Comprehensive Business Environment Analysis of British Airways Report

This report provides a comprehensive analysis of the business environment of British Airways (BA). It begins with an introduction to the concept of the business environment, followed by an examination of BA's objectives, responsibilities, and stakeholder relationships. The report then delves into the national environment, discussing economic systems, fiscal and monetary policies, and the impact of competition and regulatory mechanisms. Further, it explores market structures, market forces, and cultural environments shaping organizational behavior. Finally, the report assesses the significance of global factors, including international trade and the policies of the European Union, on BA's operations. The report covers topics such as the objectives of different types of organizations, the allocation of resources in economic systems, the impact of fiscal and monetary policies, market structures, and global factors affecting the business. The report concludes with a summary of the key findings and implications for British Airways.

Business
Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO1 UNDERSTAND THE ORGANIZATIONAL PURPOSES OF BUSINESSES.....................1
1.1 Objectives of different types of organization........................................................................1
1.2 Extent to which objectives are met........................................................................................1
1.3 Responsibilities of organization and strategies employed to achieve them..........................2
LO 2 UNDERSTAND THE NATURE OF THE NATIONAL ENVIRONMENT IN WHICH
BUSINESSES OPERATE...............................................................................................................3
2.1 Describe how economic systems attempt to allocate resources............................................3
2.2 Impact of fiscal and monetary policies on company and their activities...............................3
2.3 Analysing the impact of competition policy and other regulatory mechanisms on the
business activities........................................................................................................................4
LO 3 UNDERSTAND THE BEHAVIOUR OF ORGANIZATIONS IN THEIR MARKET
ENVIRONMENT............................................................................................................................5
3.1 Describe how market structure determine the pricing and output decisions of businesses...5
3.2 Describe ways in which market forces shape organizational response.................................5
3.3 Examine how business and cultural environments shape the behaviour of company...........6
LO 4 BE ABLE TO ASSESS THE SIGNIFICANCE OF THE GLOBAL FACTORS THAT
SHAPE NATIONAL BUSINESS...................................................................................................7
4.1 Importance of international trade...........................................................................................7
4.2 Impact of global factors.........................................................................................................8
4.3 Impact of policies of European Union...................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment is composed of two types of terms that are “Business” and
“Environment”. This phenomenon is a set of controllable and uncontrollable factors which
affects the business activities of an organization. The purpose of this report is to scan the
environment around which the company operates. It will help in developing a broad
understanding about the economic, cultural, social and regulatory environment affecting the
business. For this purpose British Airways has been selected which operates under the aviation
industry.
LO1 UNDERSTAND THE ORGANIZATIONAL PURPOSES OF
BUSINESSES
1.1 Objectives of different types of organization
There are different types of organizations and they are mainly divided into three sectors
such a public, private and voluntary. The purposes for all them are different. British Airways is a
private organization having a mission of offering top quality aviation services for the customers.
The mission statement explains the reason behind establishment of the organization and vision
statement reflects the ultimate goal of the company (Ahmed, 2012). For British Airways,
innovation, creativity and customer loyalty are the most top priorities. The company aims to
deliver world class flying experience for the passengers. In the present context it holds the vision
of reducing the environmental burden under which it has set an objective of decreasing the
Climate Change Emission by 2020. The short term and long term objective of the BA is to
constantly work on improving the flight experience of the customers so that brand loyalty can be
enhanced (Dickinson, 2010).
1.2 Extent to which objectives are met
It is to be noted that stakeholders are the people who are directly or indirectly associated
with the business. They are interested in the business affairs of the company. It is important for
the BA to satisfy all the wants of its stakeholders (Fernando, 2011). The primary stakeholders of
the BA includes customers, employees, employees, tax authorities, government, regulatory
bodies, suppliers etc.
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 Shareholders – Shareholders associated with the organization are satisfied as they are
getting adequate rate of dividend every year. They expect high rate of return on the shares
which they have invested
 Employees – These people expect that company should offer them various opportunities
related to the growth, development and career. They have the power to influence the
customers (Jones and Scott, 2011)
 Customers – They expect a top quality flight experience from BA. Efforts are made from
the side of the company to offer very comfortable and flexible customer services.
 Government – Government keeps a close eye on the business practices of British
Airways so that it does not get indulged in wrong doings. The regulatory bodies wants the
company to follow all the rules and regulations related to the aviation industry in UK.
 Tax authorities – These bodies’ wants that BA should make timely payment of all the
business taxes and duties. It helps in creating a good image and reputation for the
company within the society (Leon and Garcia, 2011).
1.3 Responsibilities of organization and strategies employed to achieve them
British Airway fulfil all its responsibilities and duties towards its shareholders in positive
manner. It can be described in the following manner.
 Customers – Organization emphasize on retaining the existing customers and also work
on gaining the new segment of customers (Riddle and Ayyagari, 2010).
 Employees – Employees within BA are having the power to influence the customers.
Hence it is important for the company to keep its employees satisfied in terms of training,
remuneration, working conditions and services.
 Shareholders – In order to satisfy the shareholders, BA identifies the key strengths and
weaknesses in a client’s CR program (Wright, Marston and McDonald, 2011). This
develops trust among their clients and strengthens the relations with the shareholders.
These people are involved in the decision making process related to matters such
changing a board member or adopting new strategies.
 Media – Media has a great impact on the business practices of the company in case of
any kind of controversies. British Airways is making efforts to be imagined as a good
corporate entity through reducing the carbon footprint.
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 Competitors – Easyjet, Virgin Atlantic etc. are some of the competitors for British
Airways. Company should offers attractive schemes and prices for the passengers at
regular intervals (Fernando, 2011).
LO 2 UNDERSTAND THE NATURE OF THE NATIONAL
ENVIRONMENT IN WHICH BUSINESSES OPERATE
2.1 Describe how economic systems attempt to allocate resources
There are different economic system under which every company function its operation,
these are implemented on the basis of demand of the country. Economic system are used to
control production and physical resource. These system have some subcategories also, which
include free economy, mixed economy and command economy.
In this type of market economy, BA can have freedom to set prices of product and
services according to demand and supply. Government set some monopoly for price setting but
they does not interrupt directly in to the market (Halbert and Ungulli, 2011). These economy
system provide advantage of free trade with few barrier to enter into the market.
The British Airways operates under this economic system. Under mixed market economy
many economic decision are made by individuals and Govt. also take decision of allocation and
distribution of resources. British airways come under mixed market economy because partly it’s
operated by government and by private entity. However BA has the freedom to set the prices. It
is owned by the government and decision related to operation, also taken by them (Moxham,
2010). The airline has got
While operating in command economic system can be difficult for BA. Government
control the economy and take decision about use and distribution of resources. Prices and wages
for goods and services are decided by the government. In command economy system
government owns the monopoly business such as finance, utilities and automotive.
2.2 Impact of fiscal and monetary policies on company and their activities
These policies have great impact on British airways and its activities. It is a tool used by
government to stabilize the flow of economy. Impact of fiscal and monetary policy are as
follows;
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Fiscal policy involves changes in taxation policies. These policies are determined by
government to fix amount of taxes. In expansionary fiscal policy government set lower tax rate
which means more income for customers to dispose and more cash for businesses to invest.
Govt. set lower tax rate to help businesses and to the overall economy (Riddle, and Ayyagari,
2010). These help British airways in generating more revenue so that they can use these profit
for improve its services and facilities. Contracting fiscal policy used when Govt. want to increase
its income while economy is doing well and for stabilize the peak of economy. This is cause for
less availability of funds to the organisation (Bloodgood, 2008). From the expansionary fiscal
policy, BA will pay less amount for tax and this will eventually enhances its profitability. In
addition to it, less tax rate means high disposable income which will boost the sales of cited
company and hence leads to rise in revenue. On the contrary, contracting fiscal policy results
into rise in tax rate which affects the company in two manner. Firstly, BA needs to pay more
service tax that resultant into decline in the profit. Secondly, it will also decreases the sales of the
company due to rise in tax on disposable income as well.
Changes in monetary policy effect not only organisations but also to the whole economy.
It is another tool for Govt. to boost the economy through lower interest rates with larger money
supply. These is beneficial to BA in terms of getting loans from financial institutions. Lower
interest means more refinancing with less mortgages (Bose, 2008). These help BA in making
more money through refinancing on existing mortgages. Change in monetary policy also affects
the business operation of BA. In this, if bank interest rate is increased then the company need to
pay high interest on the principal amount of bank loan. Additionally, rise in bank interest rate
also leads to decline in saving of individuals which affects the sales of the company.
2.3 Analysing the impact of competition policy and other regulatory mechanisms on the business
activities
British airways is the top most aviation industry in the UK. BA makes fair competition
among aviation firms. The main aim of competition policy are to promote competition and to
make market work better by improves the efficiency of various organisations. These encourage
company for innovate something new and for improve its efficiency (Dent, 2012). These policy
are four key parts antitrust & cartels, market liberalisation, state aid control, merger control.
These policies restrict price fixing and other abuses and these policy analyses measures to ensure
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that such measure do not spoil the level of competition in that particular market. Competition
policy involves introduction of competition in to the monopolistic market by ensure easy entry of
new competitors.
On the other hand, regulations are set by government to keep command over the market.
Government enforces such regulations to forecast market working conditions and outcomes for
customers as well as for service providers. Regulatory committee monitor prices of the product
and services. Some of that regulations are standard customer services, favourable environment of
organisation, fair trading, etc. (Craig, 2008). British airways give competition to all aviation
industries who work on international level.
LO 3 UNDERSTAND THE BEHAVIOUR OF ORGANIZATIONS IN THEIR
MARKET ENVIRONMENT
3.1 Describe how market structure determine the pricing and output decisions of businesses
Market structure refers to degree of competition in a particular market. Market structure
play an important function in determine price of the product. Every organisation work in a
particular market structure and accordingly price of product and service are decide. There are
some market structures like perfect competition, monopoly and oligopoly (Jeffs, 2008).
Perfect competition is a market where number of buyers and sellers are very high. These
is a open market where no barrier for entry and exit. In these market all buyers and seller are
engaged in buying and selling without any restriction. To survive in these type of market seller
must have perfect knowledge of market conditions.
Monopoly is a market condition where there is only one seller in the market. There is
restriction on the entry of other firms in this particular market. The seller has all rights to set
price of product and service so he is price maker. A monopolist has full control over supply of
product.
Oligopoly is a market situation in which there are few firms in same type of market. The
action of one business is likely to effect on others performance (Kale, 2014).
British airways operate under oligopoly market because company have only few number
of competitors. Decision of BA also affects other competitor’s performance.
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3.2 Describe ways in which market forces shape organizational response
 Economic factors: Economic aspects of the country always affect organization's work
processes; thus these forces shapes organizational aspects. Economic stability is the
major aspect that regulates the work processes and this helps the business entity to
manage the flow of resources in organizational activities (Conner, 2003). The market of
UK has been facing issues related to price of fuel; thus this might hamper the work
processes of British Airways. Global economic crisis has been affecting the market place
and another factor (value of pound) also influences the ratio of consumer spending.
 Competition aspects: British Airways has been operating the business in competitive
market place; thus it can be said that competitor's policies and strategies shapes
organizational aspects. Because of huge competition in the existing market place, British
Airways has to frame different strategies to manage competitiveness at the market place.
This also affects customer purchasing decisions.
 Technological factors: The market of UK has been facing issues related to technological
aspects; therefore this leads British Airways to spend huge resources in technical
concerns. Different parts of the airline needs to be maintained so that it can help in
appropriate processing of systems (Griffin, 2013). All the parts related to aircraft are
changed consistently; however the airlines have to give concern towards environmental
aspects as well so as to protect the interest of community.
 Political factors: Political scenario of UK market place has been changing; therefore
legal rules, policies and norms have been affecting business processes of BA. The
government of UK has developed a range of reforms which the airline has to follow for
the ultimate security of people (Fernando, 2011). Customers are getting more concerned
about their safety and security; thus for such aim British Airways has to emphasize on
political framework more.
 Social factors: Needs and demands of people have been changing frequently and this
leads British Airways to make several changes in the product line. British Airways needs
to adopt social aspects into account so that customer satisfaction ratio can be enhanced.
People's preference and needs allows the airline to meet the changes prevailing at market
place.
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3.3 Examine how business and cultural environments shape the behaviour of company
At British Airways, diversified people work for a common goal and they all ensure that
they are considering each other's cultural aspects for more respect and dignified environment.
The employees have to consider cultural aspects of customers as well as that can also enhance
customer satisfaction ratio. This is also one of the most influencing factors that changes the
mind-set of customers and persuades them to buy the services from the subsequent airlines.
People working with British Airways have to deliver proper services to the clients so that they
can also promote the services to other (Leon and Garcia, 2011). Employees have to treat all the
customers in respectful manner and all their queries should be resolved frequently. Hence, as per
the market structure, changes should be made in the internal environment of British Airways.
LO 4 BE ABLE TO ASSESS THE SIGNIFICANCE OF THE GLOBAL
FACTORS THAT SHAPE NATIONAL BUSINESS
4.1 Importance of international trade
International trade is the exchange of product and services across the boundaries.
International trade enable maximum utilisation of resources. These play important role in
establish relationship among different countries. Trading at international level is increasing
because companies are getting new market and new customers group. Through international
trade British airways operating its business on global level (Riddle and Ayyagari, 2010). It help
company in getting new business opportunity and many more thing beyond the boundaries. It
facilitated the business in generating high revenue and profit. International trade help British
airways to build itself as largest aviation industry in UK.
In existing business environment, bodies such as WTO, international civil aviation and
tourism body playing a major role in minimize negative impact of international trade policies on
the businesses. But there is some negative impact of international trade on the business that it
increases competition for British airways on international level (Fernando, 2011). Decisions are
taken by member governments and it implements after discussion and agreement of members
governments. These bodies provide a base for negotiating trade agreement and disputes. WTO
and such other organisation's main objective are to maintain economic environment for the
business and to protect human rights with environment.
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International Civil Aviation – It is a specialized agency of the UN which is responsible for
setting codes and practices within the industry. These are to be followed by the British Airways.
It also defines the protocols for air accident investigation. It promotes safety and orderly growth
in the air transport.
Tourism Bodies – Tourism bodies of UK such as Visit Britain and BHA (British Hospitality
Association) also affects the business activities of BA. These organizations are responsible for
promoting tourism in the country. More tourism will bring more business for the airline as
tourists will travel in high volumes.
4.2 Impact of global factors
There are many global factors which can affect operation of British airways:
Inflation:- Inflation is cause to slow down economic growth. The initial effect of inflation is
increase in the price of products and services in local market. These make heavy burden on
customers.
Oil prices:- These is one of the most important factor affected on trade. If oil prices increase then
it also increase the cost of transportation for British airways. Fluctuation in oil prices are
happening on daily basis so British airways face problems in deciding its fare. These can be
cause of making wrong image of company among market (Halbert and Ungulli, 2011).
Government policies:- Every country has its own rules and regulation and it is must to follow
these parameter to trade in that particular market. Government may prohibited on import and
export of such things Ex: animals, weapons and certain technology. These may impact on trade
of British airways.
Exchange and capital control:- Each country have its separate currency and it can be exchange
with other currency by giving exchange value of that currency. Weakness of one currency
against another can create lot of barrier in international trade. These fluctuation of exchange rates
affect cost base of British airways. Exchange and capital control can affect trade through
interrelated channels such as fluctuation if exchange rate. Exchange and capital control have
negative impact on exports and these is based on the type of exchange. British airways may
relate with current payment and transfers (Griffin, 2013).
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4.3 Impact of policies of European Union
The Policies created by the EU impact British airways as it directly affect its operation.
Each policy affect its related area, some of our explained below:
Travel policies: - European Union government regulation cover both commercial activity and
operation standard. EU give guidelines about safety of passenger and facility that should be
provide to them. It also instruct to ensure a good and well prices range of services for passenger.
These entity also set safety parameters which are necessary to follow for every aviation industry.
It state that staff member are responsible for supervision and complains and they have to respond
immediately to any problems without compromising in safety (Conner, 2003).
Competition policy:- British airways come under oligopoly market because number of its
competitors are few. EU introduce competition policy with aim to keep the market fair and open
to all. Competition policy of EU not allow to manipulate its rule and regulation to undertake the
market (Dent, 2012). EU give freedom to European airlines to operate on any route and set
whatever fares they want but only under competition law. These all rules set by EU are subject to
give better service to traveller
CONCLUSION
From the above study it can be concluded that British Airways operates under a very
challenging environment. Company is required to make use of effective business strategies
which can help the business to fight with the market challenges. It help company in getting new
business opportunity and many more thing beyond the boundaries
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REFERENCES
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