Business Environment Report: British Airways Analysis and Strategies

This report provides a detailed analysis of the business environment surrounding British Airways (BA). It begins by defining the business environment and introduces BA as a case study. The report then delves into the different types of business organizations, focusing on sole traders, franchising, and private and public companies, with a specific emphasis on BA's vision, mission, and objectives. It identifies and analyzes key stakeholders, including shareholders, customers, employees, and creditors, and examines how BA addresses their respective needs and expectations. The report further explores economic systems, particularly command, free enterprise, and mixed economies, and assesses the impact of fiscal and monetary policies, such as changes in interest and tax rates, on BA's operations. It also examines the competitive landscape, including the influence of competition policy and regulatory mechanisms, and discusses the significance of international trade and global factors on BA's business. Finally, the report concludes by summarizing the key findings and offering insights into BA's strategic responses to various environmental factors.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Different types of business organization..........................................................................1
1.2 Key stakeholders of corporate and meeting their objectives............................................2
1.3 Accomplishing responsibilities of stakeholders...............................................................3
2.1 Economic system attempting to allocate resources..........................................................4
2.2 Impact of fiscal and monetary policy on enterprise.........................................................5
2.3 Impact of competition policy and regulatory mechanism................................................5
TASK 2............................................................................................................................................6
3.1 Market structures determining pricing and output decisions...........................................6
3.2 Ways in which market forces shapes organizational responses.......................................7
3.3 Business and cultural environments of BA......................................................................8
4.1 Significance of international trade to BA.........................................................................8
4.2 Impact of global factors on BA........................................................................................9
4.3 Impact of European Union on BA....................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment can be defined as all the internal and external forces which affect
the functioning of business including employees, customers, demand and supply, improvement
in technology, laws and government activities etc. In this context, this present report is based on
British Airways (BA) which is UK's largest airline service on the basis of fleet size. Organization
operates its business in various parts of the world and it has also developed unique feature of
cargo services in order to increase their profits and productivity. This present report focuses on
how organization is able to meet the needs of their potential stakeholders and 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 also the
mechanisms which is opted by mentioned company.
TASK 1
1.1 Different types of business organization
Business organizations vary from one another as they have their own plans, policies,
strategies and functioning to achieve their goals and objectives. In this context, for having a
competitive advantage, corporate has to make prepare different strategies for different market
segments (Madura, 2006). These different types of organizations are bifurcated below: Sole trader- This activity is most common business activity in UK where a single vendor
performs wide range of activities. Moreover, these sole traders offer quality of services to
their large customer base and are quite sensitive in satisfying their needs and demands.
This is because they are quite closer to customers and understand their perception. Main
advantage of these types of firms is that traders have a total control over their business
and they keep all the profits. These businesses are also quite cheap to start. Franchising- In UK, half of the retail corporate are operating their business activities
through franchising system (Rios, McConnell and Brue, 2013). Franchising is becoming
increasingly popular in UK. Under this system, a franchise gives permission to sale their
product and trade under a particular name for that area. Franchisee gets benefits as they
are operating under a well-known company brand and they enjoy monopoly of that
corporate. Example of it is McDonald's which world’s largest fast food company which
has outlets under franchising organization.
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 Private Company- It is a non- public sector company which is operated by couple of
individuals. Moreover, the aim and objective of private organizations is to maximize their
profit by extending their business ventures by reducing the cost of their product and
service (Zhu and et.al., 2012).
 Public Company- Companies which are listed with minimum share capital and issues
fresh shares to public are known as public limited companies. In relation to this,
organizations have to get registered under Companies Act, 1980 and these organizations
have more advantages as compared to private companies. British Airways comes under
this head.
Organization mission Vision- To be world's most responsible and reliable airline, BA wants their customers to
feel safe and confident. Further, their mission is to satisfy their passenger’s needs by
providing them with best of the services at low cost. Mission- Mission is to provide them sustainable employment for current employees and
new human resource. Further, mentioned company aim is to make their establishment in
major metropolitan cities of different countries. Short term objectives- Corporate is focusing on providing excellent qualities of product
and services so that it will help them to increase their profitability and shares in the
market (Our Strategies and Objectives. 2010). Long term objectives-- Cited Company is working with suppliers and customers to
develop a healthy sustainable business and also they are making sure that organization
does not impact the environment relating to air, noise, garbage waste etc.
1.2 Key stakeholders of corporate and meeting their objectives
Stakeholders play a crucial role in development of a company. BA has a large number of
stakeholders and these stakeholders have different expectations from the corporate. British
Airways have to satisfy their needs and demands to improve their goodwill and profits. BA
stakeholders are: Shareholders- British Airways is a public limited company and hence; it accepts deposits
from the public through initial public offer. Those individual who has invested their
valuable money in BA becomes shareholders for the company (Mysiak, Giupponi and
Rosato, 2005). Moreover, objective of BA is to give them productive return on their
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capital and handsome dividend amount which will increase organization performance
with more profitability. Customers- Travellers are the life blood for British Airways, therefore: corporate is
focusing on giving best of the services to their passengers. Customer’s expectation from
organization is to provide good and health services in flight at an affordable price.
However, if customers are not satisfied then organization will not be able to achieve their
goals and objectives. Employees- British Airways consists of more than 43000 employees who are giving their
productive services worldwide. Individuals expectations from cited company is that, they
get better remuneration and opportunities which will help them to achieve their individual
goals (Adler and Gundersen, 2007). Further, BA is also offering them with better job
opportunities, security of job, healthy salary etc. This is because employee's within
corporate feel motivated and they work with best of their efficiency and capacity to
achieve corporate goals and objectives.
 Creditors- Creditors plays a crucial role as they provide short term and long term loans to
corporate whenever they require. Organization creditors are banks, financial institutions
and their corporate friends. However, BA has a liability that they have to return the loan
amount after certain duration. If they fail then the image of corporate will be impacted
negatively.
1.3 Accomplishing responsibilities of stakeholders
Mentioned company follows different strategies in order to accomplish need of their
potential stakeholders. These are: Shareholders- Through initial public offer, BA issues shares to individuals and they
purchase corporate shares because they have a high interest in financial success of
business venture. BA is obliged to provide necessary information relating to annual
reports, accounting records to their shareholders as these accounts and reports have
positive impact which leads to growth of individuals (Dreher, 2005). Customers- BA has to provide excellent customer service and quality of products to their
travellers. For this, corporate have to develop an effective CRM policy in order to offer
customers with best of the services. In this context, corporate will be able to develop
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satisfied customers and these satisfied individuals become loyal customer for the
corporate which helps BA in generating more of the revenue and productivity. Employees- BA has responsibility of providing a healthy environment to their large
employees. In order to perform it successfully cited company have effective HRM
policies that works on satisfying employee's needs and objectives. Moreover, corporate
follow democratic style in which all employees participate in decision making (Poterba
and von Hagen, 2008).
 Creditors- Creditors have a strong interest as well as they can affect the performance of
the organization. This is because, if BA failed to clear their loan amount, then in future
these creditors can refuse to provide them with short term and long term loan to
corporate. To maintain this flow, BA has incorporated a cash management technique
which helps them in clearing their short term and long term debt on time.
2.1 Economic system attempting to allocate resources
There are various economic systems which are followed by government in order to
allocate natural and human resources efficiently and effectively. Different economic systems are
as follows: Command or planned economy- Under this economy, government controls full economy
and allocate resources like capital, employee's etc. Government also have full information
relating to BA profile and they take healthy decision for efficient resource allocation.
Further it also takes decisions relating to fuel prices, tax amount on food and services
which organization provides to their travellers. These taxes are paid by passenger on
every confirmed seat (Stonehouse and et.al., 2009). At times, government interference
does not allow the firm to take effective decisions and restricts them to function
effectively. Free enterprise economy- Under this, BA can operate its business activities either with
small or no government restrictions. However, if restrictions exists then they are quite
negotiable and corporate can easily operate its business activities. In this economy,
problem comes when a single company dominates the entire industry (Kelliher and
Henderson, 2006). As stated, government does not interfere therefore BA can develop
their services by considering the demand of their customers and the market.
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 Mixed economy- It is same like free enterprise economy system but government have
little restrictions with their different fiscal and monetary policies. This is the policy which
is usually practiced by the government of UK where organization have freedom to
operate business activities freely and government make some slight regulations in order
to make market stable. Therefore, BA forms their policies by managing government
policies and regulations.
2.2 Impact of fiscal and monetary policy on enterprise
Fiscal policy is a method by which government adjusts the level of spending in order to
monitor nation's economy. On the other hand, monetary policy is developed by the Federal
Reserve that is designed to influence availability of cost of money (Hofstede and Hofstede,
2005). These policies are also implemented by the government by considering different
economic positions. Some of them are:
 Change in Interest rates- It is a part of monetary policy which have a huge impact on
organization functioning. If interest rate rises then, BA will face huge difficulty to raise
funds. In respect to it, travellers will reduce to fly which simultaneously results in low or
no profit for the corporate. Then vice-versa corporate will be able to get more finance
from varied source at lower rate.
 Change in tax rates- This comes under fiscal policy where government affects business
activities from different viewpoints (Berman and et.al., 2009). If rate of tax is reduced
then BA will be benefited and they will be able to give best of the services to their
travellers without any change in price. In this context, corporate will be able to sell more
of their air tickets at low price. This will make aviation industry more profitable as
corporate will be able to spend more on the advertisements which will increase their
customer base.
2.3 Impact of competition policy and regulatory mechanism
In UK, British Airways faces a tough competition from their large competitors as they
have equal amount of capital and almost same specifications. Major competitors of British
Airways are Deutsche Lufthansa AG, Japan Airlines Co. Ltd, United Airlines INC, Jet Airways,
etc. Competition Act, 1998 have a major origin from competition law. Corporate have a major
holding in the market share as change in competition policy affects the operational activities of
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the cited company (Yu and Ramanathan, 2012). BA has to adjust their policies with the existing
market to cope up with their competitors. Therefore, when other changes their policies to stay in
competitive position, BA also needs to change their business policy. Moreover, BA makes
competition policy by considering the cost and product factor. In addition to it, there are safety
standards that been developed by Ofgem (Office of Gas and Electricity Markets) which needs to
be followed by BA for ensuring sustainable development. This affects the profitability as cost of
operation is affected by implementing new safety standards. Beside this, Civil Aviation
Authority (CAA) also affects operations of BA directly and indirectly as it regulates different
aspect of BA. Cited company need to adhere with the policies laid by CAA so that it can run its
business with high efficiency (Zhu and et. al., 2012). For this, BA needs to focus on the interest
of passengers majorly due to which cost of operation is increased.
TASK 2
3.1 Market structures determining pricing and output decisions
For different market, BA has to utilize various strategies to determine output and price of
the product and services. Market structure can be as follows:
 Monopoly market- It is a market where only two or more organization dominates a
particular market and there are large number of buyers who are interested in organization
product and services. In this market structure, company imposes the price for the services
to maximize their cost and profit (Mockler, 2002). Moreover, they really do not care
regarding what consumers are willing to pay for a particular product or service.
 Monopolistic competition- Under this type of market structure, there are many sellers of
a particular product or service but they generally have a unique specification which
differentiate them from each other. Cited company is bounded to provide services at a
cheaper rate to have a competitive advantage. However, there is freedom of entry and exit
and corporate can incur profit only after a long run of business activities.
 Perfect Competition market- In this type of market, several enterprises are operating in
same industry with an immense competition. Therefore, it is clearly evident that there are
many buyers and sellers which have no barriers of entry and exit in the market. Firms
usually incur a normal amount of profit as existing competitors are at high numbers
(Jeffrey and et.al., 2013).
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 Oligopoly market- It is a market structure where market is dominated by few sellers and
they are known as oligopolistic. In this type of market, organization focus on providing
best qualities of product and services to their customer base which restrict the entrance in
this industry. British Airways comes under this market structure as organization is
showing willingness to defend their market share.
3.2 Ways in which market forces shapes organizational responses
There are various market forces which organizations have to consider in making effective
strategic decisions (Malmi and Brown, 2008). Respond to market forces are discussed below: Economies of scale- Economies of scale plays a crucial role as BA have to consider this
before producing high value products. Mentioned company has a good economic of scale
and company can start a new airline to the same route if demands of passengers are high. Output and Cost- Services rendered by British Airways helps travellers to roam around
the globe at an affordable price. In relation to it, if more and more passengers travel, it
increases organization efficiency, productivity and profitability. Customer’s perception- BA has to consider needs and demands of customers before
making and implementing policies (Besley, Persson and Sturm, 2010). BA is also
required to consider travellers perception and also need to think that what things they
consider before flying from aeroplane. BA in order to increase their sale focus on
providing extra facilities to their customers like WIFI services, variety of food etc.
 Technologies- BA can compete with their competitors with the help of various new
technologies and methods. BA has to make sudden changes in their technologies in order
to give a stiff competition to their competitors.
 Demand and Supply: In addition to above stated forces, demand and supply is one of the
key market forces that shapes the response of BA. It is evident that customers now a days
demands for low cost airline along with direct connectivity between places. With this
scenario, BA responds for the same and arranged flights with direct connectivity between
places. It has also reduces the prices by giving option of removing food services in
flights. This aids in gaining high attention from target customers. Also, it has risen the
fleet size so that they can meet with the customer’s demand and can able to offer quality
services (Rios, McConnell and Brue, 2013). It has helped BA in sustaining in the market
with increased profit margin.
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3.3 Business and cultural environments of BA
BA has to consider the business and cultural environment to make decisions as these
environmental factors have a direct impact on corporate performance (Ghannadian, 2006). It can
be easily understood from PEST analysis: Political- These factors are genuinely related with government affairs which includes
various policies and acts relating with organization products and services. Government
has undertaken activities like air control and safety measure to increase safety and
prevent anti- terrorism actions. Economic- Economic factors have a direct effect on BA operations as it includes factors
like inflation rate, unemployment rate, inflation rate and various others. Moreover, global
economic crises affect business activities of BA as travellers have nothing to spend
around. Social- Social factor includes behaviour of travellers, their expectations and perceptions
which are determined by their social and environment norms (Li and Hewitt, 2008).
Corporate is focusing on retired people majorly as they are free and have lot more to
spend.
 Technologies- With new techniques and innovations technology is upgrading rapidly. BA
has to adjust and make change in their operational activities to increase their product
quality and reduce the cost of service.
4.1 Significance of international trade to BA
Government support, reduction in tax rates and better transportation has uplifted the
importance of international trade in a decade or so. British Airways in recent times is able to
expand their business activities either with no intervention or a little in form of taxes (Chen and
Bouvain, 2009). Furthermore, international trade has become important for BA as it has so many
operations in different countries but relatively more importantly in EU countries. But through
development of international trade, corporate is able to fly 750 daily flights which now carry
almost 35 million people globally on annual basis (What is Business Environment? Explain its
types. 2013). In addition to it, international organization like WTO (World Trade Organization)
frames policies for trade activity that helped the company in expanding into different countries as
well where there is complex legislation. From this, BA is able to enter into Middle East that
offers an opportunities to expand its operational efficiency. This aids in attaining an edge over
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the rivals by gaining opportunities from different market. Also, BA is able to develop tailored
products as per the needs and wants of the customers at different region. Through this, more of
customers are attracted towards the company that essentially boost its sales volume (Mockler,
2002). Further, BA is able to incorporate technological innovation in the operation with the help
of international trade activity.
4.2 Impact of global factors on BA
Global factor affects the performance of mentioned company when it is operating
globally or in the home country. Different global factors are as follows: International competitiveness- No matter whether BA is operating in other countries or in
the home country, it faces a stiff competition from their major competitors like Deutsche
Lufthansa AG, Japan Airlines Co. Ltd, United Airlines INC, Jet Airways, etc. However,
if this competitor increases continuously then it will become difficult for corporate to
survive. Business environment- It includes political, economic, social and technological (PEST)
factors which has a direct impact on British Airways performance. BA has to effectively
scan the business environment before setting up new venture at different place.
 Exchange rates- It is another global factor through which corporate revenue and
profitability is affected (Wallace, Pollack and Young, 2015). In context to it, changes in
the exchange rate in UK with comparison with other countries become a major threat for
British Airways.
4.3 Impact of European Union on BA
European Union (EU) comprises of some rules and regulations which member countries
have to maintain in order to seek and perform well in operating countries. Major policies which
are considered by EU are employment, regional, educational and training, international, inflation,
taxation policy etc. BA have to consider all the policies which are implemented by EU, if not so
then corporate will be faced under a common law of violation of agreement (Freeman and
Whish, 2007). This can lead to decreasing in sale of air tickets, reduces profits and most
importantly affects corporate goodwill badly. However, business organization is performing
quite well and this has increased their number of loyal customer base daily. Corporate is able to
generate good amount of dividend for their stakeholders. In addition to it, government plays a
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significant role towards development of employment opportunities of individuals. In this context,
fund is even offered by government body as per the norms of EU so that overall development
can be done. This aids in developing the competency of employees (Freeman and Whish, 2007).
Also, with the help of international policy, government is able to decline import and also
increased exports so that favourable balance of payment can be attained.
CONCLUSION
From the above report it is clearly evident that, British Airways is a prima airline industry
in UK which has operations all around the globe. This present report states organization vision,
mission with its short term and long term objectives. This report shows that organization comes
under oligopoly market that helps in making effective policies by considering needs and demand
of their travellers. Further, this report concludes the effectiveness of British Airways in order to
satisfy needs and demands of their prospective stakeholders.
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