Business Environment Report: British Airways Case Study (Semester 1)

This report provides a comprehensive analysis of the business environment surrounding British Airways. It begins with an introduction to the airline and then delves into the purposes of different types of organizations, differentiating between public, private, and non-profit entities. The report identifies a...Read More

BUSINESS
ENVIRONMENT
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Table of Contents
Introduction................................................................................................................................1
Task 1.........................................................................................................................................1
1.1 Purposes of different types of organisation................................................................1
1.2 Objectives of different types of stakeholders..............................................................2
1.3 Explain the responsibilities of an organisation and strategies employed to meet them.
...........................................................................................................................................2
Task 2.........................................................................................................................................3
2.1Explain how economic systems attempt to allocate resources effectively..................3
2.2 Impact of Fiscal and Monetary Policy on British airways..........................................3
2.3 Impact of competition policy on British airways........................................................4
TASK 3......................................................................................................................................5
3.1 Types of market structures affecting pricing and output decisions of businesses......5
3.2 Impact of market forces to shape organization response............................................6
3.3 Impact of business and culture environment on the British airways..........................6
TASK 4......................................................................................................................................7
4.1 Significance of international trade to British airways.................................................7
4.2 Impact of global factors on UK business organisations..............................................7
4.3 Impact of European union policy on British airways.................................................8
Conclusions................................................................................................................................8
References..................................................................................................................................9
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INTRODUCTION
British Airways are a flag carrier airline company headquartered in Waterside,
Harmondsworth, England. It is the second largest airline company in United Kingdom after
Easy jet. It was established in the year1972 by United Kingdom government in order to
manage two nationalized airline corporations. This report depicts about various types of
organisations. It this report objectives of different types of stakeholders are discussed.
Further, it also discusses how different types of policies imposed by the government affects
the working of business organisation. It also shows how different types of culture and
behaviour affects the decision making power of the British airways.
TASK 1
1.1 Purposes of different types of organisation.
Public organisation: A Public organisation is the company that are owned and
controlled by the state government. In this type of company chairperson and board of
directors are appointed by the government minister in order to run a company. Its main aim is
to provide various type of essential services to the public (Arseneau and Chugh, 2008). It also
aims at utilising the available resource to full extent in order to benefit the society.
Private organisation: - Private organisations are the organisation that are controlled
and managed by the private individuals. In this type of organisation shareholders are the
owner of organisations (Craig and Campbell, 2012). There share in the company depends
upon the capital invested by them. Some traders, partnership firm, companies are different
types of private organisations. Its main purpose is to earn profit by increasing its sales. They
also aim at achieving the market growth by increasing their market share.
Non-profit organisation: - Non-profit organisations are the one which are not owned
and managed by an individual. It is managed by group of individuals. Its main purpose is to
work for the betterment of the people (Cazurra, 2011). This type of organisation tries to
provide all type of necessary help to the individual without charging any fee. This type of
organisation is also known as charitable institutional. Profit maximum is their secondary
motive.
A British Airway is one of the largest airline companies in UK. Its mission is to
expand its business at the global level in order to increase its market share. It also aims at
increasing its brand image in the foreign market. Therefore, in order to achieve its mission, it
is trying to reduce emission of carbon from its planes. This in turn will assists in creating
brand image in both domestic and foreign market. In order to enhance its brand image British
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airways set an objective to provide quality services to the customers at low price. Thus, it is
clear from British Airways mission, vision and objective statements that British Airways in
the long-run wants to enhance its brand image.
1.2 Objectives of different types of stakeholders
Employees: - Employees are considered as one of the important stakeholders of British
Airways. Growth of the company depends upon behaviour of employees towards its
customers. Therefore, in order to achieve the growth British Airways should focus that no
employee is de-motivated towards its job due to discrimination at the workplace.
Shareholders: - Shareholders are also one of the important parts of the company. They
invest capital in the company which in turn assist the company to flourish its business
(Ditlev-Simonsen and Wenstøp, 2013). Therefore, British Airways should continuously try to
improve their performance in order to build confidence in its shareholders mind in order to
invest.
Suppliers: - Other important stakeholders of the British Airways are suppliers. They are
the distributor of raw materials. Therefore, British Airways should pay attention towards their
supplier demand in order to satisfy them. They should make payment to the suppliers as and
when required by them.
Creditors: - Creditors are those who provide credit to the company. Every company
requires working capital in order to meet their day-to-day requirements (Ghannadian, 2006).
Due to lack of Capital, the company is not able to fulfil their daily requirement, so the firm
raise their money by taking loans from friend or banks. Therefore, British Airways should try
to satisfy its creditors by making timely loan payment.
1.3 Explain the responsibilities of an organisation and strategies employed to meet them.
Employees:-It is the responsibility of the organisation to see that no malpractice or
discrimination is done among employees on the basis of caste, creed, gender and religion.
Therefore, British Airways should make strict rules against those who are seen indulge in any
type of discrimination practices.
Shareholders: - It is the responsibility of the firm to satisfy its shareholders by paying
them maximum return on their investment. In order to pay maximum to its shareholders
British Airways need to increase its profitability (Hamilton and Webster, 2015). Therefore, in
order to increase its profitability British Airways should adopt cost control and downsizing
measures.
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Creditors: - It is the responsibility of the organisation to pay its creditors on time.
Company can adopt short-term credit facility in order to pay to its creditors on time.
Therefore, British Airways should focus on reducing its debt burden in order to make timely
payment to its creditors.
Suppliers: - It is the responsibility of the firm to satisfy its supplier in order to have
continuous flow of raw material as when required (Hill, 2008.). Therefore, British Airways
should make efforts to pay its supplier on time.
TASK 2
2.1Explain how economic systems attempt to allocate resources effectively
Free market economy: - In this type of economy all the activities of the organisation
are controlled and managed by the organisation itself, without government interference.
Demand and supply of the company depends upon the seller and customers wants. In simple
words it can be that all the decisions are taken by the organisation itself, without any
government interference.
Command economy: - In this type of economy working of the entire organisation are
controlled and managed by the government only. In this, government only decide quality and
quantity of raw materials which is required to be supplied to the organisation. Various types
of resources are also controlled by the government. Some of them are labour, capital and oil.
Mixed economy: - In this type of economy all the activities of the organisation are
controlled and managed by the government as well as shareholders. Normally, internal affairs
of the company are controlled by the shareholders and external affairs are controlled and
managed by the government. Organisation working under this type of economy aims at
generating more profit keeping in minds the welfare of the society.
British Airways operate its business in England which is the part of mixed economy. All
the operations of the company are controlled and managed by the government and the
shareholders. Companies working under this type of economy need to share all information
with the government. Main aim of this type of organisation is to generate profit but keeping
in mind the welfare of the society. These organisation need to pay taxes on time. Therefore,
British Airways should prepare different types of strategies in order to face various types of
problems that arise out of the business environment.
2.2 Impact of Fiscal and Monetary Policy on British airways
Fiscal policy: - Fiscal policy is the policy introduced by the government in order to
control the flow of cash within the economy. Government introduce this policy in order to
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control the condition of inflation and recession (Palmer and Hartley, 2008.). Introduction of
this policy affects the demand of customer. Since, introduction of these policies change the
level of taxation and government spending on different type of fields.
Impact of fiscal policy on British airways
Introduction of fiscal policy affects the profitability of the British airways. Increased
rates of taxes implied by the government will impact the profit margin of the company.
Increased rate of taxes will lead to increase in price of the products and services. Increased
price of the product will force the customers to move towards another substitute flight. This
in turn affects the working of the company and will reduce the rate of profitability.
Monetary policy: - This policy was introduced by the government in order to
confront the monetary disequilibrium. Main aim of the government behind introduction of
this policy is to increase the rate of currency and create stability in the price (Swanson,
2004.). Introduction of this policy affects both economic and financial decisions of the
people. This policy was introduced by the Federal Reserve Board. It also affected the small
enterprise badly.
Impact of Monetary policy on British airways
Introduction of monetary policy has affected the expansion of the British airways.
Due to increased rate of taxes company will not be able to take loan in order to expand its
business. Introduction of monetary policy has also affected the research and development
strategies of the company. British Airways will not be able to provide valuable services to its
customers. This in turn will affect the profitability of the company.
2.3 Impact of competition policy on British airways.
Introduction of competition policy and other regulatory mechanism has affected the
British Airways in many ways. Competition policy was introduced by the government in
order to stop monopoly in the market. It was also started in order to protect customers from
unfair trade practices. It can be said that introduction of this policy affects the profitability of
the British airways. Due to reduce rate of tickets, company is not able to earn more profit.
This in turn stops the British Airways to expand its business in other countries. In addition to
this British airways are also facing various challenges related to the health and safety
arrangements, use of green policy introduced by the government. Therefore in order to
overcome these problem British airways should try to properly follow the legal policies
introduced by the government in order to improve their goodwill.
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TASK 3
3.1 Types of market structures affecting pricing and output decisions of businesses
Market structure is the framework which affects the pricing and output decisions of the
firms. This structure helps in identifying the level of competition available in the market. This
structure assists to find out the demand of the customers and number of similar products
available in the market. Therefore, there are four types of market structure available which
are as follows:-
Monopoly: - In this type of market structure, there is only one seller with no close
substitutes. Entry of new firm is very difficult (Teece, 2010). Those companies working
under this type of market structure faces no problem of competition. Elasticity of demand is
zero in this case. Therefore, the only aim of this type of firm is to increase its profit margin
anyhow. For example: - railway industry is the best examples of monopoly market. Hence,
British Airways does not come under this category.
Oligopoly: - In this type of market structure only few sellers are available with good
substitute of products. New companies can easily enter into this type of market. Rate of
competition is high in this case. Price of the products is decided by keeping in mind various
products. These products are differentiated on the basis of its features. Level of competition is
also high in this case. For example- cement and airline industry came under this head.
Therefore, British Airways fall under this category. Thus, pricing and output decision of the
company is highly affected by the demand and supply situation in the market. Various
organisations that functions in the aviation industry of UK form connivance which in turn
reduces the level of competition in the market. In lieu of which company charges high rate
from the customers. Therefore, it can be said that presence of British airways in oligopoly
market proves beneficial for them.
Organisations that are operating its business under this structure are highly
interdependent and it closely affects the pricing and output decision of British airways. In
addition an organisation before setting up its own pricing and output strategies they should
first analyses the policies and strategies of the competitor.
Monopolistic competitions: In this type of market there are number of firms which
are available with large amount of substitute products. These substitute products are
differentiated on the basis of its features, prices, branding and many more (Yannelis, 2004.).
Level of competition is very high in this case. Therefore, main aim of the firm is to increase
its sell by beating its competitors. Profit earning is their second precedence. Entry of new
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firms is very easily. Elasticity of demand is less. Thus, British Airways do not fall under this
category.
Perfect competitions: - In this type of competition large number of sellers is available.
Similar nature of products is produced by the firm. Therefore, level of competition is very
high. There are no barriers on entry of new firms. Elasticity of demand is perfectly elasticity.
Those firms which entry into this type of market structure has complete knowledge about the
market. Hence, British Airways does not fall under this type of structure.
3.2 Impact of market forces to shape organization response.
Demand and supply: - Demand and supply curve assist the company to decide the
price of its products. Demand and price both have inverse relations. If supply remain constant
and demand will decrease then it cause low equilibrium price. Similarly, if supply remains
constant and demand increases then it cause high equilibrium price. Moreover, British
Airways income is generated from the travellers who travel from one place to another for the
purpose of education, tourism, or business purpose. Therefore, demand of the airlines highly
depends upon the economic and business conditions.
Technology: - Technology also affects the demand of the customers. It also impacts the
company’s response towards business environment. A British airway is an operating
company that is facing high competition in the market (Yu and Ramanathan, 2012).
Therefore, in order to come up of high competition British Airways should start focusing on
research and development activities in order to update its technology.
Customer's perceptions: - In this step, the awareness of the customers is defined
regarding the company. This will assist the customers to know about various offering which
are offered by the company. Customers will be able to know about these offering through
advertisement, social media sites and so on. These perceptions can affect the demand of
customer towards airlines. There are many airlines available in United Kingdom like Easy jet,
Ryan air etc. These airlines try to provide valuable services to its customers at the cheaper
rate. Thus customer positive perceptions about the cheaper rates of different airlines can
affect the demand of British airways.
3.3 Impact of business and culture environment on the British airways.
Culture environment is one of the elements of business environment. Business
environment highly affects the decision of the organisation. Therefore, British Airways
should prepare different type strategy in order to overcome the environment problems. British
Airways should follow various types of law and legislation which are implied by the
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government in order to create a good image in the mind of people. They should also disclose
all its financial statements to its shareholders which in turn will attract more investors
(Gottschalk, 2015). Disclosure of financial statements will create a positive impact in the
mind of individual towards the company. This in turn helps in attracting more customers
towards the airline. British Airways should take permission from higher authority in order to
operate its business in a healthy manner.
TASK 4
4.1 Significance of international trade to British airways.
International trade is the exchange of goods and services from one country to another
across various international boundaries. It assists the company to flourish its business all over
the world. International trade aid the British Airways in many ways (Sen, 2011). Some of
them are listed below:-
 Enhance expansion: - Going internationally will aid the British Airways to expand
its business in both domestic and international market.
 Increased profit and sales: - Moving towards international trade, British Airways
will able to generate more profit by increasing its sales.
 Increased number of customers: - It will help the company to attract more
customers by providing various types of services. It can also provide those services to
its customers which other airline are not providing at a cheaper rate.
 Achieving global market share: - Moving towards international trade will benefit
the British Airways to increase its market share in both the markets.
 Tax benefits: - Moving towards international trade will provide various types of tax
benefits to the British airways. Reduction in tax rates will help the company to reduce
the price of its tickets in order to attract more customers.
 Reduce dependence: - Going internationally will also assist the company in reducing
its dependence in local market.
4.2 Impact of global factors on UK business organisations.
British Airways run several flights across the world. Consequently, large impact of
global factors has been observed on the British Airways performance. Now-days, many
countries are facing various type of problem like cut throat competition, political instability,
culture differences, growing rate of unemployment, low GDP and many more. Increased
level of competition in the market is affecting the pricing and output decision of the
company. This in turn affects the profit margin and growth of the company. Similarly,
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political instability also affects the functioning of the company. Impositions of different rules
and regulation by the government of different countries affect the overall decision of the
company. Formation of some strategy may prove beneficial for the company in some
countries on the other hand the same strategy in different country can affects the functioning
of company. Likewise, culture differences among the country also affect the functioning of
the organisation working in UK. On the other hand, the increased rate of unemployment is
affecting the growth rate of the travel and tourism industry which in turn is reducing the
profit margin of the companies. These industries contribute about 10% of its share to
countries GDP. Therefore, this change has been putting large impact on the income of the
British Airways every year. It is spending large amount of its income on the bills in order to
purchase fuel from Jet every year. Moreover, currency fluctuations are observed which is
affecting business operations. Rate of crude oil is also increasing. Therefore, in order to
overcome this problem companies are using various type of contracts which protect the
company from increased price of crude oil and currency fluctuations.
4.3 Impact of European Union policy on British airways.
Introduction of European policy proves beneficial for the company in order to expand its
business in various European countries. It also assists to conduct free trade and movement of
products and services from one country to another (Yu and Ramanathan, 2012). This policy
brings liberalisation policy into existence which in turn opens the gates for various types of
airline companies in order to enter into the European market. This in turn results in increasing
level of competition. Increased level of competition proves beneficial for the customers.
Introduction of this policy created problem for the costlier airlines. On the other hand, it
proves beneficial for the low grade airlines to enter into the geographical areas where they
cannot enter before. Therefore, introduction of this policy creates both positive and negative
impact on the company like British airways.
CONCLUSIONS
From this report, it can be concluded that business environment has a huge impact on
the working of the business organisations. In this report various factors are identified in order
to satisfy the stakeholders. Responsibilities of the British Airways are also discussed. This
report also assists to know the impact of monetary and fiscal policy on the British Airways. It
also aids to know how introduction of European policy affects the working of the company.
From this report, it is also known that British Airways operates its business under oligopoly
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market structure. Therefore, at last it can be concluded that moving towards international
trade will assist the company to flourish its business in other countries also.
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REFERENCES
Books and journals
Arseneau, D.M. and Chugh, S.K., 2008. Optimal fiscal and monetary policy with costly wage
bargaining. Journal of Monetary Economics. 55(8). pp. 1401-1414.
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Cuervo Cazurra, A., 2011. Global strategy and global business environment: the direct and
indirect influences of the home country on a firm's global strategy. Global Strategy
Journal. 1(3‐4). pp. 382-386.
Ditlev-Simonsen, D.C. and Wenstøp, F., 2013. How stakeholders view stakeholders as CSR
motivators. Social Responsibility Journal. 9(1). pp.137 – 147.
Ghannadian, F.F., 2006. Fiscal policy and political limitations in the European Union.
International Journal of Commerce and Management. 16(1). pp.41 – 50.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford
University Press.
Hill, C., 2008. International business: Competing in the global market place. Strategic
Direction.
Palmer, A. and Hartley, B., 2008. The business environment. McGraw-Hill.
Swanson, A.G., 2004. Retirement entitlement and monetary-fiscal policy. International
Journal of Social Economics. 31(9). pp.818 – 831.
Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning.
43(2). pp. 172-194.
Yannelis, C. D., 2004. Fiscal and monetary multipliers under imperfect competition.
International Journal of Social Economics. 31(8). pp.767 – 772.
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.
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Online
Gottschalk, J., 2015. Introduction To Monetary Policy [pdf]. Available
through:<http://www.imf.org/external/region/tlm/rr/pdf/Jan4.pdf> [Accessed on 18th
November 2015].
Sen, S., 2011. Market structure:Monopoly, Oligopoly, Monopolistic competition and Prefect
competition. Available through: <http://fintowin.com/2011/07/market-structure-
monopoly-oligopoly-monopolistic-and-perfect-competition>. [Accessed on 18th
November 2015].
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