Analysis of British Airways Business Environment Factors

This report provides a comprehensive analysis of the business environment surrounding British Airways (BA). It begins with an introduction to the concept of the business environment and its various internal and external factors, emphasizing the dynamic and complex nature of these influences. The report then delves into the different types of organizations, including corporations, charitable organizations, sole proprietorships, private organizations, and public organizations, highlighting their unique characteristics and operational styles. A significant portion of the report focuses on BA's mission, vision, goals, and objectives, followed by an examination of the objectives of different stakeholders, such as customers, shareholders, employees, and creditors, and how BA strives to meet these objectives. The report further explores various economic systems, including free enterprise, mixed, and command economies, and their impact on resource allocation. It analyzes the effects of fiscal and monetary policies on BA's operations and the broader economic environment. Additionally, the report discusses the implications of competition policies and legal changes within the aviation industry, emphasizing the competitive landscape and the challenges faced by BA. The report concludes by summarizing the significance of international trade, the impact of global factors, and the influence of European Union policies on BA's business operations. The report underscores the interconnectedness of various factors in shaping the airline's performance and strategies.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purposes of different types of organizations....................................................................1
1.2 Objectives of different stakeholders in British Airways..................................................3
1.3 Meeting objectives of different stakeholders...................................................................3
2.1 Different economic systems attempts to allocate resources.............................................4
2.2 Impact of fiscal and monetary policy on British Airways................................................5
2.3 Impact of competition policies and legal changes in aviation industry............................6
TASK 2............................................................................................................................................6
3.1 Market structures determine the pricing and output decisions.........................................6
3.2 Market forces that are shaping the organizational response.............................................7
3.3 Business and cultural environment shaping the behavior of BA.....................................8
4.1 Significance of international trade to BA.........................................................................8
4.2 Impact of global factors on BA........................................................................................8
4.3 Impact of policies of European Union on BA..................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment can be defined as the combination of all the internal and external
factors which generally affect the functions of organization. Business environment consists of
employees, customers, suppliers and government along with political, economic, social and
technological factors (Li and Hewitt, 2008). Further, from the above explanation, it is quite clear
that business environment is a mixture of all the dynamic, complex and uncontrollable factors
which at times affect the performance of the enterprise.
In this context, organization undertaken for the present study is British Airways (BA)
which is a UK based airline and is the largest airline company in the mentioned country on the
basis of fleet size. Further, this report will focus on understanding vatious purposes of different
types of organization as well as the responsibilities of cited company to fulfil the objectives of
stakeholders. Moreover, this report will also emphasize on fiscal and monetary policy along with
describing the effect of competition policy and other regulatory mechanisms.
TASK 1
1.1 Purposes of different types of organizations
Every company has its own plans, policies and strategies which help them in achieving
its goals and objectives in a precise manner. Different types of business organizations are stated
below and each one of them has its own style of working:
1. Corporation- Corporations are the dominating business firms in UK as these are legal
entities and are distinct from the individuals within business entities (Roijakkers, N.,
Hagedoorn and van Kranenburg, 2005). Further, these corporations are owned by share
owners who choose the board of director for performing the primary responsibilities of
venture.
2. Charitable organizations- Main intent and function of charitable organization is to
conduct business activities which generally supports poor and needy people without
taking any sort of finance from them. This states that this type of firm works on free of
cost for the betterment of the society.
3. Sole Proprietorship firms- These firms comprises single person who performs business
operations. Further, these sole proprietors are dominating the UK market and they
perform a wide range of business activities. Furthermore, the core advantage of these
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organizations is that they have the total control over the business and the owner keeps all
the profits and revenue.
4. Private organizations- Private limited companies are the ones which are functioned by
few individuals and main objective of these types of ventures is to earn sufficient amount
of profit by extending their business operations (Adler and Gundersen, 2007). However,
some restrictions facing by private company is that it cannot issue shares to the public.
5. Public organizations- The prime purpose of these types of organizations is to make the
customers available with the best quality of products and services at convenient prices.
Further, these firms have lot more advantages as compared with the private limited
company because these organizations are working on the welfare of the society.
British Airways
Vision
 To be most responsible and reliable airline throughout the world.
 To give clients the best facilities within flights.
 Reducing emission of carbon from airplanes in order to have
sustainable environment.
Mission
 Become favorite airline globally by understanding needs and
wants of customers.
 To make healthy existence in metropolitan nations of the world.
 To increase more of the market share by attracting potential
stakeholders.
Goals
 Excellent quality services by producing different types of food.
 Focusing on increasing number of airlines for a major route.
 Satisfying Employees, Customers, Performance, Excellence and
partnership.
Objectives
 To become the premium airline in terms of services at global
level.
 Company having long term objective in developing Eco friendly
approach to safeguard and protect the environment.
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 Mentioned company is also focusing on following the ethical code
and conduct.
1.2 Objectives of different stakeholders in British Airways
There are different types of stakeholders for BA and they play a significant role in
leading business to success. Organization’s different stakeholders are as follows: Customers- For every business organization, customers are considered as the soul and the
cited firm is focusing on satisfying the needs and demands for the same. Further, firm is
also focusing on giving best of its services to the travelers (Yu and Ramanathan, 2012).
Further, customers are expecting to get the best services within the flight at a reasonable
price. Shareholders- Shareholders make investment because BA is a plc which issues shares to
general public. It is important for British Airways to have a good relationship and to earn
good return of capital employed that is invested by the shareholders. Employees- Organization has approx. 43000 employees and these individuals are giving
productive services throughout the world. Further, these human resources are having
expectations that are related to get better salary and remuneration from the mentioned
company
 Creditors- Creditors of the company are the business friends or those who have interest in
British Airways. Creditors give short and long term loan to the organization. In order to
meet this, British Airways have to earn sufficient amount of profits for paying their debts
on time to creditors (Temponi and Cui, 2008). It is analyzed that their objective is to give
valuable support to cited firm so that they can achieve their goals and objectives in
predefinite manner.
1.3 Meeting objectives of different stakeholders
British Airways has an obligation to satisfy needs of their different stakeholders and
organization’s responsibility towards these potential stakeholders has been discussed below: Customers- British Airways is emphasizing on developing new products that will help in
meeting the customers’ needs. Further, BA is focusing on keeping their existing customer
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base and it also aiming to attract new ones with the help of different sources like
promotional activities (Koller, 2005). Shareholders- Strong relationship with shareholders is important as these people have
high interest in the success of venture. Further, BA is also obliged to provide them
necessary information after a certain quarter or yearly relating to the annual reports and
accounting records of business venture. Employees- Organization’s responsibility is to render healthy working environment to
employees so that they get motivated and work with best of their capability and
efficiency (Wallace, Pollack and Young, 2015). Further, mentioned company has to
conduct training and development program on timely basis for the career planning of
their multi-talented employees.
 Creditors- Financial institutions impact the performance of British Airways as it is
because if cited company failed to clear their loan amount, then in future creditors will
refuse to give them short term and long term loans. Further, in order to meet this, BA is
adopting cash management techniques and applying different strategies that will help
organization in increasing its revenue.
2.1 Different economic systems attempts to allocate resources
Economic systems is a process where governments distribute resources and sells goods
and services as per their own wish and assumptions. Further, this economic system is generally
used to control the five factors of production which consists of labor, capital, entrepreneurs,
physical resources and information resources (Spitzeck and Hansen, 2010). These economic
systems are introduced by government for smooth run of business organizations and some of
them have been studied below: Free enterprise economy- Under free enterprise economy, BA regulates its functions
either with few or no government restrictions. Although, if any restrictions persist then
these are quite normal and organization can easily execute their business operations. This
generally help the cited firm as they serve their valuable services by considering the
needs and demands of their potential travelers. Mixed economy: Mixed economy is an economy where government has partial control
over the business ventures. Further, this economy is a mixed type of economy where
local authorities and business firms have an equal control over the valuable resources
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(Zhu and et.al., 2012). Moreover, British Airways will have some exemptions where they
will be free of using resources on which the government of UK having no control. BA
develops their policies by recognizing government norms and regulations.
 Command economy- Under command economy, local body has full control on the
economy and they allocate useful resources like employees, capital, constructional
development etc. Further, government has the complete necessary information relating to
organization and UK government undertakes healthy and effective decision for
organization’s well being.
2.2 Impact of fiscal and monetary policy on British Airways
In order to visualize the smooth and consistent functions of business organizations, local
body of UK makes different monetary and fiscal policy in order to control the business enterprise
along with the economy. Further, fiscal policies are those where government make decisions
regarding the spending of resources for efficient and effective results. With the implementation
of fiscal policy, government is focusing on stimulating growth of economy (Green Jr, 2005).
Further, aspect of fiscal policy involves change in the government spending and tax rates. As tax
rates decreases, it affects the operations of the cited firm from different perspective and the
economic growth of country will be affected. In other words, when tax rates declines, then BA
will be able to sell more of the air tickets at substantial low price which will lead towards
increase in revenue and productivity.
On the other side, monetary policy are the one which are formulated by monetary policy
Committee of UK for having a proper control on the cost and flow of money in the country.
However, excessive out flow and inflow is also dangerous. Further, with increase in cash flow,
the demand and inflation will get enhanced and with the increase in outflow, organizations will
get less capital for their business (What is the difference between monetary policy and fiscal
policy? 2015). Change in the interest rates and reserve requirements are the major components of
the monetary policy. Moreover, monetary policy Committee of UK focus on decision making
regarding SLR and CSR. Genuinely, these policies are quick, reliable in comparison with fiscal
policies.
2.3 Impact of competition policies and legal changes in aviation industry
There are various rules and policies which governs the competition and it generally
aiming at making the market to work better and improving the effectiveness of individual
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markets. Moreover, Competition Commission in UK looking towards competition policy and
these policies have their core origin from the competition law. Moreover, the main objective of
the competition policy is to boost healthy competition in the market of UK by improving up the
different products and services (Competition Law & Its Impact on Airline Industry. 2011).
However, organizations in UK facing a stiff competition as there are various competitors
in the industry who are fighting to get the competitive advantage as they also same amounted of
capital along with incidental business plans and policies of other firms. Further, Competition
policy promotes competition and develops market a better place by improving the efficiency of
business ventures (Halbert and Ingulli, 2009). In context to the competition policy, BA faces a
stiff competition from their major competitors like Jet Airways, Deutsche Lufthansa AG, Japan
Airlines Co. Ltd, etc. Moreover, along with these policies, there are few regulatory mechanisms
like Ofgem (Office of Gas and electricity market), Ofwat (Office of Water services Regulation
Authority) aiming to have a consistent regulation economically for the interest of customers,
investors, etc.
TASK 2
3.1 Market structures determine the pricing and output decisions
Market structure is a structure where various corporations are operating and they
generally offer uniform products and services to the consumers. Further, in different markets
business enterprise have to make different strategies in order to determine the cost and output of
products as well as service. In context to it, different markets are studied below: Monopoly market- It is a type of market which is dominated by a single seller and there
exists many buyers who are interested in the organization’s products and services.
Further, they do not have any substitutes and in context to it, they sell their products at an
relatively high price (Whetten, 2009). Here, companies focuses on profits without
considering the demands and income level of individuals. Oligopoly market- Oligopoly is a market structure which is controlled by few sellers and
jointly they are known as oligopolistic. Under this market, enterprises focuses on
providing the best services to customer with the restrictions of entering new organization
in the same industry.
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 Perfect competition market- Under this market, various ventures are operating in the
same industry with immense competition. From this, it is clearly evident that there exist
buyers and sellers which do not have any options of entry and exit in the market. Further,
 Monopolistic Competition: This is a market structure where there are many firms which
are selling different products. Moreover, there are many second-string of same kind of
products and services too. BA is a part of the same market and they have to produce
services which gives customers maximum level of satisfaction.
3.2 Market forces that are shaping the organizational response
There exist different markets structures which British Airways needs to consider in order
to make effective marketing decision. Successful firms like BA do market research and proper
analysis to ensure that they are providing the best quality of products and services to their
customers. Market force which affects the firm’s response is as follows: Customers behavior: In order to develop new policies and regulations, BA has to
consider the needs and demand of their potential passengers (Gurtoo and Antony, 2007).
Further, all the individuals are not same as they differ from one another and have their
own way to think. If the perception of customer changes, then this will lead to its
competitors to grow. BA must focus on giving best of the services to travelers like
different types of foods, WiFi facilities, etc. Technological improvement: BA can give tough competition to their competitors with
the help of implementing different innovative technologies in the flight (Mysiak, J.,
Giupponi and Rosato, 2005). Further, BA should improve their technologies for
providing better services to their customers and this will help them in giving high level of
competition.
 Economic scale: Mentioned company should consider the needs and demands of their
travelers and should decide the economic scale as per the requirement. Further, cited
company can start new airlines on the same route so that passengers will be more
satisfied and they can enroute without any difficulty in the peak season.
3.3 Business and cultural environment shaping the behavior of BA
BA has to consider their business and cultural environment before implementing any
decision as these factors have a direct impact on the cited company. Further, changes in the
economic situation can affect the performance of organization as recession generally tends to
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decline the sale of goods and services of the firm. Due to this, consumers will not be able to
purchase more as they are not left with anything to spend around. Moreover, these business and
cultural environment having direct impact on organization performance and it affects the
corporate goodwill as well.
Furthermore, organization have to consider all these changes before tapping a new
market as without having proper knowledge, the plan will not be successfully implemented
company will not be able to increase the market share (Stonehouse and et.al., 2009). Moreover,
when firms come up with new services which has many qualities which fulfill the customers
needs, then it will be preferred by the travelers at large scale.
4.1 Significance of international trade to BA
Importance of international trade has been uplifted in a decade due to decrease in tax
rates, government support and better transportation facilities. Further, in recent times British
Airways is able to expand their operations either with little or no government intervention. If
intervention is there then it is there in the form of taxes and duties.
Further, international trade have some positive as well as negative impacts on UK
organizations and these are:
 Helps in allocating resources
 Promote effective competition
 Impelling trade helps in reducing the price of commodities.
 Helps in expanding the business.
International trade has negative impact on UK businesses which are as follows:
 Long time required in gaining global market share.
 Include additional cost (Miao, 2005).
4.2 Impact of global factors on BA
Global factor comes into play no matter whether the organization is operating their
operations within home country or globally.
 Global competition- British Airways is having major competitors like Japan Airlines Co.
Ltd., United Airlines INC, Jet Airways, etc (Avlonitis and Indounas, 2004). who are
performing relatively well in order to increase their goodwill and also to have a
competitive advantage.
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 Business-environment- British Airways has to perform their operations in different
business environment of countries. Further, it is only possible if company has conducted
PESTLE analysis for processing new franchisee in other country of world (Impact of
Global Forces on UK Business Organisations. 2013).
 Rates and tariffs- If tax rates are significant high, then organization will face difficulty
in performing their operational activities. Moreover, firm will also have difficulty in
order to move ahead of their competitors (Bowen, 2013).
4.3 Impact of policies of European Union on BA
European Union plays an important role in influencing the UK business. However,
following are the factors which are affected by EU: Taxation policies: Business can contribute to society by paying their taxes. With the help
of this policy, UK government can help industries in various projects like road
construction, aid to developing countries, airports, etc. International policies: Promoting sales of goods and importing goods from other
countries by local body comes under this category (Madura, 2006).
 Environmental policies: For challenging employees, government plays crucial role. In
UK, government promotes effective business which results in creating new jobs and is
usually competitory in the international market.
CONCLUSION
From the above report it has been concluded that BA is a leading airline in the aviation
industry of the UK and cited firm has its operations in metropolitan cities of the world. From the
report it has been also evident that changes in interest and taxation rates affect the operations of
business ventures in UK. This report also analyzes the core stakeholders of British Airways
which involves namely shareholders, employees, customers.
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