Analysis of British Airways Business Environment and Stakeholders

This report provides a comprehensive analysis of the business environment of British Airways (BA). It begins with an introduction to the business environment and then delves into various aspects of BA's operations. The report examines different types of business organizations, focusing on BA's stakeholders, including employees, customers, suppliers, financial institutions, and shareholders, and how BA meets their objectives. It discusses BA's responsibilities to meet stakeholder needs and analyzes different economic systems and their impact on BA. The report also explores the impact of fiscal and monetary policies, competition policies, and legal changes on the airline industry, specifically focusing on BA. Furthermore, it examines market structures, market forces, and the cultural environment shaping BA's behavior. The significance of international trade for BA and the impact of global factors and European Union policies are also discussed. The report concludes with a summary of the key findings and includes references and an illustration index.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Various types of business organizations ..........................................................................1
1.2 Key stakeholders of BA and meeting their objectives ....................................................3
1.3 Responsibilities to meet the need of stakeholders ...........................................................4
2.1 Different economic systems attempting to allocate the resources ...................................5
2.2 Impact of fiscal and monetary policy on BA ...................................................................6
2.3 Impact of competition policies and legal changes in the airline industry .......................7
TASK 2............................................................................................................................................7
3.1 Market structures determining price and output decisions ..............................................7
3.2 Market forces that are shaping the organizational response ............................................8
3.3 Business and cultural environment shaping the behaviour of BA ..................................9
4.1 Significance of international trade for BA.....................................................................10
4.2 Impact of global factors on BA......................................................................................11
4.3 Impact of policies of European Union on BA ...............................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

ILLUSTRATION INDEX
Illustration 1: Different types of stakeholders.................................................................................4
Illustration 2: Different market structure.........................................................................................7

INTRODUCTION
Business Environment is considered as sum total of all internal and external forces which
affects the performance of business organization. Business environment includes factors like
competitors, owners, clients, suppliers, technological improvements and various government
activities (Zhang and Huang, 2012). In the context of business environment, this present report is
based on British Airways (BA) which is UK's largest airline service on the basis of their fleet
size. Organization operates its business in various parts of the world and it has also developed
unique feature of cargo services for increasing their profits and productivity. This report also
focuses on how organization is able to meet needs of their potential stakeholders and also what
strategies mentioned company need to employ in order to achieve them. Further, this report
discusses on the impact of fiscal, monetary and competition policy as well as it stresses on the
mechanisms which is opted by BA.
TASK 1
1.1 Various types of business organizations
Business enterprises differ from one another and they have different plans, policies and
strategies to have a competitive advantage over their competitors. Different types of business
organization are stated below: Sole trader- Sole trader is a type of business which is owned by a single person. This type
of business ventures are quiet cheap to start and the business owners usually keeps all the
profits by distributing some salary to their selected employees (Mockler, 2002).
Moreover, this is considered as most common business activity in UK where sole trader
produces quality of goods and services by considering needs and demands of their
customers. Corporation- Corporations are also considered as dominating business organizations in
UK in which this legal entity is separate from individuals within the business enterprise.
Moreover, these corporations are owned by shareholders who selects board of director
from the majority of polls and after the selection he/she look towards all the prior
responsibilities. Different types of corporations are Non Profit Organizations (NPO),
charitable trusts, etc.
1

 Partnership- Partnership organizations consist of two or more owners where these
partners are normally seated by accepting Partnership Deed. This deed includes amount
of capital which each partner will contribute and also how the profit and losses will be
divided among them (Temponi and Cui, 2008). In this type of organization, risk of
business is divided among many individuals, this is because when organization gets into
difficultly then there will be many people to share the debt of enterprise. Private Limited Company- These companies come under non-public sector which is
usually operated by few individuals. Further, the aim and objective of these organizations
is to maximize their profits by increasing their business ventures and also by reducing the
cost of their product and service. Public Limited Company- This type of company issues new or existing shares to the
public and are registered with minimum paid up capital. For issuing the shares,
organization have to get registered under Companies Act, 1980 and these ventures have
relatively more advantageous as compared with private limited company (Li and Hewitt,
2008). BA is a part of this head.
Vision Mission Short term objectives Long term objectives
Providing best of the
service at low cost.
Setting franchisee or
business in major
cities of different
countries
Increase in market
share.
Working with
suppliers and
customers for
developing
sustainable business.
To become world's
most responsible and
reliable airline.
Providing sustainable
employment to
current employees.
Providing the best
quality of products
within airline (Our
Strategies and
Objectives, 2010).
Conducting business
operations by
focusing highly on
sustainable factors.
Passengers must feel
safe and confident
whenever they travel.
2

1.2 Key stakeholders of BA and meeting their objectives
Individuals and groups who possess interest in the operation of company are considered
as stakeholders. Different stakeholders have diverse needs and expectations from the mentioned
company. Up to an extent, BA fulfils the expectations and objectives of their stakeholders.
Different types of stakeholders for organization are mentioned below: Employees- Organization has approx. more than 43000 employees who are giving their
productive and valuable services around the globe. Human resources are having
expectations that they get healthy salary and remuneration from cited the organization
(Chen, Liu and Cheung, 2014). This will boost up their morale and they will be able to
achieve their individual goals. Moreover, BA cares for their employees and they give
them better salary and also job security. This makes the employees motivated and they
work with more of their capability and enthusiasm. Customers- For every organization, customers are considered as the soul of organization.
In this context, cited company is focusing on giving the best of their services to
travellers. Expectations of customers are to get valuable and quality of services in the
flight at a reasonable price. Suppliers- BA’s main suppliers are their online travel agents which constitute
cheapflights.co.uk, ibibo.com, etc. Customers buy tickets from such websites and in
relation to this; they get the best and cheaper deals. Financial institutions- Financial institutions include banks, corporate friends, individual
investors etc. These financial institutions have high impact on the operations of BA. If
cited organization failed to pay the debt on time then they refuse them to grant the fund
(Hofstede and Hofstede, 2005).
 Shareholder's- British Airways is a public limited company and it accepts deposits from
public through initial public offer by issuing their existing securities. Those individuals
who have invested their valuable money in BA become the shareholders of company.
3

Illustration 1: Different types of stakeholders
(Source: Business Stakeholders: Internal and External, 2015)
1.3 Responsibilities to meet the need of stakeholders
BA is a global organization and they have strategies to accomplish the needs of their
potential stakeholders: Employees- Employees in the cited company have power to influence the customers. If
BA takes care of their employees then their workers will surely take care of their
passengers. In this context, organization is having effective HRM policies which focus on
satisfying the needs and objectives of their workers (Adler and Gundersen, 2007).
Further, BA adopts democratic style of functioning where employees are free to give
their valuable suggestions for the success of business venture. Customers- Although, customers are treated as a source of profit but at times, they have a
little impact on the corporate performance. BA is focusing on keeping their existing
customer base and it is also aiming to attract new one from varied sources. Suppliers- Suppliers are the additional source of generating organization’s revenue and
profits. BA has the responsibility to satisfy their supplier’s needs by giving some amount
of profit on the tickets which this online travel agency has sold.
4

 Financial institutions- Financial institutions at times affect the performance of BA. It is
because if cited company failed to clear their loan amount then in future, these people can
refuse to provide long term or short term loan to the business enterprise (Thompson and
et.al., 2008). In order to make a unique flow of their debt, organization has made a cash
management technique which helps them to clear their loan after a specific time period.
 Shareholder's- Relationship with shareholders is duly important as they have high
interest in the organization’s success. Firm is obliged to provide them necessary
information after a certain quarter or yearly relating to the annual reports and also, as per
the various accounts of business venture.
2.1 Different economic systems attempting to allocate the resources
Economic systems are in the control of government body which helps organization to
allocate the natural and human resources effectively and efficiently across economy. These
economic systems are stated as below:
 Command economy- Under command economy, government has full control on the
economy and they allocate useful resources like capital, employees, constructional
development etc. Government has the complete necessary information relating to
organization and they undertake healthy and effective decision for organization’s
wellbeing (Van Buren, Greenwood and Sheehan, 2011). Government takes decision
relating to the fuel prices, tax on tickets, VAT on food and services etc. Moreover, these
tax prices are paid by the customers on every booked seat in flight.
 Free enterprise economy- Under this economy, organization regulates their functions
either with few or may be no government restrictions. However, if any restrictions
persist, then they are quite normal and organization can easily perform their business
transactions. This helps the cited organization as they can serve their services by
considering the needs of their potential travellers.
 Mixed economy- Likewise, in free enterprise economy, there exist few restrictions from
the state or federal government as they enforce various fiscal and monetary policies for
controlling the economy of country (Broberg, Venugopal and Buyya, 2008). This policy
is usually practiced by the government of UK where cited company has freedom to
operate the business activities freely and where government makes slight regulations in
5

order to make the market stable and smooth. In this context, BA develops their policies
by considering the government norms and regulations.
2.2 Impact of fiscal and monetary policy on BA
Fiscal policy is considered as a tool where government body adjusts the spending level to
monitor the economy of nation. However, on the contrary, monetary policy is formed by the
Federal Reserve which is usually designed to influence the availability of cost and money. These
monetary policies are considered as a watchdog of the nation’s money supply (March and
Hevner, 2007). Some policies developed by government and federal banks are as follows: Change in inflation rate- Recent economic recession in many parts of the world has
affected the working of various industries and eventually of British Airways. This is
because price for all goods and services have grown up which has forced to fall the
production of goods and services. In order to overcome this problem, organization has
been forced to adopt different strategies to deal with this situation. Change in reserve requirement- If monetary policy changes the reserve requirement then
it will have a major impact on the cited company as high reserves will take interest rate
high and that will influence the individuals to deposit more rather than to consume (Rios,
McConnell and Brue, 2013). Further, they will be able to spend more on traveling which
will increase BA’s revenues as well as profits.
 Change in tax rates- It constitutes the part of fiscal policy as local body affects the
functioning of business organization from different perspectives. Reduction in the tax
rates has a positive influence on organization as they will be able to produce the best
services for their passengers at low costs.
Further, in UK as well as in other EU countries, Federal Reserve is mainly responsible
for increasing and decreasing the supply of money. Moreover, to increase the supply of money,
government bonds and other treasury bills is also beneficial to increase supply in the market
(Mockler, 2002). Apart from it, to improve the market conditions and also to increase more of
the employment, UK local body is making different changes in their trade policies. By providing
tax and other kinds of financial relaxations, government of country can improve airports and
other aviation services as well.
6

2.3 Impact of competition policies and legal changes in the airline industry
Competition policies are the part of Competition Act, 1980 which have their major origin
from the competition law. In UK itself, British Airways faces tough competition from
competitors as they also have same specifications and almost equal amount of share capital
(Competition Law & Its Impact on Airline Industry, 2011). Moreover, major competitors for the
cited company are Japan Airlines Co. Ltd, United Airlines INC, Jet Airways, etc. Competition
policy affects the functioning of business enterprise as they have major holding in the market
share and any changes in the policy by government might affect the functioning of aforesaid
company (Melitz and Ottaviano, 2008). Further, organization has to make relative changes
according to the changes made by competitors to cope up and stay ahead in the challenging
world. In this context, BA has to change their policies in order to have a competitive advantage
over their competitors.
Further, industrial policies are also developed by the government in order to encourage
the investors for investing money in the aviation industry. In order to harmonize this,
Competition Act 1998 has been efficiently followed by BA and other organizations who are
working in the same industry (Hofstede and Hofstede, 2005). Moreover, International
Regulations for Airlines will also be helpful for BA in order to gain high market share and also
to deliver the best quality of goods and services to customers. Apart from this, Civil Aviation
Authority also impacts the operations of BA as they manage air traffic
TASK 2
3.1 Market structures determining price and output decisions
There are different market structures like monopoly, oligopoly and perfectly competitive
market. For different markets, cited company has to make different strategies to determine the
cost and output of product or service. Different markets are as follows:
 Perfect competition market- Under this market, several business organizations are
operating in the same industry with an immense competition. In this context, it is clearly
evident that there exist buyers and sellers which are generally having no options of entry
and exit in the market (Roijakkers, Hagedoorn and van Kranenburg, 2005). Moreover,
BA is also not having any option except to sell the products and services according to the
7

demand and affordable price of customers. Profits earned by firms are normal as there is
high competition.
Illustration 2: Different market structure
(Source: What are oligopolies and oligopolistic markets? An introduction
with examples, 2009)
 Monopoly market- This is the market where few sellers exist and there are numerous
buyers who are interested in purchasing the product or in using services given by the
organizations. Moreover, business enterprise sets the price of products and services in
order to increase their revenue and also, to increase their profits without considering the
needs and expectations of their potential customers.
 Oligopoly market- It is a type of market structure which is dominated by few sellers and
collectively they are known as oligopolistic. Under this market, organization has their
major emphasis on providing the best services to their loyal customer base which restricts
the entry of new organizations (Santos-Vijande and Álvarez-González, 2007). However,
entry in this aviation industry requires huge amount of capital and other infrastructural
development which is not possible for any venture. BA falls under this market where they
are competed by few renowned airlines.
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. Organization’s response to market forces has a great
impact on profits and reputation of business. Successful firms like BA do market research and
8

proper analysis to ensure that they are providing the best quality of products and services to their
customers (Yu and Ramanathan, 2012). Response given by the cited organization towards
market forces are as follows: Economic scale- As per the demand and needs of their travellers, cited company can start
new airlines on the same route so that passengers will be more satisfied and they can
convey their departure at any other time as well. Perception of passengers- In order to develop new policies and regulations, BA has to
consider the needs and demand of their potential passengers. Further, all the individuals
are not same as they differ from one another and have their own way to think. Without
losing their existing travellers and for developing the new ones, corporate can focus on
facilities like different types of food within flight, WIFI, etc.
 Latest Technologies- BA can give tough competition to their competitors with the help of
different technologies and methods (Poterba and von Hagen, 2008). BA has to make
changes in their technologies in order to give a stiff competition.
Further, by giving new and unique services to customers at an affordable price, cited firm
will be able to increase their market share and also, can develop a chain of loyal customers. This
will also help BA to get a competitive edge over their rival competitors and they will be able to
increase their goodwill in a significant manner (Zhang and Huang, 2012). However, organization
can response to market forces by changing their strategies such as they can adopt new
technology, up-gradation technology and can introduce flights in new routes. Further, they can
also design lucrative aircraft and invest money in market research and R&D to better understand
the perceptions of customers.
3.3 Business and cultural environment shaping the behaviour of BA
These two factors have a major influence on the cited organization behaviour as it has the
direct impact on BA performance. Business environment consists of economic and non-
economic environment. Further, economic environment comprises of economic systems, policies
and conditions. Non-economic environment for BA consists of Political, Economic, Social,
Technological, Legal and Environmental (PESTLE). Cited organization gives their valuable
services in approximately 183 destinations around the globe. Its operations depend on their
business and cultural environment of countries in which they operate (Freeman and Whish,
2007). For instance, per capita income of individuals in UK is higher as compared with the
9

people of India. Further, social environment for BA includes tradition, customs, demand, attitude
and belief of their customers. The natural environment of business organization includes
geographical and ecological factors that influence the organizational behaviour of BA. These
factors include the availability of natural resources, weather and climatic condition, location
aspect, topographical factors, etc.
Further, the culture followed in BA is a kind of dominant and BA employees have good
leadership qualities, employee’s diversity and ethics which make them different as compared
with other ventures who are working in the same industry (Hofstede and Hofstede, 2005).
Further, organization also has employees who are from different backgrounds and they are
giving their services efficiently and contributing towards the cultural development of venture.
Along with it, company also implements good policies and attract shareholders with their
increasing profit year by year.
4.1 Significance of international trade for BA
Reduction in tax rates, government support and better transportation has uplifted the
importance of international trade in last few years. Further, British Airways in recent times has
expanded their business operations either with no intervention or a little which is also in the form
of taxes and duties (Jeffrey and et.al., 2013). Moreover, by development of international trade,
BA is able to fly 750 daily flights which now carry almost 35 million people globally on annual
basis. Due to this only, mentioned organization is treated as the largest airline in terms of fleet
size. Cited organization is playing its role by being a leader of international trade for SME's.
Moreover, through effective carriage facility, British Airways is responsible for almost 50% of
private sector turnover. International trade has become important for BA as it has so many
operations in different countries but relatively it is more important in the EU nations. Further,
cited company wants to help SME by connecting with the new customers globally.
Further, social-cultural factors like change in lifestyle of people, increased price-
sensitivity and high spending on travel & tourism is helping British Airways to increase their
business operations at global level. Moreover, to control traffic and to reduce negative impact of
environment factors, BA uses new emerging technologies which are generally helpful for them
in terms of getting huge profit and advantage.
10

4.2 Impact of global factors on BA
Global factor comes into play for each and every organization, no matter whether the
mentioned company is operating their business activities globally or within the home country
(Melitz and Ottaviano, 2008). Different types of global factors are stated below:
 International competition- British Airways is having competitors like Japan Airlines
Co. Ltd., United Airlines INC, Jet Airways, etc. who are relatively performing well in
order to develop their goodwill and also, for seeking competitive advantage over others.
If competition becomes stiff, then it will be difficult for the cited company to stay in the
competitive world.
 Exchange rates and tariffs- If tax rates are high, then organization will face difficulty in
performing their business operations. Moreover, cited organization will also have
difficulty in order to move ahead of their competitors. This will also affect the
productivity and revenue of mentioned company.
 Business-environment- British Airways has to perform their business operations in
different business environment. This is only possible if organization has conducted
PESTLE analysis for developing new franchisee in other country. These factors have a
major impact and British Airways need to have a market research before starting their
new operations in the international market.
Apart from it, different other factors like strategic alliance, overseas competition and
export trade operations can affect the functioning of business venture. However, trade and
policies formed by UK body is generally favourable as it helps them in creating a new way to
success (Chen, Liu and Cheung, 2014). Local body gives relaxation in taxes for different types of
projects like development of roads, airports, etc. Moreover, tight regulatory controls and
infrastructure costs also impact the business decisions of BA as they have to change their
business policies by taking government rules and regulations into consideration.
4.3 Impact of policies of European Union on BA
European Union (EU) consists of rules and regulations which member countries have to
maintain in order to perform well in the operating nations. Nowadays, all the rules and
regulations of EU are same for all EU countries as they have to follow Union's legislation.
Furthermore, EU policies have a great influence on UK business through various support and
subsidies (Van Buren, Greenwood and Sheehan, 2011). In this context, BA has to follow all the
11

norms and regulations of EU and if British Airways failed to do so, then they will come under
common law of violating the agreement. However, BA improves their business operations daily
with various tactics and implications. This is the only reason where corporate is able to maintain
and hold their large customer base and also, for attracting the new ones on daily basis.
Moreover, policies designed by European Union (EU) like Consumer protection act, EU
Emission Trading Scheme and Climate act are also impacting the business operations of BA. EU
develops various policies which constitute employment, taxation, safety and security and various
others (Temponi and Cui, 2008). Apart from it, security management systems (SEMS) used by
BA to reduce the chance of risk at workplace and also, compulsion of wear seatbelts during
journey which avoids risk during the take of plane play a significant role.
CONCLUSION
From the above report, it is clearly inferred that British Airways is the leading airline
services on the basis of their fleet size. This report concludes different types of organizations
which have their own plans, policies and objectives. Further, this report focuses on different
types of economic systems like command economy, free enterprise economy, etc. which helps
British Airways to allocate the resources effectively. This report also concludes the effectiveness
of cited organization in order to satisfy the needs of their potential customers.
12

REFERENCES
Journals and Books
Adler, N. J. and Gundersen, A., 2007. International dimensions of organizational behavior.
Cengage Learning.
Broberg, J., Venugopal, S. and Buyya, R., 2008. Market-oriented grids and utility computing:
The state-of-the-art and future directions. Journal of Grid Computing. 6(3). pp. 255-276.
Chen, H, Liu, H. And Cheung, H., 2014. Radical innovation, market forces, political and
business relationships: A survey of Chinese firms. Chinese Management Studies. 8(2).
pp.218 – 240.
Freeman, P. and Whish, R., 2007. A guide to the Competition Act. Butterworths.
Hofstede, G. and Hofstede, G. J., 2005. Cultures and organizations: Software of the mind. 2nd
Ed. London: McGraw-Hill.
Jeffrey, A. and et.al., 2013. The role of institutional and market forces in divergent
organizational change. Administrative science Quarterly. 45(4).
Li, Y. and Hewitt, C. N., 2008. The effect of trade between China and the UK on national and
global carbon dioxide emissions. Energy Policy. 36(6). pp. 1907-1914.
March, S. T. and Hevner, A. R., 2007. Integrated decision support systems: A data warehousing
perspective. Decision Support Systems. 43(3). pp. 1031-1043.
Melitz, M. J. and Ottaviano, G. I., 2008. Market size, trade, and productivity. The review of
economic studies. 75(1). pp. 295-316.
Mockler, R., 2002. Multinational strategic management: An integrative entrepreneurial context-
specific process. London: Haworth Press.
Poterba, J. M. and von Hagen, J., 2008. Fiscal institutions and fiscal performance. University of
Chicago Press.
Rios, M. C., McConnell, C. R. and Brue, S. L., 2013. Economics: Principles, problems, and
policies. McGraw-Hill.
Roijakkers, N., Hagedoorn, J. and van Kranenburg, H., 2005. Dual market structures and the
likelihood of repeated ties–evidence from pharmaceutical biotechnology. Research
Policy. 34(2). pp. 235-245.
Santos-Vijande, M. L. and Álvarez-González, L. I., 2007. Innovativeness and organizational
innovation in total quality oriented firms: The moderating role of market turbulence.
Technovation. 27(9). pp. 514-532.
13

Temponi, C. and Cui, W., 2008. Factors impacting participation of Hispanic small businesses in
government contracting in the USA. Journal of Small Business and Enterprise
Development. 15(3). pp.504 – 526.
Thompson, A. A. and et.al., 2008. Crafting and executing strategy: The quest for competitive
advantage: Concepts and cases (Vol. 19). McGraw-Hill/Irwin.
Van Buren, H. J., Greenwood, M. and Sheehan, C., 2011. Strategic human resource management
and the decline of employee focus. Human Resource Management Review. 21(3). pp.
209-219.
Yu, W. and Ramanathan, R., 2012. Effects of business environment on international retail
operations: case study evidence from China. International Journal of Retail &
Distribution Management. 40(3). pp. 218–234.
Zhang, A. and Huang, Q. G., 2012. Impacts of business environment changes on global
manufacturing outsourcing in China. Supply Chain Management: An International
Journal.17(2). pp.138 – 151.
Online
Business Stakeholders: Internal and External. 2015. [Online]. Available through:
<https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/
introduction-to-accounting-1/overview-of-key-elements-of-the-business-19/business-
stakeholders-internal-and-external-117-6595/>. [Accessed on 24th October 2015].
Competition Law & Its Impact on Airline Industry. 2011. [Online]. Available through:
<http://www.legalservicesindia.com/article/article/competition-law-&-its-impact-on-
airline-industry-918-1.html>. [Accessed on 24th October 2015].
Our Strategies and Objectives. 2010. [PDF]. Available through:
http://www.britishairways.com/cms/global/microsites/ba_reports0910/pdfs/
Strategy.pdf>. [Accessed on 24th October 2015].
What are oligopolies and oligopolistic markets? An introduction with examples. 2009. [Online].
Available through: <http://www.freeeconhelp.com/2012/02/what-are-oligopolies-and-
oligopolistic.html>. [Accessed on 24th October 2015].
14