Business Environment Report: British Airways and Market Dynamics

This report provides a comprehensive analysis of the business environment surrounding British Airways (BA). It begins by identifying the purposes of different organizational types, distinguishing between private, public, and non-profit sectors, and then specifically analyzes BA's role as a public limited company. The report identifies key stakeholders of BA including owners, employees, consumers, and the government, and discusses their respective objectives and challenges. It then examines BA's social, environmental, and legal responsibilities and the strategies employed to meet them. The report also delves into economic systems, discussing market, planned, and mixed economies, and how BA operates within a mixed economic system. It analyzes the challenges posed by fiscal and monetary policies, including excise taxes, fees, and deregulation, and the impact of competition policies, market liberalization, and merger controls. The report further explores the market structure of the airline industry, particularly the oligopoly, and its impact on pricing and demand. It also discusses the influence of business and cultural environments, global changes in trade regimes, and the impact of EU policies on BA's operations.

Business Environment
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TABLE OF CONTENTS
INTRODUCTION................................................................................................................................3
TASK 1.................................................................................................................................................3
1.1 Identification of the purposes of different types of organisation...............................................3
1.2 Identification of the key stakeholders of BA.............................................................................3
1.3 British Airways' various responsibilities as an organization and the strategies it employs to meet
them.................................................................................................................................................4
2.1 Discussion of the economic systems that attempt to allocate resources effectively..................5
2.2 Analyse some challenges due to fiscal and monetary policies on business environment faced by
British airways.................................................................................................................................6
2.3 The regulatory, competition policies and legal changes in British Airways..............................6
TASK 2.................................................................................................................................................7
3.1 The market structure of the airline industry impacted the pricing and demand for airline seats7
3.2 The interplay of different players and market forces shape organisational responses...............7
3.3 Business and cultural environments shape the behaviour of British airways............................8
4.1 The impact of global changes in trade regime...........................................................................8
4.2 Impact of the global factors on the British airways...................................................................9
4.3 EU policies on travel, competition or aviation impact British Airways....................................9
CONCLUSION AND RECOMMENDATIONS..................................................................................9
REFERENCES...................................................................................................................................11
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INTRODUCTION
Business environment is the combination of all the internal and external factors that can
influence the various operations of business as well as working conditions (Ekici and Onsel, 2013).
External and internal factors of business environment put its impact on each other and work together to
have an effect on the organization. British Airways (BA) is a UK market leader in the airline industry
(British Airways, 2016). It is also the largest airline based in the United Kingdom in terms of fleet size,
international flights and international destinations. The current report is indicating various aspects of
business environment such as organizational purpose of businesses, nature of the national environment,
etc. Furthermore, it also discusses about organizational behaviour in the market and dealing with the
global factors which form the national and international business activities.
TASK 1
1.1 Identification of the purposes of different types of organisation
A social unit of people which is structured and managed to meet a need or to pursue collective
goals and objectives is known as organization. There are different types of organisations that are
categorized into three types. Classification can be as private sector, public sector and non-profit
organisation. Private Sector organizations are business firms which are owned and controlled by the
private individuals, not by the government. It is usually formed to make profits for its shareholders and
other stakeholders. For example, Virgin Atlantic is a private British airline company which covers their
customers from across the world (Virgin Atlantic, 2016). The main purpose of this company is to
expand their business globally as well as to increase their profitability.
Public Sector includes the organizations which are owned, controlled and monitored by the
government. The aim of this sector is to provide public services and benefits to the society. For
example: British Airways Plc is a public limited company in airline industry which is the largest airline
of UK. Further, the main purpose of BA is to benefit the whole society rather than just individual who
uses service (Miyake and Friedman, 2012).
The last is non-profit organisations which deal in the social cause. For example, main purpose of
NGO, like British Academy of Management is to advance the academic discipline of management. It
uses its surplus revenues in achieving its purpose and mission rather than distributing profits as
dividends.
1.2 Identification of the key stakeholders of BA
British Airway’s long term vision is to be become the world's leading global premium airline
company. Whereas, the mission statement of British Airways is “To be the undisputed leader in world
travel for the next millennium”. The airline focuses on a variety of goals and objectives both for short
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and long term survival in the competitive global market.
Stakeholders are the persons who are interested in the organisation to see how business is
performing in the market. Stakeholders can be owners, employees, customers, government etc. which
can influence the management by taking critical decisions related to business. There are different
stakeholders and they have various objectives and challenges in the organisation. They are classified
as:  Owners: They invest their working capital in the organisation and generate profits from the
business. In return of their investment, they want profits as well as need to increase the market
share of business. By getting more profits, they will receive security from those earnings
(Seuring and Gold, 2013). In context to this, British Airways owners also invest more capital to
gain more profitability which can sometimes acts as challenge for them. Workers: They work for the non-executive as well as executive level and help in running
business effectively and efficiently. Employees work for the organisation to gain job security
and job satisfaction. They also want satisfactory level of income for their efforts which they are
giving to their jobs. Therefore, British Airways is also paying good salary and wages to their
workforce. Consumers: These are an important part of management because consumers are those who buy
goods and services of the organisation. Consumer’s main aim is to purchase products and
services which are safe and authentic in nature (Setting up a social enterprise, 2015). British
Airways are giving their customers good services which will equivalent to their value of
money. Sometimes, giving better services to the customers becomes a major challenge for the
organization.
 Government: It also plays a crucial role in managing the economy through charging tax from
the company and controlling the environment of business. Main aim of government is to create
more employment opportunities in the country. Therefore, government focuses on British
Airways to give more taxes and should follow their rules and regulations which can be a major
challenge for it.
1.3 British Airways' various responsibilities as an organization and the strategies it employs to meet
them
British airways has various responsibilities and strategies which are necessary to be employed
to meet the desired objectives of the organisation. Some of the various responsibilities and strategies
include: Social responsibility: BA is committed to activities that provide great support to social
development such as following environmental standards, etc. BA communicates with their
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customers to know their feedback and improve its products and services to gain positive
outcomes. Company is also organising CSR activities like “One Banner” which have set
challenging goals for further reduction in carbon emissions, reducing and recycling waste,
minimising air and noise pollution etc. Environment responsibility: Company is operating its activities in environment with security
by ensuring about various responsibilities. British Airways is focussing on the renewable and
recycling resources which are beneficial for business as well as society. By utilizing resources
more effectively, business firm is accomplishing responsibility towards environmental aspects
(De Schepper and et.al., 2014). BA is also a responsible airline which focuses on eliminating air
pollution. It makes certain that working environment should be clean as well as safe and
organisation should work with positive vibes.
 Legal responsibility: BA is fulfilling its legal responsibility very effectively by following legal
policies of the country. Legal policy includes employment policy, in which company provides
salaries and wages to their employees on time (Harper, 2015). As per the non-discrimination
policy and equality policy, company provides equal remuneration to their employees on the
basis of age, gender, race etc. In health and safety policy, company provides security to their
employees and also maintains good environment in the organisation.
2.1 Discussion of the economic systems that attempt to allocate resources effectively
An economic system is broadly defined as a state or a nation allots its resources and allocates
goods and services in the national community. Basically, there are three different types of economic
systems prevailing around the world and they are market economy, planned economy and mixed
economy. They are as following: Market economy: It aims to reduce or eliminate subsidies for a particular industry, the pre-
determination of prices for different commodities and the amount of regulation controlling
different industrial sectors (Rashid and et.al., 2014). Planned economy: The most important aspect of this type of economy is that all major
decisions related to the production, distribution, commodity and service prices, are all made by
the government.
 Mixed economy: A mixed economy combines elements of both the planned and the market
economies in one cohesive system. Mixed economies include both capitalist and social
economic policies and often arise in societies that seek to balance a wide range of political and
economic views (Pejovich, 2012.). British Airways operates in the Mixed economic system as
British Airways was early privatised and the government has less intervention as it's a private
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company. After that the only intervention that the government would have is only setting the
prices of the air tickets.
2.2 Analyse some challenges due to fiscal and monetary policies on business environment faced by
British airways
Some challenges due to fiscal and monetary policies on business environment faced by British
airways are as been analysed. The change in fiscal and monetary policy can affect the British airways
as well as will create some challenges for the company. Some challenges are followed: Monetary policy: The action of a central, bank currency or other regulatory committee that
determine the size and rate of growth of the money supply, which in turn affects interest rates
(Benes and et.al., 2015). Recent monetary policies made by the federal government to improve
the market conditions will have an effect on the BA and the company has to face challenges in
the employment, growth, and prices.
 Fiscal policy: Government spending policies are influencing macroeconomic conditions. These
policies affect tax rates, interest rates and government spending in an effort to control the
economy (Hansen, 2013). Many fiscal policies directed toward the airline industry have had
profound effects. One such policy is represented by the excise taxes and fees levied on air
carrier. Deregulation is another fiscal policy that has considerably impacted areas of the airline
industry.
2.3 The regulatory, competition policies and legal changes in British Airways
The competition policy of UK government has major effects on dominant companies like
British airways. There are three pillars of competition policy in the UK and in the European Union i.e.
Antitrust & cartels, Market liberalization and Merger control. Firstly, Antitrust and Cartels include the
elimination of agreements which ensure to restrict competition through barriers of entries such as
price-fixing agreements whereas cartels which will reduce the power of market giants. Therefore,
British airways will be affected as it is one of the top airline companies in UK (Hovenkamp, 2015).
Secondly, Market Liberalization contains introducing in monopolistic or less competitive markets and
this will help and decreases barriers to entry for new entrance. However, this may not be a major
problem for British airways as they are well established and operate in a high capital required industry
which is considered to be more powerful obstacle to entry. Thirdly, Mergers have new rules to control
which will reduce chances of growth other than organic growth for British airways. However, there
some regulations on competition are needed to enhance the business growth.
The regulatory and legal changes in British Airways needs heavy regulation from the UK
government which has been a major challenge to the company. Hence, it is essential for BA to comply
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to the rules if the company has to continue operations (Price and Ross, 2014). Moreover, since the
government has increased security due to past terrorist threats, sufficient security measures should be
in position to ensure consumer's self-belief and competitive advantage should be maintained.
TASK 2
3.1 The market structure of the airline industry impacted the pricing and demand for airline seats
Market structure is a set of factors that determine the nature of the communication between.
companies. There are different types of market structures such as perfect competition, monopoly,
monopolistic competition, oligopoly etc. Airline industry come under an oligopoly market structure
which is a form of imperfect competition in which there is only a few numbers of firms which are
contributing to the whole market share (Mikhalkina and et.al., 2015). Oligopoly firms are price-setter.
Oligopoly firms can potentially produce efficiencies that give lower-priced or better products to
consumers. For example, the percentage of seats occupied. Rising variable costs for fuel, coupled with
high and inflexible fixed costs, further reduce the airlines' ability to compete on the basis of price.
Microeconomic market factors have lowered demand and increase elasticity of demand in the
airline industry. It demonstrates the demand for airline tickets has decreased and also become more
elastic. Oligopoly industry will reduce supply when it is motivated by changes in demand. It shows
airlines reduce the supply of passenger seats by maintaining prices by reducing cost (Bilotkach and
et.al., 2012). Price discrimination is a price strategy that the low-cost airlines will follow. Customers
are encouraged to book earlier by giving lower prices. Even at reduced fares, the airlines industry need
to fill every seat because unfilled seats represent lost revenue. To achieve the highest selling number of
seats on every flight, airlines uses price discrimination in response to these economic incentives.
3.2 The interplay of different players and market forces shape organisational responses
There is a different type of market forces exist which may need to be followed by any
organization there are three common factors that affect businesses in today's contemporary world:
customer participation, information availability, demand and cost pressure (ZENG and XIANG, 2013).
The market forces which shape organisational responses in the British airways in context to the Virgin
Atlantic are delivering an outstanding service for customers. Virgin Atlantic is hiring more employees
to serve the customers so the British airways is also hiring more skilled employees so that they bring
more customers. The other market forces which can affect the British airways is the needs and
requirements of the customers. Virgin Atlantic is satisfying their customers by giving air tickets at low
price whereas British Airways is also implying and providing their products and services at low prices
and satisfying its customers but increasing of the competitors are reducing their customers (Johanson
and Mattsson, 2015). The correct decision will make sure that the firm is completely prepared to
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lookup the key market essential forces impacting the organizational performance.
3.3 Business and cultural environments shape the behaviour of British airways
Business and cultural environments helps in shaping up the behaviour of British airways
because they are key performance in measuring the progress of the company. Customer
recommendation is a importing activity in measuring of company success. To survey the ongoing
customers, BA has survey about their customer through Global Performance Monitor survey which
shows the customers' arrivals process and their monthly insights. Cultural environment is the important
aspect in progressing the business (Buckingham, 2013). Cultural environment include the tastes,
preferences and lifestyles of the customers which changes according to the perspective of the people.
So by this, British airways has to identify their customers' needs and requirements to attract large
number of customers and to increase their profitability. The business and cultural environments
emphasizes things like customer aim, empowerment, cost reduction, strong bonds, innovation and
control which results to the various business perspective. British airways used to motivate business
relationship so that they change the business culture and their environment for the betterment
(Dedering and et.al., 2015). The transformation of British Airways is impressive when it comes to
corporate changes.
4.1 The impact of global changes in trade regime
The impact of global changes in trade regime caused by organizations such as WTO and other
international civil aviation and tourism bodies on British airways. They are as following: WTO: World Trade Organization is impacting the British airways by reducing the carbon
emission because airline companies have a high contribution in carbon emission (Wilkinson,
2013). British airways is trying to contribute 50% carbon emission to be reduced. WTO is also
targeting to reduce the average noise per flight by around 15% whereas British airways is also
targeting to reduce at 30%. International Civil Aviation: British airways is publishing their aviation policy framework
which is balancing the economic benefits of air travel which is impacting the environment and
local communities (Kastner and et.al., 2012). British airways is targeting new fly carriers in the
emerging markets like Latin America, India and south east Asia. To meet their standards , the
company should follow their framework which is impacting the business of the airways.
 Tourism bodies: In economic crises situation, the purchasing power of the customer is low and
they are not tend to travel in other countries by airlines. It surely affects the sales of the British
airways which is consider as a major impact of the global changes in trade regime.
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4.2 Impact of the global factors on the British airways
The impact of the global factors on the British airways can be analysed through political, legal
and environmental factors which are as follows: Political Factors: The political stability of UK is not stable for this government is cutting down
their savings and reducing the national debt (Ekici and Onsel, 2013). This might affect BA in
the planned expansion which brought more revenues with increased number of flights might
not go ahead due to budget cuts. Legal Factors: Restriction on mergers will have an impact on BA planned alliance with
American Airlines. Recognition of trade unions and industrial action e.g. Cabin Crew strikes
are necessary if the company has to withstand in the global market (Papanastasiou, 2015).
Industrial actions and interrupted operations will impact on the good employee relations which
are vital for BA.
 Environmental Factors: Due to strict environmental regulations, the operating cost of the
company can increases every year which can be the impact for the British airways. The
growing of the airport expansion are affecting the BA because of the limited capacity for the
aircraft.
4.3 EU policies on travel, competition or aviation impact British Airways
EU policies on travel, competition or aviation can impact British Airways in various ways. In
order to comply with EU law, all new or revised bilateral agreements signs by EU countries should
contain a Community designation clause in place of nationality clause. This clause states that it allows
EU airline to apply for available traffic rights (McCann, P. and Ortega-Argilés, R., 2015). This may
impact British airlines because the agreements are renegotiated. Most of the markets in which British
airways operates are highly competitive. At one extreme, there are a few international routes on which
competition is limited because of the regulations formed by EU. This is because state’s designated
airline and fares are regulated according to the different country. EU has set the minimum standards for
air passenger rights to compensate and assist at the time of overbooking, cancellation or long delay
flights (Keukeleire and Delreux, 2014). It will be a negative impact for the British Airways because it
is providing benefits to customers irrespective to any damage occur by the firm.
CONCLUSION AND RECOMMENDATIONS
British airways have many essential effects for consumer decision making. The company is
effectively improvising in the environmental factors by reducing carbon emission and noise pollution.
The air fare should be low because of increased in internet ticket purchases, competitions and rise of
aviation tax which are affecting the sales of the company. To improve their customers' experience, the
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company can rise the price of online sales. The other recommendations are British airways can increase
their profitability by providing snacks and newspapers ion flight. The chosen company can offer free
Wi-Fi facilities through data ports and individual television set top their customers.
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