policies protect small companies from larger companies which impose powers on small
companies so that they cannot perform effectively in the market.
 EU Aviation Strategy- Main role of this policy is to promote economic growth, trade
and job creation in EU (Competition, 2016). It also presents the importance of high safety
standards. These rules are overseen by European Commission, EASA and National
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Aviation authority which are applicable on EU members. Main areas of aviation are
aerodromes, airworthiness, aircrew, air operations etc. UK is a member of European
Union so its airline industry has to follow all these safety measures. Therefore, British
Airlines has to follow up all these safety measures set by EU. There are various other
aviation strategies which have to be followed by BA such as passenger safety and
accident investigation.
CONCLUSION
From the above report, it can be concluded that there are different purposes of different
organizations. Stakeholders of British Airways face challenges such as changes in inflation rate
and availability of recession times. The report has been discussed about the impact of fiscal and
monetary policies on the organization. Further, it can be concluded that market forces such as
demand and supply impact British Airways. BA is also effected by other country’s working
practices and cultures. At last, the report has been ended over with the effect of aviation and
competition rules of EU on British Airways.
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REFERENCES
Book and Journals
Adomako, S. and Danso, A., 2014. Regulatory environment, environmental dynamism, political
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Small Business and Enterprise Development. 21(2). pp.212-230
Bansal, P. and Hoffman, A. J., 2012. The Oxford handbook of business and the natural
environment. Oxford
Botha, A., Kourie, D. and Snyman, R., 2014. Coping with continuous change in the business
environment: knowledge management and knowledge management technology. Elsevier.
Cavusgil, S. T. and et.al., 2014. International business. Pearson Australia.
Dickinson, P. G., 2013. SMEs and the business reality of Estonia's tax regulation environment.
Journal of Law and Management. 55(4). pp.273–294.
Didonet, S. and et.al., 2012. The relationship between small business market orientation and
environmental uncertainty. Marketing Intelligence & planning. 30(7). pp.757–779.
Grassl, W., 2012. Business models of social enterprise: A design approach to hybridity. Journal
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Klapper, L., Lewin, A. and Delgado, J. M. Q., 2011. The impact of the business environment on
the business creation process. Palgrave Macmillan UK.
Nandakumar, M. K., Ghobadian, A. and O'Regan, N., 2010. Business-level strategy and
performance: The moderating effects of environment and structure. Management Decision.
48(6). pp.907-939.
Onyido, T. B. C., Boyd, D. and Thurairajah, N., 2016. Developing SMEs as environmental
businesses.Construction Innovation.16(1). pp.30–45.
Popescu, G. H., 2013. Macroeconomics, Effective Leadership, and the Global Business
Environment. Contemp. Readings L. & Soc. Just. 5. pp.170.
Rainey, D. L., 2010. Sustainable business development: inventing the future through strategy,
innovation, and leadership. Cambridge University Press.
Thompson, W. J. and Van der Walt, J.S., 2010. Business intelligence in the cloud. SA Journal of
Information Management. 12(1). pp.5-pages.
Vaiman, V., Sigurjonsson, T. O. and Davidsson, P. A., 2011. Weak business culture as an
antecedent of economic crisis: The case of Iceland. Journal of Business Ethics. 98(2).
pp.259-272.
Online
About British Airways. 2016. [Online]. Available through: <http://www.britishairways.com/en-
gb/information/about-ba>. [Accessed on 17th March 2016].
Competition. 2016. [Online]. Available through: <http://europa.eu/pol/comp/index_en.htm>.
[Accessed on 17th March 2016].
Ibrahim, R. and Primiana. I., 2015. Influence Business Environment On The Organization
Performance. [Online]. Available through:
<http://www.ijstr.org/final-print/apr2015/Influence-Business-Environment-On-The-
Organization-Performance.pdf>. [Accessed on 17th March 2016].
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