Business Environment Analysis of British Airways: A Report

This report provides a comprehensive analysis of the business environment surrounding British Airways. It begins by outlining the company's vision, mission, and objectives, followed by an examination of its key stakeholders, including passengers, airport management, shareholders, and employees, and how BA fulfills its responsibilities to them. The report then delves into the different economic systems and their impact on BA, specifically exploring the challenges posed by fiscal and monetary policies and the influence of competition and regulatory mechanisms. Further, it discusses market structures, organizational responses, and the impact of global changes and various policies on the airline. The report analyzes how the company adapts to the external environment and its effects on BA's operations, including financial status and policy framework. The report concludes with a detailed analysis of how the company adapts to the external environment.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 The purposes of different types of organization...............................................................1
1.2 Key stakeholders of BA and the challenges impacted the organization..........................3
1.3 The ways in which BA responds to fulfill its responsibilities to these stakeholders.......3
TASK 2............................................................................................................................................4
2.1 Economic system that attempt to allocate the resources differently................................4
2.2 Challenges due to fiscal and monetary policies on business environment faced by British
airways in the last one decade................................................................................................4
2.3 The impact of competition policy and other regulatory mechanisms on British Airways5
TASK 3............................................................................................................................................6
3.1 Different Market structures determine the pricing and output decisions of businesses...6
3.2 The impact of different players and market forces on organizational responses.............7
3.3 The impacted of working practices and cultures of the countries on British Airways.....7
TASK 4............................................................................................................................................8
4.1 The impact of global changes on British airways............................................................8
4.2 The impact of other global factors, including policies/regulations of government players
on British Airways..................................................................................................................8
4.3 The impact of policies of the European Union on British Airways.................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment refers to the circumstances under which a company operates. No
company works in isolation, its working has the direct influence of various internal and external
factors. External factors include political influences such as law and regulations framed by
government, macro-economic forces like consumer confidence, economic conditions,
technological innovations and internal factors like organizational management structure and
business reputation. This report outlines the scenario, how the business organization operates in
different economic, cultural, regulatory environment. This report in is the context of British
Airways, which is the largest Airline in UK in terms of fleet size with no. of subsidiaries. It
focuses on the short term and long term visions of the cited organization, its credibility over their
stakeholders, and impact of state's policies to check the business undertakings. Other areas of
discussion include the impact of global changes on company's financial status and its policy
framework.
TASK 1
1.1 The purposes of different types of organization
On the basis of ownership business organization can be categorized in the following
ways:
 Sole proprietorship: In this form of business, organization is run and managed by an
individual. Though he can employ other persons, he is entitled to the profits and has to
bear all the losses. In this type owner gets the 100% profit from its transactions of all
forms (Sakbani, 2005).
 Public Ltd. Company: Public Organization is similar to that of private limited companies.
Under this, shares are distributed to its partners. These partners sign a memorandum of
association. Board of directors control and manage the organization and accountable for
distribution of profits among its members (Bowen, 2013).
 Private Company: the capital of private limited company is divided into parts called
shares. These share are freely transferable into its members. Liability of members is very
limited. Due to its limited liability feature it starts on large scale and has high growth and
profit possibility (Tung and Wan,2008).
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 Partnership: In partnership group of people run and own a business together. All the
partners agree to work together by signing an agreement stating various clause regarding
the shares and liabilities of every individuals. Losses and profits are shared between
partners and decisions are taken on mutual consent (Nandakumar, Ghobadian and
O'Regan, 2010).
Considering the case of British Airways, following are its visions and missions
Vision: The Company has the vision of becoming the world's leading global premium airline by
providing elite services to its customers.
Mission: Its mission is to widen the stream of customers by improving the future prospects of
business and making it beneficial for colleagues and shareholders as well. Further, company
aims to offer outstanding and distinguishing services to the Travelers in order to become
successful in the market place.
In order to achieve the stated vision and mission BA has set some objectives:
Short term:
1. To deliver the remarkable service to the travelers in every strata of their journey.
2. To meet the passenger's need and boost the margins by introducing new products and
better hospitality services.
3. To increase the sales volume by offering lucrative prices at the time of occasion like
Christmas and another events
4. To spread the awareness among target customer with the help of social media and mobile
marketing
Long term:
1. To remain the first choice of the long-haul premium customers. With this, company is
able to enhance its competency.
2. To nurture its presence globally. It can be done by creating a good base in developed
economies and emerging countries. London is the organization's home city, and also the
hub of one of its subsidiary Heathrow. It’s vital to ensure the dominance over there. For
this it is aiming to work in collaboration with airport authority and influence the
government policy decisions (Business environment, 2015).
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1.2 Key stakeholders of BA and the challenges impacted the organization
For every organization, there are certain stakeholders which possess interest in the
operations of the company. In this context, key stakeholders of British Airways are its
passengers, airport management, aviation authorities, shareholders, investors, airport
managements, employees, competitors and suppliers (Ahmed and Long, 2013). Passengers play
the key role in Airlines industry. This is so because credibility of airlines largely depends on the
passenger's satisfaction level. Passengers seek for quality travel experiences and BA meets this
objectives by offering world class hospitality services.
Further, airport management's efficiency and accessible services ease the traveler's
journey. With the help of it, BA is able to execute its operation in effective manner and hence
able to meet with the satisfaction level of their customers. Further, BA ensures to pay
maintenance fees and other charges to airport authority on time, through which business
relationship gets smooth. Additionally, suppliers for BA are travel agents and company that deals
in Aeronautical equipment. Relations with travel agents are developed by offering them high
commission on each ticket booking. Through this, overall sales volume of company gets
increased. Further, aeronautical equipment are been purchased by the company on regular basis
and makes timely payment. Apart from it, employees are one of the key stakeholders and they
are offered with high development opportunities along with sound motivation.
1.3 The ways in which BA responds to fulfill its responsibilities to these stakeholders
To increase the comfort level of it its passenger BA is coming up with improved services
at every step of their journey. They are introducing new inflight entertainment facility for them.
Recently they launched the new long-haul aircraft and came up with Boeing 777-300ERs.
Optimizing the operational performance with the up gradation in regular intervals, as lately to
improve the experience of terminal 5,airport terminal at London it developed the satellite
Terminal 5c (The markets we operate in: British Airways 2009/10 Annual Report and Accounts,
2009).
Better partnership leads to the enhancement of business opportunities. BA is in
collaboration with varied airport authority for the optimum level of services. It is aiming to ink
down some agreements with the leading airlines of the emerging economies, like with India's
Kingfisher airlines and Russian carrier S7.
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For the better results a company has to be single goal oriented and result focused. BA is
services centric organization. So to keep the employees motivated towards their work it has an
effective reward framework, it frequently praises them with performances pay.
TASK 2
2.1 Economic system that attempt to allocate the resources differently
Economic system refers to the system of production and exchange of products and
services in a society. Categorization economic system answers these three questions about the
allocation of resources: what to produce, How to produce and whom to produce. Accountability
and powers changes with the different category of system (Anger-Kraavi and Köhler, 2013).
 Free market Economy: The economic system in which the goods and services are owned
by private entities. Their aim is the profit maximization and the allocation of resources is
not done equally. The economy is profit centric. If BA were working in a free market
economy then the fares and tariffs would be decided by the demand and supply
mechanisms (Živko, 2006).
 Command Economy: The economy in which government owns the factors of production
and the allocation of resources is entitled to it. Social benefit is the ultimate aim in public
economy. The economy is goods centric. BA in command economy gives the full control
of government over it. The sole authority will be the Government itself (McLean, 2006).
British Airways working in command economy have minimum control over pricing and
output decisions due to maximum control of government body in varied areas.
 Mixed Economy: In mixed economy some resources are owned by public sector and
some by private sector. In this economy Government intervenes to check the situation of
market failure. It is done by either purchasing the private company (Nationalization) or
by selling some of its undertakings (Privatization) (Kelliher and Henderson, 2006). At
present business airlines works under this system of economy under which some
decisions are taken by board members and some power lies in the hand of government.
British Airways experience some control in the form of taxation or other policies in
which it has its operations. BA abides the laws related to environmental, consumer
protection, employees related issues and many more.
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2.2 Challenges due to fiscal and monetary policies on business environment faced by British
airways in the last one decade
Any business organization experience the direct impact of the policy framed in an
economy. Monetary and fiscal policy significantly affects the business planning of BA.
Monetary policy refers to the steps undertaken by the central bank to control the money supply in
an economy for example by making in interest rates etc. Fiscal policy refers to the measures
adopted by the government to check the market situation. It can be done by changes in
government spending and taxation policies. Seeing the present situation of economy Government
makes some changes in different sectors such as increasing fares and quota imposition.
FISCAL POLICY
Last decade recession was been hit globally. Governments and central banks of countries
took all the possible steps to recover the economy as soon as possible. These steps trickle down
to the business planning of organizations as well. BA was also not left unaffected, it encountered
many deviations in its annual financial statements in last one decade. There was a continuous
increase in fuel prices which affected the airlines' industry all over world drastically. Some
airlines stepped into merger but some had to face the bankruptcy. BA managed to survive in such
difficult conditions by taking steps accordingly. It adopted the “No fares up” policy. Fiscal
policy refers to decisions taken by the government to stabilize the condition of economy by
adopting tools such as spending and expenditures which affects the working of British Airways.
MONETARY POLICY
Due to extremely frangible demand in this situation BA cannot risk raising the fares. It
kept the fares at the previous level at the expense of profit margin to stop dwindling its customer
base.
1. Pay Lock policy: BA managed to convince its employers that it won't be able to give
performance or management bonuses for the time being, but would adjust as soon as it
recovers from economic downturn.
2. Short-haul and long-haul markets: Competition intensified in the short-haul market, many
passengers and cargo travelers have been absorbed into the train route leaving the overall
aviation industry weak in this sector. It has the significant impact on long-haul market.
Ensuring its hold on this market BA established new Airbuses with increased departures
and with additional services.
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Monetary policy is the method adopted by central bank to regulate the money circulation
in economy through making changes in interest rates, bank rates and adopting other methods.
This steps fluctuate the decision taken by British airways such as changes in interest rates
changes investment decisions.
2.3 The impact of competition policy and other regulatory mechanisms on British Airways
Competition policy aims to improve the efficiency of business organizations and
maintain the competitive behavior by taking steps such as De-regulation, privatization, laws and
penalties against anti competitive behavior and by reduction in import tariffs. Aviation industry
is a very challenging industry. Every company invests huge amount in it to get the better results.
Competition policy ensure the consumer get the maximum benefit. British airways abides the
laws laid down in competition policy to prevent the market from unfair trade practices. In ensure
the product standard, opens new market opportunities and checks competitive behavior. Other
regulation is done by government policies, government intervenes in favor of public interest.
Competition commission examines the investment and merging of companies. It ensures the
healthy competition to make the benefit to the economy (Martínez-López, 2015). British airways
follow the norms prescribed related to maintaining healthy competition and promote growth in
aviation industry. Civil aviation authority in UK have enforced the laws for the protection of
consumers. It also takes into account the issuing of aerodrome licenses, ensures airport safety
and check the infrastructure, safeguarding and public safety zones.
TASK 3
3.1 Different Market structures determine the pricing and output decisions of businesses
Market structure plays a vital role in output and pricing decisions of business
organizations. The following are the few market structure in an economy.
Perfect competition in which there are many sellers and many buyers (Harrison, 2013). They
have no control over the price decision. Prices are common for all the sellers. But they can vary
their output quantity. If we consider the aviation industry globally BA operates under perfect
competition. It has to limit its pricing at its international bases to become the preferred choice of
its travellers.
If monopolistic competition, there are large number of sellers and many buyers. Each
member comes up with slightly different product (Capon, 2009). They have partial control over
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pricing. BA in monopolistic competition operates in industry with variation in its hospitality and
customer services it offers from its competitors with little control over its fares. In order to
establish prominent position in market place, distinguished services are offered by British
airways to create a gap with their rival companies.
In monopoly, there is only one seller and many buyers (Marti and Puertal, 2015). The seller has
dominance over the pricing and output decisions but with some limitations. It has a large market
share. In reality Perfect monopoly does not exist but BA has a large dominance over some
sectors like in long haul journeys such as trans Atlantic routes. Hence, prices are kept as such to
attain maximum profitability.
In oligopolistic market there are few sellers in which the pricing and output decisions are
dependent on each other (Didonet and et.al, 2012). The have good market share and significantly
affect the market decisions. British airlines' comes under Oligopolistic market in which it
operates with very few close competitors. In this market structure there is fierce competition in
which slight variation in tariffs can largely affect the costumer base of the other. Each member
come up with different policies and influence schemes on occasions to attract the travelers.
British Airways falling in this market structure enables to adopt certain policies such as
maintaining competitive price to capture the attention of large stream of travelers.
3.2 The impact of different players and market forces on organizational responses
Market forces refers to the aggregate influence of demand and supply of product and
services on the price and output decision (Palmer and Hartley, 2011). It has the direct impact on
organization's strategies and policies. It affects the organization in regard of its services,
production, promotional activities and its profitability. If demand of product and services decline
in compassion to the supply, the price has to be increased in order to avoid chaos and similarly if
demand decreases prices also reduces. BA is always prepared to address such forces. Its
prediction and quickness in responding to its passengers need helps to develop trust relationship
with them. In respond to the changes in demand ratio it brings with it different schemes for its
premium passengers, increases the comfort level of their passengers at every step of their journey
and by making the online services more accessible. Further, changes in the macro economic
figures such as interest rates and other affects the decisions taken by management of British
Airways which alters its revenue generation and investments.
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3.3 The impacted of working practices and cultures of the countries on British Airways.
British Airlines is the leading airlines giving its services globally in different countries.
Each country has different cultural environment and legislative norms and every industry
operating in that country whether national or international has to follow those norms.
Government lays down various laws regarding route flying rights, environmental measures and
security issues (Eikebrokk and et.al, 2011). Some factors affecting the BA's planning are:
Political
When political conditions are favorable it expands the operational domain of British
airways. On the other hand unrest in political situation deviates it away from the smooth
functioning of organization in a country.
Economic factors
o Inflation: BA checks its fare range as per the inflation prevailing in the economy. But
sometimes it prevents itself from raising the tariffs at the cost of its profitability to retain
the passengers.
Social factors
o Employment conditions: Motivated and efficient employ delivers the optimum service to
its customers. BA recognizes the importance of reward and performance appraisals to its
staff to make them feel value and recognize for their work (The markets we operate in:
British Airways 2009/10 Annual Report and Accounts, 2009).
Technological factors
Advancement of technology enable British airways to process the operation effectively
via high tech communication and coordination.
Legal factors
o Consumer confidence: Aviation is a customer centric industry so BA maintains the
customer satisfaction by regularly evolving its product line and abiding laws laid down
by government and other legislative bodies with respect to consumer protection.
Cultural factors
o Cultural environment have large influence over the organization's services and strategies
(Fernando, 2011). BA is offering its services predominantly in UK. London is its home
city and the hub of International trade. Business class exclusively covers the major share
of the passenger from this terminal. To give them optimum satisfaction and comfort BA
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ensures the smooth operational processes and departure punctuality. It has facilitated the
airports with special lobbies for waiting purposes.
TASK 4
4.1 The impact of global changes on British airways
After 1930 Global depression, need of some international organizations was felt to
monitor the economic situation all over the world (Eikebrokk and et.al , 2011). WTO is one such
organization to monitor the trade activities of all the countries (Krasniqi, 2009). It has issues
some regulations for every industry for the protection of consumer rights as well as in the favor
of all member countries. Air transport is one of the challenging aspect to deal with. WTO and
other international civil aviation bodies have issued certain instructions: Environmental impact: BA has to comply with all the environmental regulations to
minimize the carbon emissions, reduce the average noise per flight to the stated target, to
improve the air quality performance by reduction in nitrogen dioxide emissions and
minimizing waste &disposal to landfills and increasing reuse and recycling of materials
(The markets we operate in: British Airways 2009/10 Annual Report and Accounts,
2009). British airways is required to abide the laws related to environment such as
maintaining minimum emission ratio of harmful gases laid down by international
organisation working in this area. Consumer's right: Provide the consumer full satisfaction for the services the get, the fares
should be charged justifying the criteria prescribes and disruptions occur should be
immediately addressed.
 Safety and security: Safety and security is the crucial factor in aviation industry to handle.
BA has the good comprehensive monitoring system, a special team to check the illegal
immigration and terrorist activities, has trained pilots and advanced technology to combat
accidents.
4.2 The impact of other global factors, including policies/regulations of government players on
British Airways
British Airways being the prominent airline and the first choice of premium passengers
globally have to go through the impact of various global factors. Some factors are political
factors, International competitiveness, tariffs and taxes, Exchange rates and science and
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technological advancements. Operating in different countries is a critical task it has to deal with
different political situations and their administration. BA faces fierce competition with the
national flights in every country. Threat of terrorist activities and illegal immigration is major
concern of the aviation industry. Different exchange rates, stock market fluctuations and inflation
level play the deciding role in the flight fares. BA has to comply with all regulations laid by
international organizations and the countries laws in which it has its base. In the era of
technological advancements, emergence of high tech communication facility made the
monitoring easier in all the parts of the world.
4.3 The impact of policies of the European Union on British Airways
EU has the framework of some policies (Kew and Stredwick, 2005). UK being the
member state of European Union, So BA enjoys some rights and also has to follow the norms its
concerned areas. For air passengers, laws concerns the delays, cancellations and boarding denied
due to overbooking. Organization has to ensure the safety and health at work. Committees of EU
such as ACSH, SCOEL and SLIC monitors the implementation of all the prescribed measures
(Burdekin and et.al , 2011).
EU has also adopted the clean air policy package, in which it has laid some legislation on
maintaining air quality, reducing air emissions and on air transport related policy measures such
as reducing green house gas emissions and enable a 10% reduction in the effects airplanes have
on environment.
CONCLUSION
British Airways is the premium airlines with the large number of passengers all over the
world (Zulkhibri, Naiya and Ghazal, 2015). This airline is highly regulated with advances
centralized monitoring system. In order to remain competitive BA's primary concern should
remain the customer's satisfaction by providing optimum level of services. It can remain in
market by providing distinguished hospitality to its passengers at all the strata of journey. In case
of disruptions it should be immediately addressed without any delays. Safety and security should
be the major concern, it can be done by keeping check on all activities by centralized monitoring
system, prompt communication and smooth operational processes. Environmental factors should
also be kept under consideration by reducing greenhouse gas emissions and maintaining air
quality.
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