Analysis of British Airways' Business Environment - Report

This report provides a comprehensive analysis of the business environment of British Airways (BA). It begins with an introduction to the concept of the business environment and its importance for organizations. The report then delves into Task 1, which examines the purposes of different organizational types, focusing on BA's role as a major airline. It explores the challenges faced by BA's stakeholders (customers, employees, shareholders, etc.) and BA's responsibilities towards them. Furthermore, the report analyzes the impact of economic systems, fiscal and monetary policies, and regulatory changes on BA. Task 2 investigates the market structure of the airline industry and its impact on pricing and demand, the interplay of market forces, and the influence of working practices and national culture on BA. It also discusses the effects of global trade regimes, global factors, and EU policies on the airline. The report concludes with a synthesis of the key findings and insights into BA's business environment.

Business Environment
'Analysis of British Airways'

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
TASK 1 ...........................................................................................................................................3
1.1 Purposes of different types of organizations..........................................................................3
1.2 Impact of challenges to various stakeholders of BA.............................................................4
1.3 Responsibilities of BA to stakeholders..................................................................................5
2.1 Economic Systems (ES) to allocate resources.......................................................................5
2.2: Impacts due to fiscal and monetary policies.........................................................................6
2.3: Impact of regulatory, competition and legal changes in the airline industry .......................7
TASK 2 ...........................................................................................................................................7
3.1 Impact of market structure of airline industry on pricing and demand..................................7
3.2 Interplay of different players and market forces shapes organizational responses................8
3.3 Impact of working practices and nation's culture on British Airways...................................8
4.1 Impact of global changes in trade regime on British Airways...............................................9
4.2 Impact of global factors on BA............................................................................................10
4.3: Impact of EU policies on BA..............................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCE.................................................................................................................................12
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INTRODUCTION
Business Environment (BE) is a framework where organization carries out its
responsibilities. The ultimate objective of an enterprise is to earn profit. In this modern business
world, it has now gone beyond earning revenues. It is now about providing services and meeting
the demand of an individual so as to satisfy him. Business organizations survive only if they
meet all the external changes that may affect its business (Carrere, 2014). The current report
throws light on the business environment of British Airways (BA) (British Airways, 2015).
According to the provided case study, report analyses internal environment of organization and
ways in which this aviation firm meets its objectives. Along with this, market structure of whole
airline industry has been discussed. Furthermore, UK government policies and regulations that
have direct impact on the working of BA have also been presented.
TASK 1
1.1 Purposes of different types of organizations
Organization refers to the association of various individuals who come together for
gaining some objectives. Generally, there are four organizational types that are stated as follows:
1. Sole trading: Individuals own this type of entity with a motive of earning profit.
2. Partnership: When two or more than two firms work together with the objective of
earning profit, they form partners (Greenfield, 2014).
3. Company: Another type of organization where directors function on the behalf of
stakeholders is company. They have motive of sharing earned profit as dividends. These
are categorized into private and public firms.
4. Non-Profit Organization (NPO): Group of individuals who come together to work for
the need of society is NPO.
British Airways
BA is the largest airline organization of UK that is providing its services since last ten
years. Currently, it is carrying out its operations in 80 countries of the world with covering 170
destinations altogether (Smeritschnig, 2013). Therefore, the quality and service standards of BA
are highly standardized and effective with respect to other organizations in the same industry.
The vision of BA is 'to serve the needs of its customers at global level by maintaining cost and
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quality together'. In the same vein, the vision of BA is to occupy the position of leader in
aviation industry in the whole world. Company has its short and long term objectives which are
stated as follows:
Short term goals:
 Delivering equal services to the passengers at every journey level.
 Ensuring comfortable and affordable services for customers.
 Influencing clients to use their airline services.
 Supporting passengers for using the highest quality of services.
Long term goals:
 Maintaining top position in the international flight market.
 Improving its online services to serve people for the long run (ZHAO, 2008).
 Expansion program of BA by becoming the part of top-tier locations.
1.2 Impact of challenges to various stakeholders of BA
Stakeholders are defined as the individuals who have interest in the working of
organization. Associated trade unions, customers, employees, society and vendors etc. are
different types of stakeholders of BA. They have their different roles and objectives with regard
to this airline organization. For example, owners are investors and profit sharers. They have an
objective of profit earning. Consumers are the stakeholders who purchase services of BA and
they contribute company to earn money with the sales made (Zischka, 2013). UK government is
the stakeholder who manages the country's economy. They have the objective of implementing
laws, creating taxes, developing employment, etc. Society has direct or indirect role in the
functions of BA. Company is socially responsible for the products and services of BA. The
impact of challenges to various stakeholders of BA is:
 Customers expect quality services from BA. They take this challenge in maintaining
quality aspect at consistent manner. Along with this, short and long term objectives are
defined to upgrade their services.
 With the manpower of 39000 employees, there has been rise in more employment
opportunities at BA. This is maintained by effective hiring process, organizational
structure and culture.
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 With high rate of company’s growth, shareholders expect high return. It becomes
challenging for BA to distribute appropriate dividends among them for better future
investment.
1.3 Responsibilities of BA to stakeholders
BA planned its strategies by considering its stakeholders effectively. Company has some
responsibilities towards them which are discussed as follows:
 Meeting the needs and demand of community is the biggest responsibility of BA. By
engaging in Corporate Social Responsibility (CSR), BA is inclined in showing respect
and concern towards society (Allgood and Walstad, 2013).
 As a part of business working, BA follows UK laws and regulations. They have set of
norms which are to be followed at the workplace. For example, air legislation for all its
airlines is to be followed compulsorily.
 Environment is another BA's responsibility. Meeting out all needs and demand of its
stakeholders and behaving them properly with respect to sharing and fairer returns, BA
ensures completion of all its responsibilities.
 Policy formulation is one segment which helps the organization to implement action of
responsibility. Along with this, any kind of conflicts and violation of rules are handled
and managed with the challenge of changing business environment.
2.1 Economic Systems (ES) to allocate resources
ES defines the structure in which nation utilizes its resources. Economic systems that
attempt to allocate resources effectively have been discussed as follows: Market economy: The type of nation's economy where there is less interference of the
government in the operations of organizations is market economy. Companies in this type
of economy have full right over the production of goods and services. Command economy: The planning body of this type of economy has complete control
over the resource allocation. Government makes all decisions with respect to quantity and
quality of goods and services (Caprotti, 2012).
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 Mixed Economy: The existence of both market and command economy is a mixed
economy. The allocation of resources is made through companies by following the rules
and regulations formulated by planning body.
For example; in UK, there is a mixed economy and hence, BA after privatization carried
out its roles and responsibilities by their own. However, they have to meet out the rules and laws
of UK government in parallel with company’s policies and framework.
Regarding allocation of resources, price mechanism is the most vital factor. It determines
what to produce and for whom to produce. BA utilizes all its resources in meeting out the
demand of its customers. Prices are defined by UK and global market force by taking effective
demand and supply forces. UK has partial interference in the resource management of BA.
2.2: Impacts due to fiscal and monetary policies
The set of action plans which are undertaken for making work in an organization is
policies. Fiscal and monetary are major government policies which have direct impact on the
working of the BA. These have been stated as follows: Rate of interest: Change in interest rate affects the overall functioning of the BA. Rise in
rates have direct affect on the increase in the capital cost of the company (Clark and
Vincent, 2012). This may leads to rise in fare rise which may create possibility of fall in
consumption of seats or passengers booking. Exchange rate: This is rate on amount which is exchanged in the forms of payment made
to suppliers or earned money from customers etc. Since BA is operating at a global level,
the difficulty is face by Company in case of increase or fall in the exchange rate.
 Tax rate: Change in tax rate may have direct impact on the operations of BA. As with the
rise in tax rate, prices may fluctuate (Flouris and Kucuk Yilmaz, 2011). However, if there
is reduction in the tax rate, the benefit will be shared by all the stakeholders.
2.3: Impact of regulatory, competition and legal changes in the airline industry
Competition policy refers to the set of policies and norms which are defined for the
working of the organizations. There are organizations which follow competition policy as a part
of their norms and procedures. This is undertaken in order to minimize and prevent the abuse of
monopoly firms (Smeritschnig, 2013). The consequence of abusing of power of monopoly can
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turn to be collapsing the market. This is the reason why government intervenes and works to
safeguard consumer’s interest. There is need to evaluate the impact of regulatory, competition
and legal changes in the airline industry in order to assess impact on BA (Competition Policy:
Introduction, 2005). With the number of organizations who have developed in the aviation
industry, BA has number of competitors (Deng, 2010). The role of implementing competition
policy is to ensure proper flow of operations without the flow of restrictions in the organization.
If there is any future modification, BA has direct impact on its working affairs as well. This may
further leads to change in the demand and supply policy change of the BA.
In the same vein, impact of regulator policy of the BA has also been assessed. For
instance, BA is working as a part of Euro Zone, and then it has to comply with the standards as
defined by them with respect to the emission standards. Similarly, If UK government orders the
modification in security of aviation (Lee, 2007). In that case, BA is liable to develop its security
standards as a part its policy framework. The significance behind the same is to stand above to
all its competitors in the UK aviation industry.
TASK 2
3.1 Impact of market structure of airline industry on pricing and demand
Market structures that exist in the economies of nations are classified. There are
organizations who adopt different market structure in order to make effective decisions to
analyse their respective pricing and demand. The main aim of same lies in earning profits
through different ways. Given below are main types of market structure and the way in which
demand and pricing are set:
 Monopoly market structure: This is one type where prices for goods and services are
decided by the company itself. They have only aim of making profits. In this market,
customers have less demand and are therefore fully dedicated to pay for the products and
services. It is market structure type which has impact on industry on analyzing pricing
and demand. Pricing of goods and services in such industries are set by firms themselves.
However, organizations fall in this category are just two or more. But there output
demand is limited due to limited availability. Perfect competition market structure: Organizations exist in this type have strong
market structure. Prices are set according to the decision of industry and customers who
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will make payment. There exists extreme competition due to large number of firms
present in the market place. In this type of structure, many companies operating in the
same industry works with extreme competition. With respect to pricing and demand,
products and services are not determined by the firms. In this case, firm define the
demand and customers decide the price to be paid by them in the market place for the
products and services. Oligopoly market structure: A type of market structure where both pricing and demand
of the goods and services are decided and determined by the top level competitor of the
organization (Flouris and Kucuk Yilmaz, 2011). Firm has its speciality in delivering
outstanding goods and services that made them to deliver the differentiated services
which are different and more appealing than the competitors. Duopoly market structure: In this type of market, goods and services have similar type
of nature. The pricing and demand for these homogeneous products and facilities are
determine by the firms themselves.
 Monopolistic market structure: In this another type of market structure, there prevails
ample of competitors. Every firm has its own characteristics for producing goods and
services in the market place.
Market structure of BA
Oligopoly is another market structure where pricing is decided by the top level
competitors of the industry. Demands for the goods are defined by the consumers. Differentiated
services and competitors have full right over setting of prices. Duopoly is another market
structure where two companies in similar industry have equal and important control over the
functions and operations (Malbin, 2013). It is because of homogeneous nature of the market
products and services. Lastly, there is monopolistic type of market stricture where various
competitors exist. Products and services produced by each one are differentiated in some respect
with other. Regarding BA, oligopoly market structure exit where there is no such conflicts for
price. Pricing strategy is one which is different for every company. However, when there is
modification in fare changes of one company, there are seen slight modifications of others as
well.
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3.2 Interplay of different players and market forces shapes organizational responses
BA is highly involved in making strategic decision for the organization. This includes
achieving market forces with respect to factors such as: Economies of scale: Goods and services volume which is required to be provided by BA
is required to be planned. This is made by effective economies of scale which affect the
company's production directly (Ng and Seabright, 2001). Supply and Demand: With the rise in demand for the services of BA, they have to make
decisions regarding supply of goods and services which should be made effectively with
respect to quality and timely airline services. For instances, there are certain offers and
discounts offered by the BA which are planned by them for acquiring the largest market
share.
 Cost and output delivery: There is an interdependent role of cost and output delivery of
the goods and services in an organization. Mechanism of these aspects should be
effective to have positive impact on the development of the organization. With respect to
BA, there is need to maintain an equilibrium with the cost of production and resultant
output delivered in the form of facilities, services etc by this airline industry. This balance
is achieved through developing profitability high production cost for growth of good
revenues.
 Perception and action of the passengers: Generally, customers have fluctuating buying
attitude. BA has to meet these needs by providing them different aspects that are made
available to them with various options.
3.3 Impact of working practices and nation's culture on British Airways
BA is working at both national as well as at global level. In that streamline, there are
some aspects which have direct or indirect impact on their functioning. Working practices
have positive impact on how firms perform to obtain desired results. Regular monitoring and
controlling methods over working procedures and employees lead to balance outcome. Similarly,
these aspects have direct impact on the decision making of the BA. It entails that by using PEST
analysis, BA analyse the political aspects of its nation for better growth prospectus (Flouris and
Kucuk Yilmaz, 2011). Likewise, addressing regular changes helps BA to implement
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improvisation in economic conditions of the nation. They undertake social factors such as
attitude, preference and taste habits of customers during their journey.
In a streamline, cultural aspects also plays integral role as while designing and planning
its services, BA takes cultural factors of particular nation in which it is providing its services. For
instance, while flying its airline in India, warm welcome, customer’s attention, language use etc
are taken into account in order to deliver successful results with maximum customer satisfaction.
It has been stated with the help of PEST analysis follows:
PEST analysis
Political  UK has unstable political environment.
 It is because of presence of coalition government
 Wide increase in savings and minimize the national debt.
 BA is affected by planned expansion of Heathrow airport.
 It is to earn revenue by increasing number of flights.
Economical  Economy had adverse effect on the numbers of BA customers.
 Passengers have been taking overseas holidays.
Socio-cultural  BA is the largest fleet of long haul Boeing planes
 BA has local or long haul flights (Belobaba, Barnhart and Odoni,
2009).
 Establishing good relationship and safe airline.
Technological  Self service facility to check-in machines at Heathrow airport’s
terminal.
 It has established call centres for people.
4.1 Impact of global changes in trade regime on British Airways
The impact of global change in trade regime may have direct affect on the working of the
BA. It is directly played by the organizations such as WTO, civil aviation organizations, body of
tourism etc (Flouris and Kucuk Yilmaz, 2011). Globalization has taken a shape of good
flourished and established platform. They define some challenges and barriers which became
part of BA. EU zone is an arena in which BA is carrying out its roles and responsibilities. After
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entering its operations and working in EU zone, BA has fewer restrictions to work at an
international border. This has been proved effective for the organization to work in respect to
growth and development.
Regarding WTO who is responsible for handling the operations of the Company at global
level expects sustainability (Arai, 2004). Similarly, they want all the airline industry to operate
with the appropriate use of fuel. It is to protect the environment and doing business without
harming them. BA is also required to follow the environmental standards of every country as
well. This is monitored and regulated by the monitoring and continuous evaluation of the
organizations in similar industry. In similar fashion, the Company is liable to follow all rules and
regulations such as export, import and international exchanges.
4.2 Impact of global factors on BA
By working out its operations and functions at global arena, BA is also affected by some
of the government rules and regulations which are stated as follows: Competition: With the expansion of working at a global level, BA has to undergo
competitors who are at cut throat competition to the BA. It enables more competition to
the working of the BA (Belobaba, Barnhart and Odoni, 2009). Dynamic external forces: According to the PESTLE analysis of the BA, it has been
analyzed that it is affected with the same at the global level as well. For example, by
working in other nation, it has to meet and set its action plans according to the economy
of that respective country. Norms of tax and tariffs: Every country has its own tax norms and policies. Any
modifications in the policies and tax rates lead to difficulty in the working of the BA
(Malbin, 2013).
 Rate of exchange: The significant factor which is exchange rate has direct relation with
the working of the Company. For example, if there is any change in the working of the
UK. Therefore, this will be affected.
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4.3: Impact of EU policies on BA
European Union (EU) policies have great impact on the working of the BA. It is essential
as well to analyze the same for understanding the business operations of the organization. The
impact of EU has been analyzed in the table given below as follows:
Advantages of EU Limitation of EU
 It helps in decreasing and keeps
balancing the prices and services of
the BA.
 The passengers have got the right to
travel from part to another (Zischka,
2013).
 It creates more employment
opportunities.
 Deprived regions are well developed
through the EU implementation.
 Rights and working of the people are
protected.
 EU is analyzed to be costly affair to
the citizens of the nations.
 It is analyzed that all the policies of
the EU are not efficient.
 The aspect of single currency is a
problem to the working of
organization.
 It may sometimes lead to
overcrowding.
Impact of EU policies on the working of the BA has been analyzed with the help of table
given below as follows:
EU POLICIES Presence of policy to BA Absence of policy to BA
The Single European Sky
Policy
Legislation is implemented to meet
the future need and demand of the
organization (Smeritschnig, 2013).
Along with this, it helps to meet the
need of advanced aspect of
technology.
It may hamper the working due
to lack of balance and
coordination in the cost and
performance methods.
The European Aviation BY following the same, the aspect There may increase chances of
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