Business Environment Factors Impacting British Airways Operations

This report provides an analysis of the business environment of British Airways (BA). It begins with an introduction to the concept of the business environment and then explores the purpose and types of organizations, specifically focusing on BA as a privately owned entity. The report examines how BA meets its stakeholders' objectives, including employees, managers, owners, government, customers, and suppliers, and details its responsibilities towards each group. It then delves into the impact of economic systems (free market, mixed, and command economies) on BA's operations, illustrating the influence of fiscal and monetary policies, such as changes in interest and tax rates. The report also assesses the effects of competition policies and regulatory mechanisms on BA, including the impact of market structure (monopoly, monopolistic, oligopoly, and perfect competition) on pricing and demand in the airline industry. Finally, the report discusses the influence of global changes in trade regimes, and global factors on the operational policies of BA, including the impact of EU policies.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose and types of organization....................................................................................1
1.2 BA meet its stakeholders objectives.................................................................................2
1.3 Responsibilities of British airways...................................................................................2
2.1 Economic systems helps to allocate resources effectively...............................................3
2.2 Impact of fiscal and monetary policies on British Airways.............................................4
2.3 Impact of competition policy and regulatory mechanism on BA.....................................5
3.1 How has the market structure of the airline industry impacted the pricing and demand for
airline seats.............................................................................................................................5
3.2 Ways through which market forces shape organizational responses...............................6
3.3 Business and cultural environments impact on shape the behavior of the BA................7
4.1 Impact of global changes in trade regime caused by regulatory organizations................7
4.2 Impact of global factors on the operational policies of BA..............................................8
4.3 Impact of EU policies on the operation of BA.................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
ILLUSTRATION INDEX
Illustration 1: Different economic system........................................................................................3

INTRODUCTION
The term business environment deals with external and internal factors which affects the
operations of an organization. Every business is required to take of external and internal factors
in order to operate in effective manner and earn adequate profits (Zhu and et.al., 2012). This
report is presents the business environment of British Airways which is a UK based airlines. The
objectives of organization are demonstrated in this report along with the impact of legal changes
and trade regimes on the airlines.
TASK 1
1.1 Purpose and types of organization
A organize group of people which has been formed to achieve common objectives and
goals is termed as organization. The type of organization along with their purpose are mentioned
below as: Non-profit organizations- Non-profit organizations are often termed as NPO's. Rather
focusing on earning higher profits, such organization seeks for the development of
society. Public organizations- Public organizations are those businesses which are managed by
government of the country. The prime purpose of these organizations is to make the
customers available with the best quality of products and services at convenient prices.
 Private organizations- Private organizations are those businesses which are fully owned
and controlled by private individuals or parties. The decision and strategies are
developed by these individuals only. Main purpose of these organization s to earn higher
profit and market share.
British airways is a privately owned organization and all its decision related to products
and pricing are made by its owners. Its vision is to provide travellers with one of the best
travelling experience (Spitzeck and Hansen, 2010). On the other side of this, the mission of BA
is to become the best and most trusted airlines of the world. Its shorts terms goals includes
training of employees and increasing its customers base. The long term objectives of BA is to
enter new markets, increase its exiting sales and profitability.
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1.2 BA meet its stakeholders objectives
Stakeholders are considered as very important part of every organizations. British
airways has some internal as well as external stakeholders. Further different stakeholders have
different objectives which needs to be taken care by the airlines. Internal stakeholders such as
employees have an objective of getting better opportunities for growth and development (Peters
and et.al., 2011). The managers wants better working environment and the owners of BA have an
objectives of higher sales and profitability. British airways also have some external stakeholders
such as government customers and suppliers. The objective of government is to make sure that
all the employment and environment related laws are addressed by the airlines in best possible
manner. On the other side of this, the objective of customers is to get better and quality airline
services at convenient prices. The suppliers want to have better relation with the organization
and their objective is to carry out fair and long term business with the airlines (Business
Stakeholders: Internal and External. 2015).
1.3 Responsibilities of British airways
British airways is required to take care of all its stakeholders and have various kind of
responsibilities regarding the same. It is the responsibility of the airlines to take care of the safety
of all its customers and provided them with quality services. In terms of government it is the
responsibility of British airlines to addresses all the laws and regulations framed by the
government of UK. On the other hand, the airlines also have responsibilities towards its
employees and it is required to provide them with safe working conditions and adequate play
(Madura, 2006). Along with this the organization is also responsible for the training and
development of employees. Till now the airlines has been always successful in carrying out all
its responsibility in effective manner. For example its has gained high degree of customer
satisfaction by providing them with best quality of services. On the other hand, it has been able
to fulfil its responsibilities towards suppliers by making timely payment and involving them in
decision making process. For employs, training and development sessions are arranged at
regular intervals which makes them more effective and productive. Further safe and hygienic
working conditions are also provided to them so that they can stay motivated.
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2.1 Economic systems helps to allocate resources effectively
There are different set of economic system that aids in allocating the scarce resources in a
manner through which needs and wants of society can be fulfilled. In this context, following are
the economic system that been taken into account by different countries:
 Free market economy- It is an economy in which government possess less control on the
market. In other works, it can be referred that government has no control on the operation
of British Airways. However, regulatory bodies pose certain restrictions in order to
safeguard the interest of society but it doesn’t affect the cited organization performance
(Zahra, 2005). Further, it is an economic system where there is only single organization
that influences whole of the industry. With having such a brand image, BA focuses on
satisfying their customers’ needs at a very reasonable price. Some core advantages of this
type of economy are as follows:
◦ Key concern is laid on individual’s preference and spending rather than focusing on
government policies and restrictions.
◦ There are less restrictions for private players to initiate business operation in the
market place.
Illustration 1: Different economic system
(Source: Economic system. 2014) Mixed economy- It is a structure that includes the characteristics of both capitalism and
socialism. In This type of economy, private organization are allowed to use the resource
and capitals as per the desired but it also allows government to interfere in the business
activities of organization in order to ensure that social aims are also achieving (Mason,
Kirkbride and Bryde, 2007). This set of system is effective to accomplish socialism aim
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that that of capitalism. Hence, it can state that mixed economy is a sum total of free
market economy and command economy. BA operates in mixed economic structure and
hence its operation is affected due to government inventions.
 Command economy- In this type of economy, government possesses whole command
over economy within the context of allocating the resources in effective and efficient
manner. Further, government takes effective decision of fuel prices, tax on food, service
tax on every confirmed seat (Mysiak, Giupponi and Rosato, 2005). Moreover,
government also takes the full control of economy for allocating the scare resources like
labor, capital, machinery, etc. If BA operates in command economy then its operations
will be highly influenced from the government and its policies.
2.2 Impact of fiscal and monetary policies on British Airways
Monetary and fiscal policies aids in managing the nation's economic activities so that rate
of inflation and deflation can be managed. In this context, monetary policy is concerned with the
monitoring of interest rates and total supply of money in circulation. On the other hand, fiscal
policy makes an impacts on the business organization on two different levels (Grigorescu, 2006).
First is on the legislation level that regulates overall economic activities of the country. Another
one is the targeted legislation which has its focus on specific sectors of the economy. In this
regard, following are the key areas of monetary and fiscal policy: Changes in interest rates- With the change in interest rate through varied monetary
policy, operations of company are affected. If interest rate gets high then profitability of
BA gets affected as it needs to pay higher interest amount of the principle amount (What
is the difference between monetary policy and fiscal policy? 2013). By considering this
thing, travelers will reduce traveling and that will certainly decrease the British Airways
turnover and profits.
 Changes in tax rates- It is a part of fiscal policy in which UK government affects BA
activities from various perspectives (Henneberg, Mouzas and Naudé, 2006). If tax rates
are decreased then BA will witness rise in profit due to less payment of tax amount.
Moreover, sales also gets increases as travelers need to pay less service tax and this will
results into more of customers shifting toward air travel.This will help organization to
sale more air tickets at a relatively low price.
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2.3 Impact of competition policy and regulatory mechanism on BA
Competition law and policy is a part of Competition Act, 1998 where competition policy
generally makes an impact on the operations of mentioned company. The key aim of this
competition policy is to promote healthy competition and also to contribute towards the
improved efficiency in the individual market (Letza and et. al., 2008). In this regard, British
Airways is considered as the largest airline in UK in terms of their fleet sizes as they fly
approximately 300 passengers in numbers at one time. Even due to this, organization faces a stiff
competition from their major competitors which have almost same amount of capital and general
specifications. Further, major competitors for BA are Jet Airways, Deutsche Lufthansa AG,
Japan Airlines Co. Ltd, etc.
Mentioned company adheres with competition policy by considering cost and service
diversification. It is witnessed that at times, Aviation Company uses unethical practices in order
to increase their market share. With respect to it, UK government have made various restrictions
for competition policy which every organization has to follow such as not indulging in the
practice of taking unwanted advantage of brand name, no act of developing monopoly situation
and other related (Eales-White, 2004). Further, in order to have a competitive advantage, cited
airline has to frame their plans and policies by considering other airline's policy. Further, BA
implies policies by considering all the cost and product factor and set an affordable price for the
tickets which is easily purchased by the individuals.
3.1 How has the market structure of the airline industry impacted the pricing and demand for
airline seats
Market structure plays a significant role on the price and demand of seat. In this context,
there are different structure that been discussed below:
 Monopoly: In this market, there are only single seller and large number of buyer. If BA
operates in this market, then price is decided as per the management of BA and it would
be premium price only which results into high profit margin.
 Monopolistic: In this, different company sells product that varies in terms of quality,
brand, price and other related. BA if operates in this market, then it will charge
competitive price in order to attract more of travellers on its end.
 Oligopoly: Here, few firm dominates the market and hence possess different set of
pricing strategy based on the target market.
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 Perfect competition: In such market, there are huge numbers of buyers that sell identical
products to large buyer sets. Company usually focuses on charging low price in order to
boost the sales volume and to sustain for longer as well.
It has been spotted that the market structure has great impact on the pricing and demand
of airline seats. In the support of this, it can be said that the market structure of the UK can be
considered as oligopoly because there are few sellers available in respect of various buyers. It
has been identified that in UK market structure if any business organization of airline sector
increases the price of its products than other business organization of sector will also have some
changes in the price of products in order to provide better competition (Adler and Gundersen,
2007). Moreover, the UK market consists of very small number of airline services and it impacts
the development of airline sector. Industry demands high level of investment, so new airline
firms is also not entering the sector. Other than this the decreases in the demand of products also
creates some negative impact on the organizational performance. In order to have better success
the BA is looking forward to provide best quality in the market in less prices as compared to
other business firms in sector. Market structure and pricing strategy of sector relates with each
other in great context.
3.2 Ways through which market forces shape organizational responses
In current market scenario the customers are getting more aware about quality of
products and services. Customer’s key need is to attain premium quality of services at very low
cost. In this respect, the one of key challenge for aviation sector is to maintain balance among
supply and demand factors. In the support of this, it can be said that the elasticity of goods have
great level of impact due to substitute products in the market. Moreover, the factors of porter five
forces model also have great impact on the organizational process (Avlonitis and Indounas,
2004). It includes factors such as buyers, suppliers, substitutes, new rivalry and new entrants. If
any of these factors have some changes then it has direct positive or negative impact on the
operations of BA.
In order to have better development it is necessary for management of BA to introduce
some unique services at affordable price so that customers can feel valued. If market is having
inflation or issues in economic system it means it is essential for BA to have decrease in cost of
its products or service in order to attain better sustainability. Moreover, pestle factors also forces
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business firm to change its strategies so that issues can be overcome in effective manner and lead
business to impressive success.
3.3 Business and cultural environments impact on shape the behavior of the BA
British airways are one of international market and it is consisted of unique and informal
culture. It has been identified that the workforce of business firm considers themselves as
significant part of enterprise. BA is currently operating its business in diverse nations as it
focuses on various rules & regulations which are essential for aviation sector (Li and Hewitt,
2008). In the support of this, it can be said that the pricing policies of business firm have great
impact due to political factors. Such as governance of UK has increased the tax on the airline
services or airport taxes. It has forced business firm to increase the pricing of its services in order
to overcome its expense cost on the operations.
In the support of this, it can be said that the cultural changes also impacts the business
firm operations. Customers expect to attain premium quality of services at low cost so business
firm is looking forward to reduce its operations cost by adopting diverse techniques. Decrease in
operation cost also allows firm to provide better services at low cost.
4.1 Impact of global changes in trade regime caused by regulatory organizations
The changes in globe trade regimes have both positive and negative impact on the
organizations. The positive impact of this is that it provides businesses with enormous
opportunities for growth and development (Ditlev-Simonsen and Wenstøp, 2013). Further it
helps in building brand image of the businesses and increases its customers. On the other side of
this, the negative impact of globe trade regimes is that organizations are require to change their
plans, polices and strategies which is costly and difficult. International civil aviations, WTO are
developed with a prime objective of promoting and taking care of the fact that fair competition
possess among businesses. These trade regulatory bodies have also established restriction on
businesses regarding free trade in some of the countries. In terms of negative affects it can be
also stated that these bodies have also increased the price of tax and other related traffics. The
impact of this is that it has lower down the profitability of the organizations (Swanson, 2004).
British airways is now required to strictly follow all the rules and regulations which has been
developed by these bodies. If these rules and not followed then the organization is required pay
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penalties and fines. Thus, it can be stated that both positive and negative affects are cause of
trade regimes.
4.2 Impact of global factors on the operational policies of BA
British airways had various impact of the global factors and the impact are mentioned
below as:
 Impact of government polices- The rules regarding environment and employment has
affected the operations of BA to a great extent. All the process regarding the
employment were restructured and the airlines was required to adopt more sustainable,
practises in its operation. This has increased the overall cost of the airlines and has lowr
down its profit margin.
 Economic factors- The economic fluctuation in the worlds had a direct impact on the
operations and activities of British airlines (Whetten, 2009). Stages such as recession has
forced people to lower down the use of airline services and it has directly resulted in
lowering down the sales of BA. In this hard time the organizations was also required to
reduce its price to attract customers.
 International policy- changes in customs duties and tariff also has an impact on the
operations of BA (Mockler, 2002). Increasing tariff and customs duties is a big threat to
the organization as it reduces the profit margin of airlines.
4.3 Impact of EU policies on the operation of BA
There are varied set of EU policies that support and affects the operation of EU. In this
regard, following are the impact of varied EU policies:
Free Movement of Labour: Since, EU act as a single market therefore it has a policy of free
movement of labour which helps company in transferring employees to different places without
doing legal and document formality. This helps BA in managing its operation in different market
with high efficiency that leads to boosting of overall productivity.
EU Working Directives: It is evident that companies in EU does not make their employees
works more than 48 hours a week. Due to this, BA needs to develop shift of employees so that
work can be completed. This leads to recruitment of additional employees for same job role.
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Inflation Policy: EU ensures that there is no sudden price rise in the economy and same is
monitored through Monetary Policy Committee (MPC) of the Bank of England that set interest
rate. This helps company in ensuring moderate change in the price of products and services.
Further, competitive advantage is defined as a situation in which people in market prefer
the products and services of one particular firm over its competitors (Bowen, 2013). For an
organization such as BA it is not easy to gain competitive advantage as the competition among
airlines is very intense. Some of the ways which can be used by British airlines to remain
competitive are mentioned below as:
 Marketing and advertisement- The organization can main competitive in the market with
the help of effective marketing and advertisement of its services. Further it can promote
its services and offers on social media sites such as Facebook and Twitter. This will help
in increasing the market share and will also assists in earning adequate profits.
 Sustainability- One of the best way to remain competitive in the stage of intense
competition is by adapting more sustainable practises. Such practises helps in creating a
high brand image in the mind of customers as they starts perceiving that the organizations
is really taking care of society and environment in which it is operating. In addition to
this, it will also assist the organization in getting competitive advantage over the other
market players in the airline industry.
CONCLUSION
From the above report it is concluded that BA is a star airline in the aviation industry of
the UK and company have its operations in the major metropolitan cities of the world. Further,
this present report emphasis the BA’s vision, mission along with the short term and long term
objectives. Further, this report showcase the changes in interest and taxation rateswhich affect
the operations of BA.
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