Business Environment Impact on British Airways: A Detailed Report

This report provides a comprehensive analysis of the business environment surrounding British Airways (BA). It begins by defining the business environment and its impact on organizations, specifically focusing on BA. The report examines the purpose of different organizational types, distinguishing between profit and non-profit entities, with BA identified as a profit-making public limited company. It identifies and analyzes BA's key stakeholders, including internal stakeholders like employees and managers, and external stakeholders such as customers, government, and suppliers, and how BA meets their objectives. The report further explores BA's responsibilities to these stakeholders. The report then delves into the economic systems affecting resource allocation, including private, government, and mixed economies, assessing their impact on BA. Challenges posed by fiscal and monetary policies, such as increasing taxes and interest rates, are discussed in relation to BA. The report also analyzes the impact of competition and regulatory policies, including environmental regulations, on BA's operations. Finally, the report assesses the market structure of the airline industry, specifically the oligopoly in which BA operates, and how the interplay of different market players shapes BA's responses, including competition from airlines like Japan Airlines and Lufthansa. It concludes with a discussion of the impact of global trade regimes and other global factors on BA, and the measures BA can take to remain competitive.

Business
Environment
1

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Purpose of different types of organization.............................................................................3
1.2 Key stakeholders of BA and how the organization meet their objectives ............................4
1.3 Responsibilities of BA towards all stakeholders and its response regarding the same ........5
2.1 Economic system that affects allocation of resources...........................................................5
2.2 Challenges faced by BA due to fiscal and monetary policy..................................................6
2.3 Impact of competition and regulatory policy........................................................................6
Task 2 ..............................................................................................................................................7
3.1 Market structure of airline industry.......................................................................................7
3.2 Interplay of different market players shapes organizations response ...................................7
3.3 Impact of culture and working practices of different countries on BA.................................8
4.1 Impact of global trade regimes .............................................................................................8
4.2 Global factors which makes impact on British Airways.......................................................9
4.3 Measures can be taken by BA in order to remain competitive .............................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
2

Illustration Index
Illustration 1: Types of stakeholders ...............................................................................................5
3

INTRODUCTION
Business environment is termed as the sum total of all the internal and external factors
which are associated with an organization. In other words it is defined as the set of conditions in
which a business performs or operates. In the current scenario it plays a very important role as it
helps organizations to understand the environment factors which can affect its operations and
activities. The present report is based on key aspects of business environment and British
Airways has been taken consideration as an organization. This reports demonstrate how and what
kind of impact does the environment have on British Airways.
TASK 1
1.1 Purpose of different types of organization
A social unit of individuals which have been managed and structured in order to
accomplish common goals is termed as an organization. There are two different type of
organization namely profit organizations and non-profit organizations. The prime objective of
profit making organizations is to earn higher profits (Faul, 2008). Further they always seeks for
the ways thorough which they can increase their sales and market share. Profit organizations are
sub divided into public and private enterprises. The public are owned by separate individuals and
entities whereas public enterprises are usually controlled by government. On the other hand, the
non-profit organizations are those which operates with a prime purpose of development of
society. Rather than looking after sales and profitability, they try to remove the issues and
problem faced buy society such as poverty and child labor (Fernando, 2011). British airways is a
UK based airlines which is also termed as BA. The organizations is considered as the profit
organization and it is a public limited company (Our strategy and objectives, 2012). The vision
statement of airlines is to become the worlds most responsible airlines. Its mission is to become
more than airlines by developing good relation with customers and providing them with best
quality services. The short term objective of British Airways is to meet the need and demand of
customers and grow its presence in key global cities of the world (British airways, 2015). On the
other side of this, the long term objectives of the brand is to become a sustainable organization
and become the airlines of choice for premium customers.
4

1.2 Key stakeholders of BA and how the organization meet their objectives
A stakeholder is termed as a person which have interest or any kind of concern in
something. Every organizations have its key internal and external stakeholders which are within
or outside the organization (Kennerley and Neely, 2013). All the key stakeholders of BA along
with their objectives are stated below as:
 Internal stakeholders- These are the person which are within a business organization and
plays a very important role in the growth and success of the same. They key internal
stakeholders are employees, owners and managers. British airways has been always
successful in meeting the objectives of all its internal stakeholders (Lusardi and Mitchelli,
2007). For instance the employees are being provided with better incentives and pay. The
managers are provided with better opportunities for growth and development. The owners
are given with adequate profits so that they can put more efforts and hardwork.
 Externals Stakeholder- These are the people which are outside a business organization
and are affected indirectly by the operations and activities of the business (Galende,
2006). The key external stakeholders of British Airways are customers, government ans
suppliers. BA meet the objectives of customers by delivering quality services at
5
Illustration 1: Types of stakeholders
(Source: Thomas, 2007.)

convenient prices. The objectives of government are meet by taking all the environmental
and environment practices into consideration (Bernard and Jensen, 2004). The suppliers
objectives get satisfied when they are being paid on time against the products and
services supplied to the airlines.
1.3 Responsibilities of BA towards all stakeholders and its response regarding the same
British Airways have some sort of responsibilities towards all its stakeholders and it is
required to accomplish all those responsibilities in best possible manner. It is the responsibility
of the airlines to provided better and safe working environment to all its managers and
employees (Bernard and Jensen, 2004). Further it is also required to provides its owners with
adequate profits so that they can think for expansion and future growth. The airlines is also
responsible for the growth and development of all its employee and managers.
On the other side of this, the organization also have responsibilities towards all its
stakeholders. It needs to provide safe and quality services to all customers. It is the prime
responsibility of British Airlines to follow all the rules and regulation which has been framed by
government and other regulatory bodies. In terms of suppliers the organization is also required to
make timely payment to all its suppliers (Galende, 2006). Till now BA has been always
successful in meeting the objectives of all its stakeholders. Further training and development
sessions are being provided to the employees and managers so that they can find better
opportunities for growth and development within organization. On the other side, it has always
used fair practices at the time of employment and has taken care of the fact that its operations do
not have negative impact on environment. It always try to improve its services which is an great
example that it is meeting all its responsibilities towards customers.
2.1 Economic system that affects allocation of resources
Every economy has concentrate on three main factors which are what, how and for whom
to produce. Types of system with an example of BA are explained below as: Private Economy- The main objective of a private economy is to offer higher growth rate
to all those businesses which operates under this economy (Anderson, Sweeney and
Williams, 2011). For an organization like British Airways it is termed as one of the most
effective and appropriate economy. All the resources are allocated to make the business
grow and expand. The organizations have right to determine how to produce.
6

 Government economy- In this kind of economy the government of the country is the one
which determines what to produce, how to produce and for whom to produce. Further at
the time of crises such kind of economy is very beneficial (Besbes and Maglaras, 2009).
This type of economy is not beneficial for businesses such as British Airways as the
polices and plans regarding tax and duties will affect the operations of the entire
organizations.
 Mixed economy- In such kind of economy the consumer preference and government are
the one which decides what to produce. Further the producers and government decides
how to produce and the for whom to produced is determined by purchasing power and
preference of government (Gnoli and Ridi, 2014.). To a certain extent this economy is
beneficial for BA as it will now have fully control over the resources of economy.
2.2 Challenges faced by BA due to fiscal and monetary policy
The fiscal and monetary policy are considered as very important tools of a country's
government. Further with the help of monetary policy the government influence the demand and
supply of money within a country (Björklund, 2011). This is mostly done with the help of
interest rates and other monetary tools. On the other hand, the government control the spending
of people with the help of fiscal polices. The spending and taxes are controlled with the help of
fiscal policy. It has been found that there have been challenges and issued faced by British
Airways. In last few years the increasing taxes has an direct impact on all the activities of the
organization (Henderson and Kelliher, 2010). The result of increasing tax has resulted making
the customers left with less money. Thus, the demand of airlines services decreased instantly. On
the other side of this, the interest rates has also increased which means that the British Airlines
was required to pay more interest on the loans taken from bank (Kensler, 2007). The major
challenges and issues which has been faced by fiscal and monetary policy was regarding low
sales and profitability due to low demand in market.
2.3 Impact of competition and regulatory policy
The main objective behind development of regulatory policy is to ensure that all the firms
are using fair practices to compete with each other. With the growing competition among
businesses, it was very essential to develop such policy and practices. Competition policy has
affected the operations of British Airways by making the market better and improving its all
7

overall efficiency. It has helped the customers by making them available with wide range of
choices and alternatives. The impact of this is that the organizations find better ways for growth
and development as there is no price fixing and other unfair means used by its competitors. On
the other side, the competition policies adversely affected the operations of British Airways as it
has opened entry for new firms and other businesses (Lee and et. al., 2008). The regulation
regarding environment and fair practices has also impacted the British Airlines to a great extent.
It has forced the airlines to charge fair prices regarding the airline services it provides to the
customers. Further the regulations has also resulted in increasing the overall cost of operations as
the organization was required to change its practices and use some sustainable process which
have a low impact on environment. The legal changes has an direct impact on the sales and
profitability of British airlines and changes has resulted in rising the overall cost.
TASK 2
3.1 Market structure of airline industry
The market in which British Airways operates is an oligopoly market in which there are
only few sellers. One of the major characteristic of such market is that any changes in operations
or strategies of one particular firm has an direct impact on all its competitor. For example if the
prices of airlines seats of Lufthansa airlines have been lower down then it will results in
declining the demand British Airways airlines seats (Malhotra and Hinings, 2010). The reason
behind this is that the customers have very few choice available and due to this reason increase
in sales of one means decline in sales of other. This is the only reason why the pricing policy of
all the airlines is almost similar and they compete with each other on the basis of strong
marketing and advertisement. Therefore, it can be stated that reduces prices of one airlines,
declines the sales of its rival.
3.2 Interplay of different market players shapes organizations response
There are different market players in airlines industry and the operations of one has a
direct impact on the activities of another. Japan airlines and Lufthansa have been emerged as the
biggest and strong rival of British airlines (Mohan, 2000). The organization is getting affected to
a great extent by its two main competitors. The response of BA shapes by the strategies,
marketing and advertisement carried out by the two. For example if Japan airlines has introduce
any new or distinctive kind of services then BA will be required to make some modification in
8

its existing operations. (North, 2010) The reason behind this is that is the organization continues
to offer same kind of services when its competitor is offering unique service then all the
customers will direct shift from BA to Japan airlines.
3.3 Impact of culture and working practises of different countries on BA
British Airways is a UK based airlines which operates in many counties of the world.
Further each country has its own working practise and culture and all those businesses which
operates in these countries are required to follow the culture and practises. This has affected
British Airways in both negative and positive ways. In negative terms it can be stated that it is
not easy for the airlines to follow the working practise and culture (Potter, Avard and Wilson,
2008). For example in some countries the laws related to employments are very strict and the
organization is required to follow all these laws and practises strictly. On the other side of this, it
also needs to take care of the culture of a nation where it is operating. For instance people of
different countries prefer different kind of lunch, breakfast and dinner. In some nations only
vegetarian food is preferred and if the airlines serves its customers with non vegetarian food then
it will create very bad impression in the mind of customers and they will not use the services of
airlines in future (Sloman, 2007). On the other hand, if the airline sticks to the working practises
and culture of different countries then it results in creating a high brand image of the
organization. It also develops a sense of satisfaction among customers and government of those
countries. It supports the organization in its long term growth and development.
4.1 Impact of global trade regimes
The global trade regimes such as WTO, tourism bodies and international civil aviation
also impacts the operations and activities of British Airways. These trade regimes have impacted
BA in several ways. In negative aspects the free trade has been restricted in some of the counties
which has lower down the sales and profitability of British Airways. There are some areas in
which flight services are not provided by the airlines and it has created some sort of
dissatisfaction among the customers (Bernard and Jensen, 2004). Bodies such as international
civil aviation has forced the organization to use fair practises in terms of competition and use
more sustainable ways to operate. The rules and regulation in trade regimes changes and the
organization is required to follow them strictly. If these are not followed then the airlines needs
9

to pay fines and duties which is a loss. Along with this, such fines and penalties also effects the
brand image and goodwill of BA.
4.2 Global factors which makes impact on British Airways
Operating business at global level affects from different global factors and there are many
policies and regulations which makes impact on the business of British Airways. First is political
factors, it includes the rules and regulations of government of country which is essential for the
airline company while operating its business (Besbes and Maglaras, 2009). This include factors
such as taxation, service charges etc. Another global factor is economic policies which are
related to monetary and fiscal policy. Change in any of this policy makes direct impacts on the
financial aspects of the BA as these policies are associated with the inflation and interest rate of
market. Social factor is also one of the global aspect which makes impact on BA and these are
also directly related with needs and demands of customers (Gnoli and Ridi, 2014). For example:
in present scenario customers are more conscious towards pricing of airline tickets, so it is
essential for the British Airway to frame their ticket policy in accordance with global market
trend of airline sector. Another global factor in airline industry is related to development in
technology of their products and services. BA has to ensure that in countries in which they are
operating their airline service should equipped with availability of advanced technological
products and services.
4.3 Measures can be taken by BA in order to remain competitive
In order to stay competitive and earn adequate profits, some of the measures which can
be taken by British Airways are discussed below as: Innovation- One of the best way to gain competitive advantage and survive in the stage
of intense competition is by providing distinctive and innovative services to customers. it
has been found that the airlines operates in oligopoly market and it is not easy for it to
compete on the basis of price (Malhotra and Hinings, 2010). Innovation in services will
help in attracting new customers and retailing the old ones.
 Sustainability- Another measure which can be taken by BA to remain competitive is by
making its services and operations more sustainable. The benefit of this will be that a
sense of satisfaction will be created in the mind of customer that the organization is really
taking care of its impact on environment. Further it will also save the airlines form fines
10

and penalties regarding the pollution and environment harms created by its operations
(Fernando, 2011).
CONCLUSION
From the above study it has been concluded that while operating business in this competitive
market of aviation industry, it is essential for the British Airways to consider all the global
challenges, needs of stakeholders and also the policies of government. To remain competitive in
market, British Airways has to take some measures. For this company has to consider all the
rules and regulations of government, needs and demands of customers at global level and also to
fulfil the objectives of their stakeholders. In addition to this company has to manage its
operational and marketing activities in order to compete with its competitors in better manner.
11

REFERENCES
Books and journals
Anderson, D., Sweeney, D. and Williams, T., 2011. Statistics for Business and Economics.
Revised. Cengage Learning.
Bernard, A. B., and Jensen, J. B., 2004. Why some firms export. Review of Economics and
Statistics. 86(2). 561-569.
Besbes, O. and Maglaras, C., 2009. Revenue Optimization for a Make-to-Order Queue in an
Uncertain Market Environment. Operations Research. 57(6). pp. 1438-1450.
Björklund, M., 2011. Influence from the business environment on environmental purchasing—
Drivers and hinders of purchasing green transportation services. Journal of Purchasing
and Supply Management. 17(1).pp. 11-22.
Faul., 2008. Business Environment:Test & Cases 2E. Tata McGraw-Hill Education.
Fernando, A., 2011. Business Environment. Pearson Education India.
Galende, J., 2006. Analysis of technological innovation from business economics and
management. Technovation. 26(3). 300-311.
Gnoli, C. and Ridi, R., 2014. Unified Theory of Information, hypertextuality and levels of
reality. Journal of Documentation. 70(3). Pp.22-28.
Henderson, B. J. and Kelliher, F., 2010. A framework for the small business environment.
Journal of European Industrial Training. 14(6) .pp.520-529.
Kennerley, M. and Neely, A., 2013. Measuring performance in a changing business
environment. International Journal of Operations and Production Management.
23(2).pp. 213-229.
Kensler, M. C., 2007. A Study of the Impact of Learning Styles in a Business Environment when
Learning is Conducted Virtually/electronically. ProQuest.
Lee, P. R. and et. al., 2008. Knowledge Transfer between Multinational Corporations'
Headquarters and Their Subsidiaries: Influences on and Implications for New Product
Outcomes. Journal of International Marketing. 16(2). pp. 1-31.
Lusardi, A., and Mitchelli, O., 2007. Financial literacy and retirement preparedness: Evidence
and implications for financial education. Business Economics. 42(1). 35-44.
Malhotra, N. and Hinings, R. C., 2010. An Organizational Model for Understanding
Internationalization Processes. Journal of International Business Studies. 41(2). pp.
330-349.
Mohan, R. T. T., 2000. Competition Policy Dilemmas. Economic and Political Weekly.
35(28/29). pp. 2499-2502.
North, K., 2010. Environmental Business Management. International Labour Organization.
12