Business Environment Report

This report analyzes the business environment of British Airways (BA), examining both internal and external factors influencing its operations. It compares BA's purpose with that of the National Health Authority, detailing BA's responsibilities to stakeholders (consumers, employees, suppliers, and government) and strategies to meet those responsibilities. The report explores the impact of UK fiscal and monetary policies, EU/UK competition and regulatory policies, and the forces of supply and demand on BA's pricing and sales. It also examines how business and cultural environments shape BA's behavior, the importance of international trade, and the impact of global factors (analyzed through a PEST analysis) and the European Union on BA. The report further discusses different economic systems (free market, command economy, mixed economy) and market structures (perfect competition, monopoly, oligopoly, monopolistic competition), placing BA within the context of an oligopoly. The conclusion summarizes key findings, emphasizing the importance of understanding stakeholder needs and market dynamics for organizational success.

Business Environment
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TABLE OF CONTENTS
INTRODUCTION................................................................................................................................4
TASK ONE...........................................................................................................................................4
(1A) Comparison of the purpose of British Airways (BA) with the National health authority....4
LO 1.2 & 1.3 Responsibilities of BA and strategies to meet them..................................................5
(1B) Fiscal and Monetary policies of UK and their affect on the working of BA..........................6
(1C) Impact of competition and regulatory policies of EU/UK on activities of the British
Airways............................................................................................................................................6
(1D) Explaining how the forces of demand and supply can affect the pricing decisions and sales
of BA................................................................................................................................................7
(1E) Determining how business and cultural environments shape the behaviour of a selected
organisation......................................................................................................................................8
(1F) Importance of international trade to BA..................................................................................9
1G Global factors which affects British Airways............................................................................9
1H Impact of European Union on BA...........................................................................................10
TASK TWO........................................................................................................................................10
Different economic system............................................................................................................10
TASK THREE....................................................................................................................................11
Different market structure..............................................................................................................11
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................13
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ILLUSTRATION INDEX
Illustration 1: Price affected by supply and demand............................................................................8
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INTRODUCTION
Business Environment refers to the study of both internal and external factors which
influences the working of organization. Internal factors are those forces or conditions which take
place within the boundary of the enterprise. These factors include owners, employees, culture and
board of directors. External Factor includes the forces that are present outside the organisation
which includes economic, political, technological, socio-cultural and international factor (Fowler,
2013).
For the current study, British Airways (BA) which is the largest international scheduled
airline of UK is taken into the consideration. This file consists of comparison of BA with Red Cross
in terms of its responsibilities, type of stakeholders, current economic problems, EU competition,
regulatory policies, importance of international trade and PEST analysis. Along with this, study also
consists of essay about the economic systems and market structures. In the end, conclusion is
explained with the key findings.
TASK ONE
(1A) Comparison of the purpose of British Airways (BA) with the National health authority
Comparison between the purpose of British Airways and The National health authority is as
follows: British Airways (BA): It is a public limited company of UK whose shares are available for
the public. It is one of the largest airlines of UK on the basis of fleet size. The purpose of
this Company is to satisfy its customers by providing high quality services with new
innovations to them. This helps in making the journey of passengers comfortable and
memorable. The slogan of the firm is “To Fly. To Serve” which represents its main motto.
Along with it, organization wants to become one of the admirable and leading airlines by
providing quality services in affordable price to the travelers (Polak, 2013.).
 Red Cross: It is a type of society in UK which works for providing help to the people at the
time of crisis in both UK and overseas. It is a branch of worldwide impartial humanitarian
organization. The purpose of this society is to help individuals without any discrimination,
regardless of their religion, background, nationality, beliefs, languages, ethnicity, culture,
etc. It works for the welfare of the people on four values i.e. inclusive, dynamic,
compassionate and courageous. Its major purpose is to mobilize the power of humanity so
that people can deal with and recover from any type of crisis (Harrington and Katsoulacos,
2012).
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LO 1.2 & 1.3 Responsibilities of BA and strategies to meet them
Stakeholders are the individuals or group who can affect the working of organisation by
their decisions or actions that are affected by the organisation. The stakeholders of BA are
employees, consumers, suppliers and government. For proper growth and success, it is important to
fulfil the expectations of these stakeholders. Consumer: It is the prime responsibility of BA to satisfy their customers by fulfilling their
expectations. The demand and needs of the service users is to get high quality of services at
affordable price. By keeping this in mind, BA is meeting the expectations by providing high
quality services, sustainable heritage & tourism and proper safety to the passengers. On the
other hand, customers face problems at the time of strikes; as it results to flight cancellation
which dissatisfies them. For example, at the time of dispute between Food supplier Gate
Gourmet and employees, approximately 100,000 passengers have to suffer due to
cancellation of flights and their tickets were not transferred to other flights (Rozanski and
Woods, 2011). Employees: Workers help the firm in getting success and growth and due to this, it is
important to fulfil their expectations. Employees need good salary, employment benefits,
health and safety, proper working environment which results to effective job satisfaction.
BA is using various approaches such as training and development programs, effective
reward system, etc for satisfying their employees but it is still facing issues. Cabin crew staff
members are not satisfied with the services of BA and due to this, they generally conducts
strike. Similarly, at the time of ethical issue between the Gate Gourmet and workers, BA
adopted restructuring plan which resulted into thousands of job losses which was not
expected by the employees. This decision ruins the relationship between BA and its
employees. This shows that, BA needs to improve its working environment for satisfying its
employees (British Airways, 2014). Suppliers: The suppliers of BA are in limited quantity which supplies quality resources to it.
For keeping good relations and for getting quality products from the suppliers, BA provides
special offers, discounts, etc to them. Gate Gourmet, a catering service supplier is not
satisfied with the services of firm, as it faces various ethical issues. So, BA needs to improve
its services and ethical environment for satisfying its suppliers (Carlsson, 2012).
 Government: For getting success and growth in the business, it is essential to stay legally
with honesty and loyalty. BA has bought the latest techniques for engines, airframes and
alternative fuel which shows that firm is working as per the sustainable aviation policy of
the government. It also implements various programmes for changing the climate, reducing
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waste & noise and to improve the quality of air. These all factors show that BA is meeting
the expectations of UK government.
(1B) Fiscal and Monetary policies of UK and their affect on the working of BA
Fiscal and monetary policies of UK affect the working of BA which results to face low
financial performance. In Fiscal Policy, government adjusts its level of spending and tax rates for
monitoring and influencing the economy of country. In 2013, the main area of spending selected by
UK government was welfare and pensions, health, education, public order, safety and defence. BA
was working well in 2009 due to low recession and fuel prices but due to the rise in prices in 2011,
the IAG group of BA and Liberia faces issues which decreased its performance (Linn, 2008). The
rise in fuel cost made BA to increase its fare which leads to decline the number of customers. On
the other hand, monetary policy which refers to the control over the supply of money and interest
rates to maintain the price stability and to achieve economic growth. Monetary policy of UK is
controlled by Bank of England. It is independent of setting the interest rates but at present trying to
meet the government's target of inflation. The changing monetary policies make BA to change its
strategies which results to improper work management. The price of goods and services has gone up
at the time of recession which decreases their demand and results to affect the profit of BA
(Gowland, 2013).
(1C) Impact of competition and regulatory policies of EU/UK on activities of the British Airways
Impact of competition policy
Competition policy of EU helps in creating pressure to every business organization to offer
best quality products at possible price. For maintaining fair competition in the market, commission
of EU has developed some basic policies and standards that affect business activities of British
Airways. Therefore, competition policy improves the quality of the products and services of BA
which helps in improving the customer’s satisfaction. There are different laws and regulations
which affect pricing policy of BA. According to the case study, Easy Jet, Flybe, BA CityFlyer,
Aurigny etc are the major competitors of BA and for developing strong and healthy competition;
British Airways introduces new and customized products and services to customers (Competition
policy, 2015). It increases choice for consumers which augment the level of satisfaction among
them. Competition Law of EU includes different regulations regarding; innovation, merger and
acquisition. Rules for innovation affect the research and development department of BA. Overall,
competition policy of EU has both positive as well as negative impacts on business activities of BA
which helps in maintaining competitive advantages in effective manner (British Airways, 2014).
Impact of regulatory mechanism
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Regulatory mechanism of UK focuses on different rules and regulations regarding
innovation and skills, fair trading, competition and merger, etc (Twomey and Jennings, 2010).
Therefore, regulatory mechanism helps in minimizing the number of activities such as formation
and operation of cartels, concerted practices, etc. These help in maintaining fair competition in the
market. Along with this, regulatory structure in UK helps in increasing innovation, productivity and
skills in BA. Along with this, Enterprise and Regulatory Reform Act 2013 creates the right
conditions for business success which helps in augmenting individual’s performance of BA and
UK’s economy. Regulatory mechanism assures about the maintenance of fair trading in the market
which reduces the anticompetitive practices in airline market. By this, company can attain
competitive advantages and business success in effective manner (Robert, 2007).
(1D) Explaining how the forces of demand and supply can affect the pricing decisions and sales of
BA
Illustration 1: Price affected by supply and demand
(Source: Impacts of Supply and Demand on Pricing, 2015)
As per the Case study, BA is operating its business operation in oligopoly market structure.
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There are different forces of demand and supply that can affect the pricing and output decisions of
the company. This structure of the market includes few sellers so that they can enjoy their cost
advantages. Forces of demand and supply try to maintain equilibrium level where supply equals
demand (Purfield and Catriona, 2006). But changes in demand and supply can affect the pricing
decisions of BA. For example, if demand increases and supply of products and services of BA
remain unchanged, then it leads to higher equilibrium price and vice versa. But, customers refuse to
buy those particular products and services with high price reduce the total sales of the company.
Therefore, changes in supply and demand have direct impact on pricing and output decisions of
British Airways. Along with this, sales of BA also influence by the competitor’s activity and
demand of customers. High demand leads to the increment in sales and output of the company. On
the other hand, strong competition can decline total sales of the company. Therefore, different
forces of demand and supply affect competition and customer’s purchase decision which have direct
impact on pricing and output decisions of BA (Oura and Hiroko, 2008).
(1E) Determining how business and cultural environments shape the behaviour of a selected
organisation
Business environment of BA can be analysed by Pestle analysis which helps in determining
different factors that can affect the business operations of the company. As per this model, political
stability of UK affects the organization’s policies and practices. Along with this, different legislation
of the UK government can influences infrastructure cost, safety and security measures of the
organization. Similarly, economic factors such as inflation and recession have negative impact on
customer’s purchasing power which can affect the sales of BA (Linn, 2008). Including this, fiscal
and monetary policies can influence money supply and financial performance of British Airway.
Social factors of business environment comprise of taste and preferences of customers and current
trends of the market. This factor can affect the operation and production of products and services of
BA. Along with this, BA is operating its business in Airline industry in which technology is
changing on the frequent basis. Therefore, technological advancement augments the cost and
investment burden on BA. Moreover, environment issues such as climate changes leads to the
cancellation of flights which augments the cost of company. Including this, different laws and
regulations of the Aviation authorities affect the organizational policies. Therefore, business
environment of BA affect the business activities of the company in positive as well as negative
manner (Herd and et al., 2011).
In addition, BA is following a very flexible culture in which employees can share their ideas
with others which helps in augmenting communication. It improves proficiency and productivity of
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the organization. Along with this, management of the organization also follows participative
decision making process which also plays important role in increasing satisfaction level of
employees. Therefore, organization culture of BA augments the overall performance of the
company.
(1F) Importance of international trade to BA
Exchange of goods and services at global level is known as international trade. As per the
given case study, BA is operating its business operations in whole world. It is very significant for
obtaining high market share in international market. Along with this, it is important for increasing
local level competition of British Airways. International trades reduce the dependency of BA on
domestic or national market. Along with this, international trade raises the opportunity of business
expansion as well as helps in augmenting the number of customers for the company. International
level trades play important role in attaining competitive advantages ate global level (Purfield and
Catriona, 2006). Similarly, British Airways get opportunity of economic integration which
minimizes the tariff and nontariff barriers on supply of goods and services in different countries. It
reduces the cost of the company and raises the overall profitability.
1G Global factors which affects British Airways
There are many global factors which affects BA. In order to understand it clearly, PEST is
used and analysed as follows: Political factor: According to this, firm highly affects globally, if government make changes
in their policies like tax rate, interest rates, trade tariffs, Fiscal policies, etc. (Sena Ferreira,
Shamsuzzoha and Cunha, 2012). When government makes changes in their policies, then
accordingly BA has to make changes in their prices. This may results in low productivity or
they can also face losses. Economic factor: It indicates the economic performance and affects directly towards the
performance of firm. Factors which cause impact on the effectiveness of the businesses are
inflation rate, recession, change foreign exchange rate, etc. (Chandel and Sharma, 2014).
These factors affect highly towards the growth and development of the organization. Social factors: It focuses on the social environment of the country. It includes factors like
demography, trends, population analysis, etc. The needs and preferences of the country
would be different and it is essential for British Airways to understand them or else it affects
the organization negatively.
 Technological factor: Changes take place frequently and is very important for the firm to
make changes on their technology so that they could provide better satisfaction to their
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customers (Botha, Kourie and Snyman, 2014). If BA does not make changes in their
technology, then it would affect the organization in adverse manner.
1H Impact of European Union on BA
European Union has a great impact over the businesses of UK. Following are its impacts
over British Airways as follows: Taxation policies: It is very essential for the firms to pay their taxes on time. Through this,
organizations will be able to contribute effectively towards the betterment of the country
(Hamilton and Webster, 2015). It affects BA positively as through their business operations,
they contribute highly for the betterment of the country. International policies: EU is very helpful for the businesses to operate as it works at an
international level. Through this, firms are able to operate their businesses internationally
and also contribute effectively for providing employment opportunities. Inflation policies: Through Monitory policy committee, they make sure that they price of
the products or services are in control. If the inflation rate increases, then people will not be
able to spent on commodities and this would affect the organizations negatively (Menychtas,
Vogel and Varvarigou, 2014). But with the help of this policy EU is able control inflation
rate.
 Environmental policies: Government of UK promotes businesses and this is very helpful in
developing employment opportunities.
TASK TWO
Different economic system
There are mainly three types of economic systems which can be followed by countries.
Following are the different economic system used by different countries: Free market: According to this economy, all the decisions related to allocation of resources are
taken by organizations. On the other hand, government of the country has no right to interfere
in business affairs (Botha, Kourie and Snyman, 2014). Firms get highly benefited as they can
use resources according to their requirements. Additional benefits go to those large firms as
they get the power to use resources abundantly. In context with BA, as they are large scale
firms, they will be able to get resources according to their requirements. Common economy: In this economy, all the decisions related to allocation of resources are
taken by government alone. On the other hand, they do not have any right to make decision
related to allocation of resources (Welford, 2013). It is a scenario where all the organizations
are given equal opportunities as all are given resources equally. According to this economy,
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British Airways has to use their resources carefully as they will be given limited resources.
 Mixed economy: According to this economy, both organization and government jointly make
decision related to allocation of resources (Hamilton and Webster, 2015). Government make
policies and firms have to follow them and accordingly they have to make use of resources.
TASK THREE
Different market structure
Market structure is a market place where large number of buyers and seller gather at one
place. Following are the different market structures which affect the pricing decision of the
businesses: Perfect competition: It is a market condition where there are large numbers of buyer who
deliver customers with similar products. In this competition, if any firm reduces its price,
then it would not affect much (Wetherly and Otter, 2014). Customers prefer to buy that
product which provides them with high quality. Organizations focus on adopting different
strategies and promotional tools in order to attract customers. BA does not fall under this
market, as it has only few competitors. Monopoly competition: According to this market structure, there is only one seller of a
particular product or services. There is only one seller with large target audience
(Menychtas, Vogel and Varvarigou, 2014). Changing price would not affect as people do not
have any other substitute. Oligopoly competition: In this structure, there are few firms which provide similar products
or services. British Airways falls under this market structure. In this structure, If any one of
the organization changes the price, then it would affect the other business highly
(Anandarajan, Anandarajan and Srinivasan, 2012). If BA reduces its price, then all the
customers of other firms will shift to BA.
 Monopolistic competition: In this market structure, single firm provides different types of
products or services (Reynolds and Rohlin, 2014). There are many organizations which
provide similar types of commodities. They adopt different strategies which help in
attracting customers and change in prices does affect the firm highly.
CONCLUSION
From this report, it can be articulated that organization should state their aim and objectives
so that they could develop path through which they could achieve their goals and objectives.
Further, there are many stakeholders who are involved in business and are the responsibility of the
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firm to fulfil their requirements. Moreover, research and survey play vital role in understanding
customer’s needs and wants. Accordingly, they should develop their products or services so that
they satisfy their customers. BA falls under oligopoly, if they reduce their price, then it will be
helpful in attracting more and more services users.
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