Business Environment Analysis Report: British Airways Operations

This report provides a comprehensive analysis of the business environment impacting British Airways. It begins with an introduction to the airline, followed by an examination of different business organizations, stakeholder objectives, and organizational responsibilities, along with strategies to meet them. The report then delves into economic systems, resource allocation, and the impact of fiscal and monetary policies. It explores competition policies, regulations, and market structures, including pricing and output decisions. Furthermore, it investigates the significance of international trade, the influence of global factors, and the impact of EU policies on British Airways. The report concludes with a summary of key findings and provides references to support its analysis. The report aims to provide a detailed assessment of the airline's operational environment.

BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
TASK1.............................................................................................................................................3
1.1Purpose of different type of business organizations................................................................3
1.3Responsibilities of an organization and strategies to meet them............................................4
TASK 2 ...........................................................................................................................................5
2.1 Economic system and resource allocation.............................................................................5
2.2 Impact of fiscal and monetary policy.....................................................................................6
2.3 Impact of competition policy and regulations on British airways.........................................6
TASK 3 ...........................................................................................................................................7
3.1 Market structure and pricing as well as output decisions.......................................................7
3.2 Impact of market forces on organization response.................................................................7
3.3 Impact of business environment on behavior of British airways...........................................8
TASK 4............................................................................................................................................9
4.1 Significance of international trade to British airways............................................................9
4.2 Impact of global factors on British airways...........................................................................9
4.3 Impact of EU policies on British airways..............................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
British airways are the UK largest airline in terms of size. Currently, it is operating in 300
nations of the world. In today era, business environment become too complex and due to this
reason decision making become very difficult. It becomes inevitable to understand impact of
business environment on business enterprises. In respect to this business environment and issues
related to same are discussed in detail. In this report objectives of stakeholders is discussed and
responsibilities regarding same are describes in detail. Further, strategies that can be used to
perform these responsibilities in proper manner are also discussed in detail. At the end of the
report, European Union policies regarding aviation industry is discussed in detail. Further,
benefits of these policies in context of British airways are also discussed in detail.
TASK1
1.1Purpose of different type of business organizations
There are three kinds of business organizations namely public, private and government
organizations. Purpose of these organizations is given below. Public organization- These are government organizations and their main aim is to do
welfare of their workforce. In this regard employees at government organizations receive
several benefits. Private organizations- These kinds of organizations are not owned by the government
and their main aim is to earn profit. Apart from this, private organizations also aim at full
utilization of resources (Palmer and Hartley, 2008). Ultimately, it can be said that
consistent growth in terms of size and profitability is the main purpose of Private
organizations.
 Social organizations- These are those organizations whose main aim is to conduct
welfare activities in order to benefit needy people. These people may be crippled or
orphanages etc. Mean that profit making in not the purpose of these organizations.
In order to understand the strategic direction of the company it is necessary to understand
its vision, mission, goals and objectives. Vision of British airways is to become world largest
premium airline. In order to achieve vision mission is prepared. Mission of British airways is to
make journey of people safe on its airplane (Ruff, 2006). If journey will be safe then people will
be prepared to pay premium price to British airways. Goals and objectives of British airways are

to increase profitability. If profit will increase then firm will have huge amount which will be
invested in adopting measures that will ensure that life of passengers on its airplane is safe. In
this way British airways will achieve its vision
1.2Extent to which British airways achieve objectives of different stakeholders
Stakeholders are those entities that help an organization in running its business. Without
the support of stakeholders it is very difficult to run a business. Following are important
stakeholders of the firm.
Employees- These are an important stakeholder of the firm because they provide services
to the passengers from the side of British airways. It is their efforts and efficiency level due to
which British airways manage to gain commendable position in the highly competitive industry.
Objective of the employees is to boost their career development and this can be done only by
improving skills. Over the past years British airways makes an attempt improve skills of its
workforce. By conducting training and development programs it improve skill set of its
employees (Bitzenis. and Nito, 2005). In this way British airways achieve objectives of
employees as stakeholder.
Customers- Without customers no company can earn profit. Main objective of passengers
who are travelling through airplanes is to get quality service because they are paying huge
amount for travelling to destination place. British airways with passage of time greatly improve
its service quality and due to this reason it has prestigious image among people.
Creditors- These are those organizations that lend credit to British airways. The main aim
of creditors is to make sure that they will have good relationship with their debtors and those
who take a loan make timely payment of debt amount (Brown, Earle and Lup, 2005). Over the
years mentioned firm makes an attempt to ensure that debt is paid on time and also succeed in
doing so.
Government-The main objective of government is to receive tax payment of actual amount
on time from corporate. British airways make payment of tax on time and in this way it fulfill
objective of government.
1.3Responsibilities of an organization and strategies to meet them
Towards stakeholders there are many responsibilities of British airways. Ways in which these
responsibilities are fulfilled by British airways are follows.

Employees- British airways assume employees as its valuable asset and it understands its
responsibility towards career development of its employees. In order to fulfill responsibilities
towards employees British airways is conducting training and development program. In this
regard HR managers give useful information to the top managers and then by carrying detail
discussion training and development program is designed. By implementing training programs
firm is performing its responsibility in proper manner.
Customers- In order to fulfill responsibility in terms of customers company takes many
steps in order to make sure that quality of service gets improved (Björklund, 2011). In earlier
years many steps are taken to ensure that service is provided to the passengers as soon as
possible. It curtails unproductive activities from service delivery process in order to provide
service to passengers in short duration.
Creditors- Company understand its responsibility towards creditors and it is following cash
management strategies in order to make sure that debt amount is paid to creditors on time. By
managing cash and cash equivalents in proper manner firm successfully makes payment of its
debt to the creditors on time.
Government-British airways is making timely payment of tax to the government and for
this makes provisions in order to make sure that even it earn less profit it does not face any sort
of problem in paying a debt amount (Maclean, 2006).
TASK 2
2.1 Economic system and resource allocation
There are three kinds of economic systems like capitalist, social and mixed economic
system. Ways of resource allocation is different in case of all these three kinds of economies.
These three economic systems are discussed below.
Capitalist economy- In this sort of economic system government has least control on
business sectors. In this kind of economic system government does not make any interference in
resource allocation (Chi, Kilduff andGargeya, 2009). In other words, it can be said that
companies on the basis of requirements use resources and automatically resource allocation
happen. Hence, there is no role of government in resource allocation.
Mixed economy- Mixed economy is a system in which government has some control on
business sectors and in some cases it interferes in resource allocation. Such an interfere is made

in allocation of resources like coal, natural gas etc. Such kind of economy main objective is to
give equal opportunity of growth to all firms irrespective of their size. Hence, governments in
these economic systems interfere in order to make sure that resources are allocated as per
requirements of the firm. Economy of UK is mixed in nature and British airways will definitely
benefits by the business friendly policy of the mentioned nation government. In UK slots at the
airport are distributed by the regulatory authorities. Hence, it can be said that in the UK aviation
industry government is controlling resource allocation.
Socialist economy- These are those economic systems that kept a strict control on business
sectors and regulate industries by their own laws. In such kind of economies government has stiff
control on resource allocation (Xue, ShenandRen, 2010). Due to strict rules and regulations it has
been find out that companies finds a lot of difficulties in growing their business. Hence, most of
the nations do not prefer this economic system.
2.2 Impact of fiscal and monetary policy
Fiscal and monetary policy paves a way of growth for an organization. By making these
policies cash flow and inflation is controlled as well as investment is promoted in a nation.
Impact of both policies is given below.
Monetary policy- Many times in economy cash becomes excessive and sometimes it
becomes deficient. In both cases problem comes in existence. When money flow increases above
a certain level then inflation rate increases. When money flow is deficient economy growth rate
become slowly in such a situation monetary policy is prepared and it control cash inflow as well
as outflow. Such a balance brings economy on track. CRR is one of the most important
components that are widely used in monetary policy (Kelliher and Bernadette Henderson, 2006).
When CRR increases then bank have less amount to distribute as loan to business firms. If this
happens then British airways will find it difficult to finance its operations using bank loan.
Hence, it is possible growth rate may be not in line to expectation. In this way monetary policy
affects British airways.
Fiscal policy- Fiscal policy is prepared to boost economic development activities in a
nation and to review tax structure. By preparing a fiscal policy governments boost investments
from entrepreneurs and corporate. In this regard governments reduce tax rates and eliminate
some taxes (Dong, Wu andHou, 2009). Moreover, by following PPP model government

promoted investment from corporate. Ultimately, business tourism increases in a nation. Hence,
fiscal policy affects British airways.
2.3 Impact of competition policy and regulations on British airways
Competition policy and regulation affects British airways. In UK there is a policy which is
also known as Air service agreements. These agreements are followed in UK and Europe. Under
this policy number and type of services that can be provide inside and outside Europe are
determined (Craig and Campbell, 2012). It is duty of respective government to ensure that all
terms and conditions of ASA are met. UK government liberalizes some of terms and conditions
and it wants to create a competitive environment in its aviation industry. As per polices and
regulations companies operating in a UK aviation industry cannot form a cartel to compete with
rival firms. Such kind of rules certainly positively affects British airways. UK government also
introduce civil aviation bill in order to strengthen regulatory framework that is followed in the
UK aviation industry (Beck and Demirguc-Kunt, 2006). Under this old useless rules and
regulations are removed. This will certainly positively affect British airways. Hence, it can be
said that competition policy and regulations positively affect British airways.
TASK 3
3.1 Market structure and pricing as well as output decisions
Market structure refers to the number of competitors in an industry and knowledge of the
people about the product. Some of the most common market structures are as follows.
Perfect competition market- In this market structure there are numerous companies and
buyer. In such kind of structure people have lots of knowledge about the product. Moreover,
there is a large similarity in the company products in terms of features. In this market structure
pricing and output decisions are taken by considering rival firms pricing and output policies.
Hence, price competition is very high in this kind of market structure. It can also be said that in
this market structure most of the firms compete with each other on basis of price (Lambsdorff,
2007). Output decisions are taken on the basis of demand for the product in the market. In this
way price and output decisions are taken in the perfect competition market.
Monopoly market structure- In this kind of market structure there is a single company that
has dominance. In such kind of structure due to absence of competitor, company has high
bargaining power and it charge a very high price for the services or innovative product that it is

offering to the customers. Hence, company pricing and output decisions are not affected by any
factor. In other words it can be said that output of the firm depends on demand for the company
product in the market and price is decided at its own discretion.
Oligopoly market structure- In this market structure there are few companies that acts as
major supplier of services in the industry. British airways fall in this category because there are
few companies in the UK aviation industry. In such market structure there is a stiff price
competition and by looking at the competitor product pricing companies decide price for their
products or services (Blocher, Chen and Lin, 2008). If company passenger base is increasing
then it increases it fleet size or seat capacity in order to increase output. Hence, output is decided
by looking at own performance and competitor strategy but pricing is decided by keeping in
mind competitor pricing policy.
3.2 Impact of market forces on organization response
Market forces to large extent affect organization response. British airways is operating in a
highly competitive industry where companies like Easy jet and Ryan air are operating and
providing service at low price. With change in market forces trends companies needs to bring
changes in their pricing policies and business strategy. With change in market conditions if
British airways will not change its strategy then it will not get expected results. Hence, change in
market forces that are demand, supply and competitors certainly affects organization response. If
country economic condition (economic force) becomes weak then unemployment rate may
increase and same trend can be observed in case of inflation (Ayyagari, Bec. And Demirguc-
Kunt, 2007). Ultimately, revenue of British airways will fall because more and more people will
prefer to travel by bus or train. In case if travel from airplane is strictly required then they will
like to travel from airlines like Easy jet and Ryan air. In same way if regulatory authorities make
any negative change in their rules then it will adversely affect British airways. British airways
also need to evaluate a demand for the airplane travel in the domestic and international market.
By evaluating demand and competitors move to tap available opportunities British airways will
create its own business strategy in order to capitalize opportunity. The whole conclusion is that
positive and negative change in market forces put positive and negative impact on British
airways. If impact is positive then British airways will formulate a strategy that will help it to
make best use of available opportunity (Wei, Chien and Wang, 2005). Same will happen in case

if market forces will put negative impact on an organization. Thus, even change in market forces
is positive or negative organization need to respond to changes.
3.3 Impact of business environment on behavior of British airways
Economic environment- Economic environment refers to economic condition of country.
British airways are operating globally and its profitability is directly affected by the economic
environment. If economic environment will not be good then unemployment rate will increase,
profitability of companies will decline and cost of raw material will increase. Due to this reason
corporate and individual’s economic condition will deteriorate. Hence, profitability of British
airways will also decline (Wiklund and Shepherd, 2005). Thus, economic environment put a
large impact on British airways. In such a situations British airways needs to formulate schemes
that seems attractive to the tourists. By preparing such a scheme firm will be able to develop
loyal customer base.
Social environment- Social environment refers to customs and beliefs of the people. In
many nations people saving rate is very high and they believe in saving more money. In such a
nation it is difficult to expand business. In UK and Europe such kind of issues are not prevalent.
Hence, social environment does not affect British airways.
Political environment- UK government is committed towards growth of travel and tourism
industry and due to this reason it is preparing business friendly policy for the UK aviation
industry. Hence, political environment positively affects British airways. British airways needs to
take such a steps that help firm in capitalizing opportunities that comes in existence due to
changes in the government policies.
Legal environment- It refers to rules and regulation related to aviation industry. In UK
rules are prepared in order to give support to aviation industry (Teece, 2010). Hence, there is no
threat from legal environment.
Technological environment- In UK most of companies are upgrading their fleet and are
purchasing airplanes that are technogically advanced. If British airways do not do so then it will
lag behind in competition. Hence, on technology front British airways need to take steps on time.

TASK 4
4.1 Significance of international trade to British airways
International trade has great significance to British airways. With passage of time UK trade
partnerships are increasing with foreign nations. As a result, business tourism is increasing in the
UK. In upcoming years this segment of tourism will certainly increasing. Hence, international
trade will certainly benefit the British airways (Kotler, Bowen andMakens, 2006). A British
airway is also providing cargo services to its clients. With increase in international trade demand
for cargo service from British airways will also increase. Hence, with increase in international
trade business passenger will increase and revenue from cargo will also increase. Thus,
international trade has lot of significance for British airway. With passage of time countries like
India, China and south East Asia nations are growing at a rapid pace. These countries are
increasing their business relationships with the UK. Due to this reason in future business tourism
will be emerging segment for British airways. Moreover, due to increase in business relations
import and export will also increase. Due to this reason demand for the British airways cargo
service will also increase in near future. Hence, it can be said that international trade has a lot of
significance for British airways.
4.2 Impact of global factors on British airways
Global factors like political scenario in foreign nations and their economic conditions
affect British airways. In past two years in many nations political unrest was observed. Due to
such kind of situations British airways face a lot of problems in operating its airplanes in the
specific nations (Solomon, 2014). Moreover, economic conditions are also not well globally
specially in European nations from where British airways is receiving substantial amount of its
revenue. In these nations unemployment rate is skyrocketing and GDP fall consistently or if it is
growing then growth is very slow. Due to all these reasons tourism in European nations is
growing at a very slow rate. As a result, British airways face a lot of problems in operating its
business (Tayur, Ganeshan and Magazine, 2012). Along with this many small sized airlines are
providing service at lower cost, this also increases problem for British airways. Hence, global
factor to large extent are affecting British airways. Hence, it can be said that political unrest and
poor economic environment are the two main factors that affects British airways. Both
components of the business environment are out of control for the British airways and it can only

formulate a strategy in order to minimize its loss due to negative exchange in these components
of the business environment.
4.3 Impact of EU policies on British airways
In order to promote aviation sector in entire Europe, European Union is preparing a
business friendly policy. Under this policy, companies operating in the UK aviation industry can
freely determine fair. Hence, there is no authority that can prevent British airways from charging
any specific price for its services. This policy will help British airways in fulfilling it vision to
become a premium airline. Along with this, as per this policy firm can also increase its passenger
carrying capacity (EC competiton policy in the aviation sector: state of play and outlook. 2015).
Due to this reason now British airways will be able to carry more passengers in single trip. This
means that companies operating in the UK aviation industry do not need to take permission from
regulatory authorities for increasing their passenger carrying capacity. Apart from this,
companies can start their airplanes in new routes. Hence, this policy will help British airways in
increasing its revenue (Maclean, 2006). In Europe most of airlines are fully operating only in
their homeland. Due to this reason there are lots of opportunities for British airways in Europe.
Thus, it can be said that EU policies has a positive impact on British airways. Due to increase in
liberalization in aviation policies of the UK and Europe ample opportunities comes in existence
for the British airways. These policies are positively affecting British airways and by formulating
appropriate strategy firm can increase its business at the rapid rate in the Europe.
CONCLUSION
On the basis of above discussion it is concluded that business environment is versatile in
nature and due to this reason it is very difficult to achieve vision and mission on time. Corporate
needs to formulate a strategy in order to make sure that they will achieve their vision within pre
determined deadline. Stakeholders play an important role in growth of an organization. Due to
this reason an organization must understand its responsibilities towards various stakeholders.
Company must formulate tactics in order to make sure that all responsibilities regarding
stakeholders will be met on time. Today, governments are committed towards growth of an
organization on their land. Hence, firms must identify areas where they can capitalize
opportunities that come in existence due to change in rules and regulations as we seen in case of
British airways.

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