Analysis of the Business Environment for British Airways Report

This report provides a comprehensive analysis of the business environment of British Airways (BA). It begins with an introduction to the business environment and then delves into the purpose of different organizational types, focusing on BA as a public limited company. The report identifies and examines BA's key stakeholders, including owners, employees, and the government, assessing how the airline meets their objectives. It then explores BA's responsibilities and strategies. The report further analyzes various economic systems, including command, free market, mixed, and transitional systems, and their impact on BA. It specifically examines the effects of monetary and fiscal policies, competition policy, market forces, organizational forces, and the business and cultural environment on BA's operations. The report also considers the influence of global changes in trade regimes, global factors, and European Union policies on BA's business. It concludes with a summary of the key findings and insights into the airline's operational strategies within a dynamic business context.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 The purpose of various types of organization........................................................................3
1.2 The key stakeholders of British Airways and extent to which organization meet their
objectives.....................................................................................................................................4
1.3 Different responsibilities of British Airways as an organization and strategies employed by
it to meet them.............................................................................................................................5
2.1 Types of economic systems...................................................................................................6
2.2 Impact of monetary and fiscal policies on the functioning of British Airways.....................7
2.3 Impact of competition policy on the functioning of British Airways....................................8
Task 2...............................................................................................................................................8
3.1 Pricing and demand for airline seats in different market structure........................................8
3.2 Impact of organizational forces on the functioning of British Airways................................9
3.3 Impact of business and cultural environment on the functioning of British Airways.........10
4.1 Impact of global changes in trade regime caused by regulatory organizations...................10
4.2 The impact of global factors on the business of British Airways........................................11
4.3 Impact of European Union policies on the functioning of British airways........................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Business Environment refers to combination of external and internal factors which
impact working of a business including management, employees, suppliers, customers,
competitors and government etc. However, all these factors have direct as well as indirect
influence on the functioning of the company so it becomes necessary for firm to consider all
these factors. For conducting the present research, British Airways has been given and its
business environment have been analyzed so, as to know effectiveness of operations which is
being carried out by this airline company in UK (British Airways, 2015). British Airways is one
of the largest airline company of UK and also carries second highest number of passengers in the
country. In first part of the report operational activities of British Airways were analyzed which
also includes the different policies of country which makes impact on the business of British
Airways. Further in second part the impact of market forces and global factors on the operations
of British Airways were examined.
TASK 1
1.1 The purpose of various types of organization
Every organization operates to achieve certain aim and objectives. Further different
organizations operates for different purposes such as profit earning, growth and development of
society. Major types of organization and their purpose are mentioned below as:
 Private organization- These are the organization which operates with main purpose of
increasing sales and profitability. Further all their efforts are directed towards one
particular goals which is to enhance their customer base (Fey and Birkinshaw, 2005).
 Public organization- these are the organization which operates with a prime purpose of
offering quality products and convenient prices to the people in market. Rather than
looking only after higher sales and profitability, these organizations also seeks for ways
through which economic development can be done.
 Non-profit organization- The main purpose of these organization is development of
society. Further all their operations and activities are done for social development and
eliminating issues of society such as child labor (Gasparotti, 2009).
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British Airways is a public limited company which aims at providing better quality of
airline services to the people in market (British Airways, 2015).
1.2 The key stakeholders of British Airways and extent to which organization meet their
objectives
Stakeholders refer to those individuals or groups who have their interest in the
functioning of a company. They can impact or can be impacted by the organisations operations,
policies and strategies. Some of the main stakeholders are shareholders, employees, creditors,
directors, government and the society. It is very essential to meet the objectives of them they are
key element of a firm. British Airways is capable enough to meet objectives of its stakeholders
and it has been discussed below,
 Owners : The owners of the company invest their money in an organisation and thus have
stake in company so, the main objective of owners associated with BA are linked with the
growth, profitability and sustainability of the company. Further, the company meets their
objectives by timely distribution of profits in the form of dividend and hence this
maximizes their wealth (Bernard and Jensen, 2004). However the company is also
carrying out efficient operations and make its owners proud for being associated with
them.
 Employees: They are the people who work hard for the success of British Airways. The
main aim of employees is to get timely salary and incentives, also they want proper
payment accordance to the work performed. Thereafter, the purpose of staff members is
to get career advancement, proper training and development. Furthermore, the company
ensures that employees get their performance appraised on time thus provide them with
proper salary, bonus and other incremental benefits (Ormanidhi and Stringa, 2008). BA
ensures that its employees gets proper facilities at work place and healthy work
environment. It also provide proper training, development and motivation for their career
growth. Government: They are the regulatory bodies that govern the functioning of an enterprise.
The basic purpose of the government is to ensure that company perform its operations
within the regulatory framework, fulfill its social responsibilities and also help in
sustaining economic growth of an economy. Furthermore, the BA who work
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internationally makes sure that the host country's government is satisfied with practices
of company. This involves enhanced employment opportunities for residents, timely and
proper payment of taxes and also providing necessary energy supplies.
Extent to which British Airways meet the objective of stakeholders
it can be stated that British Airways has always been able to meet the objectives of all its
stakeholders objectives. For example the employees are provided with better incentives and
wages along with good working conditions. On the other hand, the organization also takes care
of all the laws and regulation which has been formed by government and other regulatory
authorities. Therefore, it is justified that British Airways has been able to meet the objectives of
all its stakeholders.
Stakeholders power matrix
Key satisfied
Customers
Employees
Encourage and influence
Employees
Monitor
Government
Keep informed
Suppliers
Customers
1.3 Different responsibilities of British Airways as an organization and strategies employed by it
to meet them
It is the key responsibilities of British Airways to take care of all the stakeholders in
effective manner (Eifert, Gelb and Ramachandran, 2005). In addition to this , the stakeholders
are the one which have direct or indirect impact on all the stakeholders. It is the key
responsibilities of the airlines to provided better and quality services to all its customers. The
price charged regarding the same are also required to be convenient. On the other hand, the
organization is also responsible for providing better working conditions and pay to all its
workers. It is the responsibility of British Airways to maintain and manage better relations with
all its suppliers and make payment on time. It can be stated that the organization has always been
able to meet all its responsibilities (Nimwegen and et al., 2008). For example British Airways
always try to improve the overall, quality of its services in order to make sure that the customers
are made available with best quality of airline services. Further it also takes care of the fact that
better working conditions and pay are provided to the employees so that they stay motivated. The
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suppliers are encouraged to take part in the decision making process which helps in developing
long term relationship with them. The organization also ensure that it fulfill all its responsibilities
towards government by following all the laws and regulations. British Airways also takes care of
its responsibilities towards environment under which it is operates. For this purpose, it has
started using more sustainable practices to lower down the negative impact of its operations on
environment.
2.1 Types of economic systems
The economic system represent the method of production and distribution of products
and services. Further, it determines the method in which the resources should be allocated in the
society. Majorly, there are four kinds of economic system which are explained as follows: Command economic system: In the command economy, the allocation and distribution
of resources is done by centralized bodies (Economic System, 2013). The decision about
flight services and its pricing is taken by government. In this pricing of airline services is
also decided by the government of UK. The main benefit of command system is that it
help in optimum utilization of resources. Therefore, private bodies play a negligible role
in this system. It is necessary for British Airways to follow commands provided by UK
governance in proper way to meet goals. Free market economy: This is type of economic system where allocation of resources is
done on the basis of market forces. Therefore, the pricing decisions and service decisions
are made by organization after considering demand and supply forces (British Airways,
2015). In this economy system the British Airways decide its service pricing by effective
focus on overall market conditions. Company is free to take decisions as per
organizational need and market analysis. Mixed economy: In this type of economy, both private bodies and government plays
important role in the distribution of resources. The main benefit of this economy is that it
maintain the equilibrium between private and public players which is further
advantageous for society and various customers (British Airways, 2007). Therefore, it
can be said that British Airways also operates in few mixed economy market. Therefore,
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flight arrangement, pricing and other necessary decisions are taken after considering the
needs and preferences of customers (Dragnic, 2014). Transitional economic system: It is type of economic system that is changing from
command system to free market or mixed economy. The main reason after this change is
due to restructuring of economy after global and liberal trade policies. Therefore, the
economy of Cuba, Bulgaria etc. is changing into transitional economic system.
2.2 Impact of monetary and fiscal policies on the functioning of British Airways
The business organizations are directly impacted by the fiscal and monetary polices
formed by government. Thereafter, these policies also impact the productivity and profitability of
organization. The monetary policy means the procedure through which the monetary bodies of
UK regulate the supply of money in the economy by making changes in the interest rates. With
this aspect, monetary authorities administer the interest rate and assures development and
progress of economy. With the assistance of monetary policy, government controls the inflation
level of country (Gasparotti, 2009). In addition to this aspect, in August 2015, the inflation level
of UK reduced to 0 % which is further the prices of airline service offered by British Airways is
also reduced which is in turn increasing the demand of airline services. Further, the monetary
policy aims to reduce fluctuations in prices of necessities and other essential goods and services
which relates with the Airline sector. In UK the monetary policies are framed and employed by
Bank of England and determine the interest rate on basis of which banks can lend funds. For
example, the interest rates are reduced by the monetary authority than, British Airways can
borrow more money at reduced cost. Further, this amount can be used by organization in its
expansion and development projects (Doving, 2010).
Thereafter, fiscal policy refers to expenditure done by government regarding
infrastructure development etc. by making changes in taxation policy. The changes in tax rate as
per the fiscal policy of country have direct impact on the overall operations of British Airways.
Therefore, the rise in taxation means, the company is required to pay more tax which will
increase the overall operating cost of firm. Therefore, the company will shift the burden of
taxation on consumers by increasing the price of airline services offered to customers. Therefore,
the demand of costly products and services is likely to reduce. At present, the bank rate of UK is
0.5% which is lowest rate as compared to many countries (Fernando, 2011). Therefore, British
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Airways can borrow funds at low interest and make fruitful investment decisions. Therefore, it
can be said that both fiscal and monetary policy have positive impact on the functioning of
company therefore they must be considered while making business plans and strategy.
2.3 Impact of competition policy on the functioning of British Airways
The competition policy is a regulation framed by European Union to ensure free and fair
competition among various organizations functioning in country. The main aim of competition
policy is to ensure healthy trade practices by ensuring avoidance of use of dominant market
position. The main objective of competition policy is to promote healthy competition by making
market function in smooth and better manner. Further, the polices assure the interest of
customers is safe and they get value for the price paid by them. Thereafter, it also maintain
proper price competition among suppliers. The competition policy was introduced in 1998 and
since than it is impacting the operation of aviation industry of UK.
Management of British Airways is required to follow the competition policy strictly.
With this aspect, company ensures it is indulged in healthy trade practices only with its
competing firms. In their operational activities company is required to ensure that they are not
having adverse impact on the environmental practices. Unfair mergers and acquisitions cannot be
done by company in order to make reduction in the competition. This legal and competition
policy had positive and negative impact on the operational activities of British Airways. It is
because With these policies company is required to make positive changes in their operational
activities to provide better services to the customers. Further, they are able to built positive
image. However, they have to face rigidity in their operational activities due to legislation
framed by legal authorities.
TASK 2
3.1 Pricing and demand for airline seats in different market structure
There are various types of market structure that are operating at present and determine the
pricing decisions and output decision of company functioning in it (Halinen and Törnroos,
2005). They can be further explained as follows: Perfect competition: In this type of market structure, there are large number of buyers
and sellers offering homogeneous products and services. Therefore, the competition level
in such type of market is intense and any new company can enter the market and existing
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one can leave the industry. In this, industry determine the price of the airline seats and
firm only accepts it. Further, the demand of the airline seats of BA will be perfectly
elastic thus, the price of the seat does not affect the demand of the seats (Fey and
Birkinshaw, 2005). Monopoly market: In this type of market structure where there is single organization
dominates the market while, there are large number of buyers. Therefore, competition in
monopoly market is negligible as there are too many entry barriers that restrict other
companies to enter the industry. Thus, the price is determined by the BA itself and the
demand for the airline seats is downward sloping that higher the demand, higher will be
prices.
 Oligopoly market: In this type of market structure, there are few business entities that
dominates the industry. However, the competition level in such kind of market structure
is low and prices are charged on the basis of unique features and other benefits provided
by company to its customers (Ekins and Lees, 2008). hence, the price is detremined by
the market leader and demand for the airline seats will be according to the features
provided by the firm.
3.2 Impact of organizational forces on the functioning of British Airways
There are several forces which affect the functioning of British Airways to a great extent.
It consists of external factors like technology, political parties and changing need as well as
preferences customers who are accessing services of British Airways (Eifert, Gelb and
Ramachandran, 2005). On the other hand, other forces like policies of government for increasing
the fuel prices. These all make significant impact on the performance of corporation. In this
regard, corporation need to increase the prices of fare and accordingly also need to take care of
preferences of large number of buyers (Cavusgil and et.al., 2014). Apart from this, sudden
change in technology is also the crucial factor which generate need of change in overall business
environment. Owing to this, British Airways incur cost and cope up with change so as to create
competitive edge in the marketplace. Therefore, production should be done according to the
demand of products and services in market. However, to determine the demand of its products,
company can take help of market research, surveys and make prediction after analyzing past
sales (Chaiprasit and Swierczek, 2011). With this aspect, company can also ascertain the needs
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and wants of its prospective customers and further use this information while manufacturing
products and services. In addition to this, supply and demand must be matched or shortage
should be matched effectively.
3.3 Impact of business and cultural environment on the functioning of British Airways
British airways is the corporation operating at global level with increased rate of return. It
ensured inclusion of number of employees from wide network. Here, functioning of corporation
is greatly impacted by rules and regulations of specific country. Also, economic policies makes
huge difference on the performance of corporation (Nimwegen and et al., 2008). Here,
management of British Airways ensure inclusion of cultural diversity and treat all workforce
with respect in order to motivate them to work with integrity. Further, the company matches the
needs of diversified range of customers by employing workforce of various culture and religion.
This also help company in complying with the requirements of Anti-discrimination policy of
UK. According to this policy, organizations operating in country should not do discrimination on
the basis of caste, creed, religion, nationality etc. while giving employment opportunities to
various individuals. Therefore, to maintain the policy of unity in diversity company equal
opportunity to various candidates of assorted backgrounds and culture (Bansal, 2012). In
addition to this, safety standard of Europe and other related regulation of different counties
where BA operates need to be taken into account. Also, other working practices such as legal
barriers imposed by government of country are taken into account so as to create competitive
edge of the firm in the marketplace.
4.1 Impact of global changes in trade regime caused by regulatory organizations
In order to attain growth and enhance profitability in business, management of British
Airways is planning to expand its operations in foreign market by starting flights services in
different nations. In this manner, they will be first organization having air transportation services
to large number of nations. Therefore, company can get the first mover advantage and increase
its customers base and market share. This will further enhance the productivity and profitability
of business enterprise. With this approach company will be able to enhance their customer base
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and can attain cost advantage for the expansion. (Adler, 2007). The international trade will also
help in making effective utilization of available resources in order to attain economy of scale.
The international trade will induce company to develop innovative and unique services
for the customers in order to enhance the level of satisfaction. For this aspect, company is
required to comply norms developed by regulatory authorities such as WTO, international civil
aviation and tourism bodies are developed to ensure fair operations. Objective of these
organizations is to promote fair trade and economic development.
4.2 The impact of global factors on the business of British Airways
There are number of global factors that affects the business of company is and impact the
different functions carried out by company. The global factors affecting company are as follows :
The political environment of UK affects the functions of British airway. It has been
witnessed that the company is intending to function at international level therefore, it is
important for organization to adhere the rules and regulations laid down by government of
respective host country (Anderson, Sweeney and Williams, 2011). Further, it is important for
company to follow the rules and regulations laid down by UK government. Therefore, British
airways should pay tax and other duties on time.
The economic policies of country have direct impact on the operations of British airways.
The fluctuation in currency rate as well the interest rate fluctuation affects company in manner.
For instance, the increase in expendable income of citizen of host countries is likely to increase
the demand of companies offering (Ormanidhi and Stringa, 2008). Therefore, the GDP, GNP,
fiscal and monetary policies of country can have direct impact on the goods and services offered
by company.
In order to operate smoothly in domestic as well as international market, it is crucial for
organization to strictly adhere the legal policies of respective country. This will increase the
goodwill of company in the eyes of government and customers. British airways do healthy
competition with its rivals, provide fair wages to workers, give equal employment opportunities
to individuals etc (Bernard and Jensen, 2004).
Technical factors refer to the modern tools and technology that assist company in
manufacturing innovative and upgraded products and services. By using up graded technology
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BA attain competitive advantage over its domestic and international competitors. It further assist
company in modifying the quality of its product and services.
4.3 Impact of European Union policies on the functioning of British airways
The main aim of policies designed by European Union is to create a healthy and
competitive environment of business. The government wants to create employment opportunities
for the business therefore, it allows company to come up with employment opportunities. The
EU government has designed Anti-Trust, which is allowable to penalized the company who are
not operating as per the law (Ormanidhi and Stringa, 2008). British airways is induce the young
and talented individuals of country to work for company. As per the employment policy,
business entities operating in UK are needed to enhance the employment opportunities for
individuals in UK first. Thereafter, proper working environment, wages and training and
development opportunity is provided to staff. This further enhance the recognition of company in
home country. However, the policies designed by WTO, it is essential for companies to function
within the guidelines generated by it. Further, WTO ensure operation of global business in
smooth manner without any hindrance. British Airways ensure it perform it functions in fair and
just manner. According to health and safety policy, it is important for company to ensure healthy
and hygienic surroundings for workers. In this respect, company should take significant
measures to reduce risk exposure of workers. Considering, this BA implement safety instrument
within its aircraft and airports like, fire alarm, extinguishers, parachute etc. Mock and safety
drills are organized to give training to employees to prevent various hazards. Furthermore, Anti-
discrimination policy state that equal job opportunities and payment should be provided to
individuals doing same kind of work, having same knowledge etc. The main aim of this policy,
is to discourage discrimination on the basis of caste, creed gender, religion and beliefs etc.
CONCLUSION
The report presented above concluded that, business environment has a significant effect
on the organizational and functional activities of British Airways. The competition policy have
strong impact on the functioning of company so it is important for company to consider EU
policies strictly. Due to this aspect, policies of business should be in accordance with these
provisions for the prevention of unfair trade practices. The organization is suggested to consider
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