Report: Business Environment Analysis for British Airways (BA)

This report provides a comprehensive analysis of the business environment of British Airways (BA). It begins with an introduction defining the business environment and its impact on organizations. Task 1 explores different types of organizations, focusing on BA's stakeholders including employees, customers, shareholders, and creditors, and how BA meets their objectives. Task 2 delves into resource allocation within various economic systems (command, free enterprise, and mixed), the impact of fiscal and monetary policies, and the effects of competition policies and regulatory mechanisms on BA. The report examines market structures, market forces, and the cultural environment shaping BA's behavior. It also discusses the significance of international trade, global factors, and the impact of European Union policies on BA's operations. The conclusion summarizes the key findings, and references are provided. This report offers valuable insights into BA's strategic approach within its complex and dynamic business environment.

BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Different types of organizations.......................................................................................1
1.2 Key stakeholders of BA and organization’s way of meeting their objectives.................2
1.3 Fulfilling responsibilities of stakeholders........................................................................3
2.1 Allocating resources as per the kind of economic system................................................4
2.2 Impact of fiscal and monetary policy on business organization.......................................5
2.3 Impact of competition policy and other regulatory mechanisms.....................................5
TASK 2............................................................................................................................................6
3.1 Market structures that determine the pricing and output decisions..................................6
3.2 Ways in which market forces shape the organizational response....................................6
3.3 Business and cultural environments shaping the behavior of BA....................................7
4.1 Significance of international trade to BA.........................................................................8
4.2 Impact of global factors on BA........................................................................................8
4.3 Impact of policies of European Union on BA..................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The term business environment includes external forces and factors which are beyond the
control of the business organization and they affect functioning of an enterprise. This business
environment includes employees, customers, suppliers, government as well as political,
economic, social, technological factors etc. In this context, the present report focuses on
understanding various types of organization and also the extent to which company meets the
needs of their stakeholders. Organization undertaken for the present study is British Airways
(BA) which is the largest airline in UK on the basis of fleet size and it operates its business in
various parts of the world and also has a unique feature of cargo services.
TASK 1
1.1 Different types of organizations
Different types of organization have their own specifications and have their own polices
structures and strategies. For different market, corporate has to make different strategies to
achieve their goals and objectives (What is Business Environment? Explain its types. 2013).
Different types of organization are as follows:
 Sole proprietor- Sole proprietor is a common type of business ownership where a
vendor constitutes a vast range of activities. In UK itself, a large percentage of
organizations are based on sole proprietorship (Zhu and et.al., 2012). This is because
decisions are made quickly and effectively and business owner have a strong contact with
their customers and employee's.
 Partnership Firm- According to Partnership act 2002, two or more partners initiate
business with signing of a partnership deed. This deed is the evidence of how much profit
and loss will be shared by partners and what amount of capital will be contributed by
them. Partnership firm is less risky as compared to sole proprietor and it increases
corporate credible position in the eyes of customers and their suppliers.
 Private Company- This is a non- public sector which is controlled and operated by
individuals (Spitzeck and Hansen, 2010). In context to it, prior aim and objective of
private organizations is to maximize their profit by expanding their business ventures
through reducing their cost.
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 Public Company- Organizations which are listed with minimum share capital and issues
shares to public are considered as public limited companies. These organizations have to
be registered under Companies Act, 1980 and further these corporate have more
advantages as compared to private companies.
Vision-
 To be world's most reliable and responsible airline.
 Customers are the assets of BA and they are focusing in fulfilling their needs and wants.
Mission-
 To deliver excellent services to their large customers base
 Making presence in major and metropolitan cities of different countries.
Short term objectives-
 In order to improve operational performance
 To provide quality products and services to their passengers so that it can increase their
market share.
Long Term objectives-
 Focusing on both airline and non-airline partnership as this will give satisfaction to their
large customer base apart from the airline journey (Our Strategies and Objectives. 2010).
 Extending ventures by collaboration with different franchises and middle business
enterprises.
1.2 Key stakeholders of BA and organization’s way of meeting their objectives
Mentioned company has different stakeholders and these stakeholders have different
expectations from them. BA is obliged and liable to satisfy their needs. Stakeholders for business
organization are as follows:
 Employee's- Cited Company has a healthy strength of employees and they are providing
services around the globe. BA has strength of more than 43000 employees and these
workers expect good opportunities and healthy remuneration from the aviation company.
Moreover, BA is focusing on providing job securities, healthy salary and motivational
techniques to motivate their employees. Further, employees are the crucial stakeholders
for BA as their revenue and profits are linked with their performance.
 Customers- Passengers are the life blood for the aviation industry. Cited company is
focusing on providing best of the services to their travelers. Moreover, customer’s
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expectation is to have a good and healthy product and services in flight at an affordable
price. However, if customers are not satisfied then (Madura, 2006), organization will not
be able to achieve their goals and objectives. In context of it, it is the utmost important
objective in which BA is giving more concentration.
 Shareholders- BA is a public limited company therefore; it accepts deposits from the
public through initial public offer. Those who invested money in business become
shareholders for the company and they are considered as a real owner for BA. Moreover,
organization is focusing on giving a productive return on their capital and attractive
dividend amount which give rise to growth of business corporate.
 Creditors- Creditors for BA includes corporate friends, banks and other financial
institutions that basically gives short term and long term loans to the cited company. In
respect to this, liability for organization is to return the sufficient debt timely otherwise; it
will surely harm the corporate goodwill.
1.3 Fulfilling responsibilities of stakeholders
Different strategies are opted by British Airways in order to fulfill the needs of
stakeholders. Some of them are as follows:
 Employee's- BA through monetary and non- monetary incentives motivates their
employees in order to achieve their goals and objectives. Being a highly reputed airline
company, organization focuses on providing healthy working environment to their
employees (Zahra, 2005). Moreover, working people have a commanding power to
influence their large customer base.
 Customers- In order to get an effective response from their customers, organization is
focusing to give the best quality of products and services to their travelers at a reasonable
price. Corporate also has effective CRM policy which helps in keeping their existing
customers and attracts new and young passengers as well.
 Shareholders- Relationship with shareholders plays a crucial role as they have high
interest in financial success of corporate. Organization also has responsibility to send
important information to their share owners which will lead to the growth of investors as
well as of corporate (Mason, Kirkbride and Bryde, 2007).
 Creditors- Creditors have a strong interest as well as impact on organization. If BA fails
to clear their loan amount on time, then in future, these creditors can refuse to provide
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funding. To maintain this, BA incorporated a cash management technique which helps
them in clearing their short term and long term debt on time.
2.1 Allocating resources as per the kind of economic system
Economic systems are opted by government and these economic systems are generally
acquainted to allocate the resources efficiently and effectively. In this context, following are the
several economic systems: Command or planned economy- In command economy, government has full control and
it modulates daily transactional affairs for BA. Moreover, government has full
information regarding corporate portfolio and they take better and healthy decision for
the resource allocation (Mysiak, Giupponi and Rosato, 2005). Decisions are made by
government regarding prices of fuel and service tax which passengers have to pay for a
particular confirmed seat. Hence, due to all these factors, sometimes corporate faces
difficulty in order to operate their functions effectively. Free enterprise economy- Under this economy, BA operates its activities effectively with
less or no government restrictions and interventions. If restrictions are there then rules
and regulations are quite negotiable to operate the business functions. Corporate by
identifying the needs of their passengers makes selection of raw materials. However, in
this economy, problem occurs when a single company dominates the entire industry. At
this moment of time, it is really difficult for the firms to survive. BA is a giant
organization but in comparison to it, medium and small scaled organization faces
difficulty in regulating their services.
 Mixed economy- Mixed economy is almost same like free enterprise economy but here,
government body imposes a little intervention and restrictions with their different fiscal
and monetary policies. This economy is opted by government of UK where means of
production and services are shared between private and public sector (Benn and Dunphy,
2007). Under this, BA forms their own policies and procedures by managing the
government policies and regulations.
2.2 Impact of fiscal and monetary policy on business organization
Fiscal policy is a way through which government adjusts the level of spending in order to
monitor and influence the nation's economy. On the other hand, monetary policy is made by
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Federal Reserve which is designed to influence the availability of cost of money. Moreover,
Federal Reserve has a responsibility to increase the money supply and also keeps the inflation
rate in check. These fiscal and monetary policies are developed by government to control the
economy and organization’s operations. Fiscal policy comes into act when demand of a
particular service increases. Thus, manufacturing and production for specific services also get
increased. In order to generate more revenues and profits, BA hires multi skilled employees
(Voinov and Bousquet, 2010). Further, increase in various taxes affects the economic growth of
organization as well as of country. However, reduction in tax rates helps the mentioned company
to sell their air tickets at low price which satisfy both individuals and organizational needs.
Monetary policies are made by government and Federal Reserve and they take decisions
on CSR and SLR. Moreover, if monetary policies change the reserve requirement then it affects
the overall corporate activities. These policies are quite flexible, effective and reliable as
compared with the fiscal policy. These policies come into act when flow of money within a
country increases and federal banks enhances the rate of CSR and SLR and they buy securities
from the open market. With respect to it, if excess outflow of money occurs, then federal bank
will reduce the CSR and SLR (Stonehouse and et.al., 2009). This will help BA to get short term
and long term loan from banks at easy rate of interest.
2.3 Impact of competition policy and other regulatory mechanisms
In UK aviation industry, BA faces stiff competition from their large number of
competitors who have equal amount of capital and almost same types of business policies.
Competition Act, 1998 is the current major origin of competition law (Buyya, Abramson and
Venugopal, 2005). Mentioned company has competitors namely Easy Jet, Deutsche Lufthansa
AG, etc. British Airways has a major holding in the market capital. But change in competitor’s
policy affects the operational activities of cited company. Therefore, when other competitors
change their business polices, British Airways also have to make required changes in their
policies and objectives. Usually, BA makes competition policy by considering the cost and
service diversification. At times, to get ahead in aviation industry, competitors adopt unethical
practices in order to increase their productivity and market shares. By taking this fact into
consideration, government of UK has made strict restrictions which every organization is bound
to follow.
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Further, companies have opted competition act, 1998 so that business ventures cannot use
unethical practices. Enterprise act, 2002 has also been applied so that merger and acquisition
activities can be done efficiently and effectively. Moreover, BA also have to follow training and
skill policy along with equality and discrimination regulations which are developed by UK
government. Along with it, EU regulations like International Regulations of Airline (ICAO) can
be advantageous for British Airways as it will help them in gaining high market share and deliver
quality of services to its customers. Civil Aviation Authority (CAA) also affects management
and operation activities of the British Airways.
TASK 2
3.1 Market structures that determine the pricing and output decisions
For different markets, corporate has to implement different strategies in order to
determine the price EU regulations like International Regulations of Airline (ICAO) can be
beneficial for British Airways for the purpose of gaining high market share and deliver quality of
services to its customers within stipulated time. Civil Aviation Authority (CAA) also affects
management and operation activities of the BA in term of managing air traffic and output. In this
regard, following are the market structures: Monopoly market- It is a market where only one or two organizations dominate the
market and there are large number of buyers who show interest in the firm’s product
(Daly and Farley, 2011). In this market, company just focuses on increasing their revenue
and profits and they do not care about the customers in terms that whether they will be
able to pay for the product or not.
 Perfect Competition market- In this type of market, many organizations are operating in
the same industry with an intense competition. So, it is clearly concluded that there are
many buyers and sellers with no barriers of entry and exit in this market. Firms usually
incur a normal amount of profit as existing competitors are quite high. Monopolistic Competition- Under this market, there are many sellers but each seller has
a unique specification and features towards the product or service. There is freedom of
entry-exist and firm incurs the profit after a long run of business. Organization further has
competition to provide the same quality of products at a cheaper rate to their travelers.
 Oligopoly market- It is an industry which is dominated only by a few sellers and these
sellers are collectively known as oligopolistic (Arestis and Sawyer, 2006). Under this,
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organization provides the best quality of services to a large customer base which reduces
the risk of entrants of new firms. British Airways comes under this market as it helps
them to develop their market share and corporate goodwill. Moreover, entering in this
type of market requires a large amount of capital which interested firm does not make as
there are very giant airways that are already giving excellent services to customers.
3.2 Ways in which market forces shape the organizational response
There are various market forces which BA has to consider in order making strategic
decisions: Supply and demand- Cited firm has to take pricing decision by considering the demand of
market. If demand for travelers is high then organization will provide services at high
volume with affordable price (Poterba and von Hagen, 2008). Therefore, BA has to make
supply available for their customers by analyzing the demand position in the market. Cost and output- Services so rendered by BA are at reasonable price which help
passengers to travel around the globe. As more customers travel, it increases the output
and productivity of firm as well. Perception of customers- While making all the policies and procedures by considering
the need of customers, BA also decides the route which helps travelers to get comfortable
and cover distance within a short period. They have to provide extra qualities like WiFi
service within plane, the best quality of food etc. If customers are not satisfied with the
price, then organization has to improve the quality of services without touching the price
element (Dreher, 2005).
 New technologies- By choosing enormous new techniques and methods, BA can compete
with their rivals. Aviation Company has to make changes in technology which are used in
aeroplanes to give healthy competition to their competitors.
3.3 Business and cultural environments shaping the behavior of BA
BA must have a proper understanding of external environment while taking crucial
decisions for the expansion of organization around the globe. This point can be easily understood
through PEST analysis: Political- This factor relates with the government affairs including various policies, laws
and acts related with products and services. Government have taken air control and safety
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measure in order to increase the safety and to prevent anti- terrorism actions. Along with
this, government develops corporate friendly policies which are quite beneficial for
British Airways in UK (Rios, McConnell and Brue, 2013). Economic- Economic factors have a direct effect on operations of BA as it includes the
factors like inflation rate, unemployment rate, etc. Furthermore, global economic crisis
affect the business activities as customers have nothing to spend around. Social- BA has to develop new products and services by considering their needs, wants,
expectations and perception. BA has their major focus on the retired people as they have
more to spend and they are able to make travel plans with long vacations.
 Technological- With daily new innovations, technology is changing at a speedy pace. BA
is using online booking services and checks in procedure which is saving time for both
passengers and organization (Miao, 2005). Further, organization is focusing on
developing something new which will improve the quality and productivity of mentioned
company.
Further, culture follow in BA is dynamic and employees can also give their valuable
suggestion in decision making of the corporate. Further, cited firm also have good leadership
qualities, diversity of employees in different operations and ethics. The above mentioned are also
the major characteristic of organizational culture. Further, by recruiting employees from various
backgrounds, BA will be able to handle different workforce in efficient and systematic manner.
4.1 Significance of international trade to BA
Innovative techniques, advanced transactional corporations and better transportation have
increased the importance of international trade in the recent years. By the development of
international trade, mentioned company is able to expand their business either with no barrier or
with some which is necessary for proper business opeations. It is giving enormous opportunities
to British Airways as corporate is able to develop new relations with two or more countries.
Moreover, international trade has become relatively important for BA as it already has many
operations in different countries more importantly in EU countries. If there had been no trade
then economics scale of cited company would be not worthy and corporate might not be able to
generate higher revenue and profits (Adler and Gundersen, 2007). However, with development
of international trade, corporate is able to fly almost 750 daily flights which carry more than 35
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million passengers worldwide annually. Further, BA provides support to small and medium sized
organization as it helps these firms to connect with the new customers worldwide.
Moreover, international trade provides opportunities to business enterprises to exchange
capital and deliver products and services across cross border. Greater utilization of resources
generates substantial parts of its revenues from international sales which shows positive impact
of expanding trade at international level. Further, to reduce their cost of production as well, they
can establish their offices in different countries of the world which will lead them in getting more
of the revenue and profits.
4.2 Impact of global factors on BA
Rise in price of services and border immigration is considered as a major cause for
British Airways in order to operate its business globally. Some global factors are discussed as
below: International business environment- It consists of political, economic, social and
technological (PEST) factors which has a direct impact on corporate performance
globally. BA has to effectively scan the business environment before setting up the new
venture. Taxes- Tax rate of one country is different from the other nation. These tax rates and
tariffs are the major global factors which affect the organization’s productivity, efficiency
and revenue (Alvesson, 2012). Along with this, if rates and taxes are high in one country
then corporate will not be able to expand its business which will be treated as a major
drawback for corporate.
 Global competitiveness- Being the global leader in aviation industry, corporate is facing a
stiff competition from Easy Jet and Deutsche Lufthansa AG. If this competition increases
continuously, then it will be hard for the business corporate to survive globally (Leung
and et.al., 2005).
Further, different components like strategic alliance, overseas competitive advantages,
exports and trade associations can affect the business operations of British Airways. Moreover,
regulation and policies framed by UK government is favorable to international companies so that
they can invest there. Apart from it, government also provides tax relaxations for different
projects such as infrastructure development airports and roads etc. However, tight regulatory
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controls and infrastructure costs influence the business decisions of BA because by considering
these regulation's, BA will frame their own plans and polcies.
4.3 Impact of policies of European Union on BA
The effects of policies are constituted to avoid harmful elements that seek positive
benefits in the UK business organization. European Union (EU) has some rules and regulations
which BA has to maintain in order to operate the business activities within or outside home
country. Policies which are taken by EU are employment, inflation, training, education and
training, etc. In relation to it, while operating business activities, British Airways has to consider
all the policies and procedures which are implemented by EU (Berkhout, Hertin and Gann,
2006). BA is performing effectively in increasing their passengers and able to generate good
amount of dividend for their shareholders. This implies that organization is positively implying
EU policies and working culture which is helping them in generating higher revenue and profits.
Moreover, policies implemented by European Union like Consumer protection act, EU
Emission Trading Scheme and Climate act affects business functions upto a great extent.
European Union has developed several polices including employment, taxation, regional,
introduce new programs for safety & security so that organizations like BA can increase their
operations.
CONCLUSION
From the above report, it is clearly evident that British Airways is a leading airline firm
in UK which has operations all around the globe. Report states the organization’s vision, mission
with its short term and long term objectives. Further, this report concludes the effectiveness of
British Airways to satisfy the needs and responsibilities of their potential stakeholders. This
report shows that organization comes under oligopoly market that makes effective policies by
considering the needs and demand of their travelers.
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