Business Environment Report: Analysis of British Airways Operations

This report provides a comprehensive analysis of the business environment of British Airways (BA). It begins by identifying the purpose of different organizations and then delves into BA's mission, vision, objectives, and key stakeholders, along with the impact of challenges on those stakeholders. The report examines BA's responses to fulfill its responsibilities and analyzes the economic systems affecting resource allocation. It also explores the challenges posed by fiscal and monetary policies, regulatory changes, and competition within the airline industry. Further, the report investigates market structures, BA's strategies for overcoming competition, and the influence of global changes in trade regimes and other global factors impacting the airline. Finally, it assesses the impact of European policies on BA's operations and concludes with an evaluation of the strategies the airline uses to maintain its competitive edge.

BUSINESS ENVIRONMENT
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TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................................3
TASK 1.......................................................................................................................................................3
1.1 Identifying the purpose of different organizations.....................................................................3
1.2 Mission, vision, objectives and stakeholders of BA along with identifying the impact of
challenges on various stakeholders...................................................................................................4
1.3 BA’s response to fulfil its responsibilities to stakeholders.........................................................5
1.3 Economic systems that attempt to allocate the resources effectively.........................................6
2.2 Challenges due to fiscal and monetary policies on business environment of BA......................7
2.3 Impact of regulatory, competition policies and legal changes in the airline industry................8
TASK 2.......................................................................................................................................................9
3.1 Market structures that determine the pricing and output decisions of business.........................9
3.2 Strategies of British Airways to overcome competition.............................................................9
3.3 Working practices and culture of countries that affects the functioning of British airways.....10
4.1 Impact of global changes in the trade regime of British airways.............................................11
4.2 Global factors that are affecting British airways......................................................................11
4.3 European polices of travel, competition and aviation impact on British airways....................12
Conclusion...............................................................................................................................................13
References................................................................................................................................................14
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INTRODUCTION
Business environment is a space in which an organization exists and it consists of all external
and internal constituents that affects the functioning of a business enterprise. Present report focuses on
illustrating different elements associated with an organization. For this purpose, British Airways (BA)
has been selected which is a flag carrier airline of UK and it is the biggest airline in terms of its fleet
numbers, abroad flights and destinations (British Airways Home, 2015). In the first part, report
highlights corporate goals and objectives of the firm as well as the approaches and methods that BA
entails to fulfil their responsibilities towards associated stakeholders.
Main purpose of conducting this assignment is to develop understanding regarding business,
cultural, economic and regulatory environment within which business entity operates. Along with this,
researcher focuses on the market structure of airway industry and its affects the price and demand of
tickets. In addition to it, report highlights the effects of trade regime stated by WTO and other authority
on functioning of BA in foreign market. At last, investigator concludes with evaluating the strategies
that cited firm undertakes in maintaining its competitive edge.
TASK 1
1.1 Identifying the purpose of different organizations
There are different types of organizations which operate in the corporate world and can be
identified on the basis of their purpose and objectives. In general, business entities are categorised in
three segments which are Private, Public and Voluntary. It can be explained with the help of below
given examples: National Health Service: It is a public funded organization which aims at providing better
medical services (Kollias and Paleologou, 2006). Being a public limited company of UK, it
provides free medication camp and services to unhealthy people around the country. Tesco plc: It is a retail giant that provides wide range of products and services to its customers
and satisfies their different needs. Main purpose of existence of Tesco is to make society healthy
and to keep the people safe with its quality of products and services. Virgin Group Ltd: It is one of the leading airline companies which operate with an aim of
providing leisure of services to its customers through three different segments which are travel,
lifestyle and entertainment (Palmer and Hartley, 2009). Being a private limited company, it
consists of more than 400 employees that are working in the business.
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 Sole proprietor: It is the business which is owned and managed by an individual as the entire
power regarding decision making is with the person and he or she is responsible for all the
profits and losses of company (Shaikh, 2010).
Mission in general helps BA to create its positive image by delivering quality of services to its
target audience. However, it is not only considered as the statement but it helps company to develop
good image in the minds of people so that they can understand the purpose of existence for the cited
company (Wallace, 2002). Mission Statement of BA is to make sure that they offer prominent services
to its target audience so that they can fly with confidence and safety. The main focus of senior authority
under mission statement is regarding enhancing the trust and loyalty of customers so that they can
undoubtedly select British Airways as the means of transport (BA Strategy, 2014).
While, on the other hand, Vision statement of company is to be at the top of airline industry and
for this, workforce and associates are putting tons of efforts. However, for operating in such a
competitive market, company focuses on developing its brand image by providing premium services to
customers so that they can enjoy the journey (Sobhan, 2003). Following are the five significant
strategic goals of BA:
 First preference of customers
 Offering quality of services
 Promoting global city growth
 Enhancing the market share in UK
 Satisfying customer’s needs and wants (Our strategy and objectives, 2010)
1.2 Mission, vision, objectives and stakeholders of BA along with identifying the impact of challenges
on various stakeholders
There are several stakeholders that are associated with BA and contribute effectively in the
successful run of business enterprise. In case of customers, quality related issues are the major concern
for the top level management (Doyle, 2005). On the other hand, suppliers expect to get their money on
time. But due to recession and increasing competition, it is tough for BA to satisfy the needs of supplier
every time. However, employees having issues in their personal growth; both monetary and non-
monetary, may affect the entire functioning of business adversely. There are two types of stakeholders
associated with the functioning of BA which are as follows:
 External stakeholders: There are several external stakeholders associated with BA which consist
of suppliers, government and customers. Suppliers are the important stakeholders as they
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provide quality of raw materials for BA to deliver quality of services to its clients or customers.
However, these raw materials can be fuel, food products, drinks etc. It is the duty of senior
authority of BA to ensure better relationship with suppliers so that quality can be maintained.
On the other hand, government requires information regarding overall functioning of business
so that they can make sure that company is following all the rules and regulations to carry out
its operations. Lastly, customers of BA expects quality of services and products at the affordable
prices.
 Internal stakeholders: Internal stakeholders for BA are employees, investors and owners. It is
the duty of BA to make sure that they satisfy each and every expectations and needs of these
stakeholders so as to ensure better running of business activities. For employees, BA has to
provide better working environment and growth opportunities for motivating them to work in
effective and efficient manner. While investors needs to be given all the information accurately
so that they can make smart and effective decisions regarding future contingency.
1.3 BA’s response to fulfil its responsibilities to stakeholders
As studied above, there are several stakeholders associated with business and for each of them;
BA has certain amount of responsibilities which are as follows:
 For enhancing the level of services for customers, top level management of BA has framed a
quality committee which ensures that whether the demand and expectations of passengers are
satisfied in an appropriate manner or not (Rosser and Rosser, 2004). The main purpose of this
committee is that it understands the needs and accordingly, moulds the services to provide
leisure experience. By the means of this, BA makes valiant efforts to satisfy the needs and
wants of customers and carry out their responsibility towards such important stakeholder in
effective and efficient way.
 Employees are considered as the most significant aspect of company as they are responsible for
providing quality of services to the customers and enhance the leisure. Therefore, in order to
maintain the loyalty level of employees, it is essential for BA to understand the basic need of its
workforce and accordingly, to provide them monetary and non-monetary benefits. Along with
this, for maintaining position in such a competitive environment, BA has to organise training
and development sessions so that employees can improve their skills and match the industry
level. By the means of all these, BA can fulfil the responsibility towards its workforce and
satisfy their needs and wants.
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 Lastly, suppliers expect timely payments from BA, thus, it is important to make appropriate
coordination between purchase and finance department (Powell, 2007). This will ensure timely
payment to suppliers and long lasting relationship. Bargaining power of suppliers is relatively
on the higher side as there are large number of companies already operating in it, require BA to
maintain better relationship with this external stakeholder and fulfil responsibilities in better
way for better outcomes.
1.3 Economic systems that attempt to allocate the resources effectively
Economic system is considered as the method through the help of which society attempts to
meet material needs and wants of people by producing quality products and services. Thus, in this
context, it can be stated that functioning of BA and usage of resources is based on the economic system
that is followed in UK. However, there are two different economic systems which make various
impacts on the distribution of available resources to different business entities.
In case of command economic system, government and other major regulatory bodies undertake
all the judgements related to the functioning of businesses. Since the authority of allocating resources is
with regulatory and legal bodies, all the market leaders get equal opportunity to avail those resources
and to carry out business operations in making optimum utilisation of it (Blair, and Hitchcock, 2001).
In case of Aviation industry, BA and its close competitors are offered with the same amount of
resources by the government and accordingly, they have to carry out their business operations and
satisfy needs and wants of target market.
Other than this, free market economic system is one in which private companies play a
significant role in distributing and allocating the available resources with an aim of protecting their
market share and customer base. However, in this system, large privately owned business like Virgin
Airlines get the benefit of utilising maximum level of resources whereas small scale companies faces
issues in accessing essential resources which are required to carry out routine functioning (Curtis and
Samy, 2014). In order to operate in this economy, BA has to maintain the demand and expectations of
customers as they are responsible for the successful running and profitability of business. Free market economy- It is an economic system in which government does not have any
control on industries. This means that resource allocation is done by the market automatically.
In this, BA can be beneficial as it is one of the biggest airline company present in UK and
already have the wide range of resources to utilize from.
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 Private economy- In terms of growth rate, private economy will offer higher rate of return for
BA through the means of which BA can accomplish its goals and objectives appropriately.
 Mixed economy: It is an economic system in which some of sectors are controlled by
government like atomic energy and railway etc. In such kind of sectors government play an
active role in distribution of resource. Organisation like BA operates in it will have impact on
its growth rate as it might slow down and in order to overcome from such situation company
might lower down its ticket prices.
2.2 Challenges due to fiscal and monetary policies on business environment of BA
Business entity irrespective to its sector is affected to a great extent by the economic policies
framed by government of UK. However, there are two types of policies, that is, fiscal and monetary.
Both the policies have different types of affects on the functioning of a business enterprise in the
market.
In general, fiscal policy is related to spending of government in the country (Dettwiler, Lindelöf
and Löfsten, 2006). It is highly concerned with the taxation system and procedures within region.
Changes in tax policy at regular intervals affect the overall financial aspects of British Airways.
Looking at the present fiscal policy of UK, it can be stated that it is not stable and recovering from the
effects of recession and economic crisis which directly reflects in the tax policy that is constantly
changing and BA has to mould its financial planning accordingly. In order to support corporates
government must reduce tax rates. By doing this lot of amount will be saved and that amount will be
used by companies for their growth.
While on the other hand, monetary policy is associated with the interest rates on borrowings
that organization takes in order to carry out the activities of business. In case of BA, it operates at large
level and requires huge amount of money for executing business activities and for satisfying the needs
and wants of different stakeholders. However, borrowings are one of the major sources of finance for
company (Kourteli, 2000). There are some rates that are used in monetary policy like CRR. It is a rate
at which banks needs to keep deposits with central bank. If such a rate gets increased then banks give
less amount of credit. But if inverse happen then credit is easily made available by the banks. So, if
hike is observed in rates then British airways will find it difficult to finance its operations using bank
loan. Thus, greater fluctuation in interest rates can increase the level of expenditure for the firm.
Moreover, due to Eurozone Crisis, interest rates on bank borrowings have increased which forced
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companies to pay more money to the institutions.
Therefore, from the above illustration, it can be said that both policies made a great impact on
the functioning of British Airways.
2.3 Impact of regulatory, competition policies and legal changes in the airline industry
Airline industry is considered as the most highly regulated sector in UK and companies
operating in it have to follow various norms and regulations as per the industry standards. These norms
are formed by European Union and other government regulatory bodies of different member nations.
Competition policy is one such regulation that has to be kept in mind by the managerial level people
while framing strategies and tactics regarding marketing or promoting the products and services in
aviation industry (Li, 2000). Main purpose of competition policy is making sure that existing
companies and new entrants compete with each other irrespective to their sector in a fair manner. In
particular, competition in airline industry is increasing to a great extent. Thus, BA make several efforts
to attract new and to retain existing customers. But in that, at times, customers and companies like BA
themselves have to suffer with negative consequences. In order to resolve those issues and to carry out
the health rivalry between firms, competition policy plays a significant role and helps in creating
positive environment within sector and helps British Airway to carry out its operations in effective
manner.
In addition to it, there are several other laws which British Airways has to follow. Out of all,
Environmental Law is important as for operating in aviation industry; BA has to keep the environment
of society safe in which they are operating. Main purpose of following this law is to make sure that
operations of BA are not harmful for the natural resources (Ward and Lewandowska, 2008). Moreover,
government of UK has developed various norms under this law which consist of pollution in the form
of emission of harmful gases, use of ozone-friendly technology etc. However, in order to follow these
rules and regulations, BA has developed their engines which emit less gas. Company uses the most
purified form of fuel to run their fleets so that to reduce, control and monitor the negative effects of it
on the environment.
In UK there are many other laws that British airways needs to comply with. If mentioned firm
fail to follow these laws then it may needs to pay penalty to the regulatory authorities like EASA or
CSA. Civil aviation authority is a body that controls and implements rule and regulations related to
aviation industry of the UK. It also has some rules and regulations and in order to operate in an industry
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without any problem British airways needs to follow rules and regulations of civil aviation authority.
TASK 2
3.1 Market structures that determine the pricing and output decisions of business
For operating in such a competitive market structure, it is important for BA to carry out its
operations in the best possible way so that corporate aim and objectives can be achieved in a desired
manner. Due to this type of market structure, functioning of company is affected; especially pricing and
output decisions (Aras and Crowther, 2011). Considering the nature of market in which BA is
operating, it is important for the top level management to determine the price of seats in such a manner
that they would attract customers as well as maintain its competitiveness in the target market.
Furthermore, it can be stated that there are various companies operating in aviation industry of UK and
making valiant efforts to satisfy the needs and wants of customers by keeping the price of seats of their
fleets cheaper than BA (Fernando, 2011). Thus, to maintain itself in the competitive environment, it is
important to charge as per the industry standards otherwise, bargaining power of people will make
them switch to different airline companies. In this regard, price can fluctuate on the basis of demand
and supply of products so that customers and target audience can be encouraged or motivated to buy
the tickets and maintain loyalty towards BA.
3.2 Strategies of British Airways to overcome competition
As studied above, there are several companies operating in the market and making use of the
latest technological to attract large number of audience. Hence, BA also needs to bring modification
within its functioning to match with the changing needs of customers (McSweeney, 2002). In this
context, BA has started adopting the latest technological aspects within its fleets so as to retain
customers and to attain the sustainable future. Top level management is focusing on expanding the
number of destinations so that more customers can be targeted. Following are the factors that senior
authority of BA has to focus upon: Human Resource Management: BA organising training and development sessions at regular
basis is helping its employees in improving their skills and abilities which indeed helps in
dealing with customers effectually. Fuel efficiency: BA is focusing on developing fuel efficient flights which aims at reducing the
use of fuel and minimizes the emission of harmful gases. Economic conditions: Top level management of British Airway has to focus on the purchasing
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power of target audience and accordingly, setting the price of seats will assist in creating
demand of its services (Sisson and et. al, 2000).
 Fleet expansion: Increasing number of fleets will assist BA in offering more number of seats to
its travellers which directly leads to improve the revenue generation of firm.
3.3 Working practices and culture of countries that affects the functioning of British airways
Culture of country and working practices goes parallel. However, it is the responsibility of
senior authority of BA to make sure that they follow appropriate employee work practices to maintain
the environment and to reduce its negative impacts. UK government has framed various policies and
regulations for employees which company has to follow. In particular, Equality Act 2010 ensures that
all the employees that are working in an organization are treated equally. In addition to it, this act
makes sure that each individual is paid with wages and salary as per level of work that he or she is
performing in company (Piermartini, 2008). Thus, it can be said that current environment of UK in
terms of business operations is highly strict. Along with this, looking at the culture of UK, there are
people from different ethnic backgrounds and to treat each one of them is to the duty of BA's
management. Therefore, recruitment process of BA focuses on selecting people who are skilled as well
as from that belong to different ethnic backgrounds so that they can deal with different culture of
people in an appropriate manner. By the means of both these measures, top level management of BA
manages and control the negative effects of working practices and culture of country (Rosser and
Rosser, 2004).
 Political: There are several regulations and increasing security from recent terrorist threats has
affected the course of BA. However, it is important for BA to comply all the regulations for
long term functioning. Along with this, sufficient security measures should be employed to
ensure consumer confidence and competitive advantage within the target market.
 Economic: In terms of economic condition, global economic crisis, declining of oil prices by
50% and recession affecting the spending power of customers in UK. Having mixed economic
activities has affected the functioning of BA.
 Social: Older category of people in UK have more time to spend on leisure activities such as
international travel has helped in increasing demand for BA quality of services.
 Technological: BA has to make sure that it remains up to date with the technological advances
so as to satisfy the needs and expectations of customers in more effective and valiant way.
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 Environmental: New legislations relating to environmental factors enforced BA to increase
operational cost each year as to use better and eco-friendly technology for minimizing noise
pollution and energy consumption control.
 Legal: In order to avoid industrial actions and interrupted operations it is important to maintain
good employee relations.
4.1 Impact of global changes in the trade regime of British airways
In the corporate world, trade can be defined as the process of financial transaction of products
and services carried out by two parties. However, to monitor the trading of foreign companies, there are
several governing bodies that have framed various rules and regulations such as:
WTO (World Trade Organization), during a conference in 1999 paid great attention to cover the
aviation industry under the regime of GATS (General Agreement on Trade in Services). The most
significant feature of GATS is that it was able to remove the trade barriers at international level and
guided companies like BA to operate freely in international markets (Dettwiler, Lindelöf and Löfsten,
2006). By the means of this, BA and other airline companies got the market opportunity to enter into
new international market and achieve global growth. But due to inappropriate financial condition
around the globe, it affects the inculcation of air transportation into GATS. This leads to recession
period for the sector as well as the number of people which are travelling through air have also
decreased.
Other than this, there are various international bodies which have significant impact on the
functioning of aviation industry such as IATA (International Air Transport Authority). IATA is a body
that governs the working and functioning of firms in aviation industry as well as responsible for
framing various policies and norms (Kollias and Paleologou, 2006). The main focus of this regulator is
to ensure that companies operating in airline sector are making efforts to minimize the effects on
environment and society. In the similar way, environmental policy focuses on controlling noise
pollution and emition of harmful gas from aircraft. It enforces the top level management of BA to
invest in eco-friendly or better technology that helps in minimizing noise pollution, but in doing so it
cost higher operational expenditure for the BA.
4.2 Global factors that are affecting British airways
There are various factors that affect the functioning of BA as they are linked with different
activities of companies. As British Airways operates in the global aviation industry, there are several
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factors that create obstacles in carrying out the functioning. Following are the global factors that affect
the operations of BA: Political: For operating in different countries, BA has to deal with political environment which
affects the functioning negatively and positively (Aras and Crowther, 2011). Because of
constantly increasing terrorist attacks, political environment of different countries is not stable
which directly affects the functioning. Economical: Countries around the globe are recovering from economic recession and crisis due
to which global operations of BA are highly affected. This is the reason due to which sales of
company has decreased to a great extent. Social: In terms of social factors, BA has been always up to the tasks. Company’s capability to
reduce prices helped in satisfying the needs and wants of customers effectively. Aging
population will help the course of BA in positive as company will generate higher revenues
from it.
 Technological: It has been the drive of globalization in economic crisis. In this context, BA
always focused in maintaining its technological aspects so that the best possible services can be
offered to the target market (McSweeney, 2002).
4.3 European polices of travel, competition and aviation impact on British airways
There are various European Union Policies which are framed in context to travelling,
competition and airline industry. However, these policies have a great affect on the functioning of BA.
Following are the policies of European Union:
 European union driving license
 Passenger rights
 Passenger safety measures
 European union citizen rights when travelling in Europe
 Services sector (Curtis and Samy, 2014)
The above stated are some of the European Union Policies regarding travelling which
companies operating in aviation industry has to follow otherwise it may affect the overall functioning.
In addition to it, there are certain competition policies framed by EU which could be used by BA in
developing competitive edge over its competitor (Blair and Hitchcock, 2001). However, the aim of
competition policy is to compete in the market in a healthy manner and allow appropriate space to
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