Business Environment Analysis Report: British Airways (BA)

This report provides a comprehensive analysis of the business environment of British Airways (BA). It identifies the purpose of different organizational types, focusing on BA as a public limited company and its mission, vision, objectives, and key stakeholders, including customers, employees, and the g...Read More

Business Environment

Table of Contents
INTRODUCTION................................................................................................................................4
Task 1....................................................................................................................................................4
1.1 Identification of purpose of different types of organisations.....................................................4
1.2 Identification of mission, vision, short- and long-term objectives and key stakeholders of
British Airways................................................................................................................................4
1.3 BA in fulfilling responsibilities to its stakeholders....................................................................5
2.1 Economic systems attempt in allocating resources in UK.........................................................6
2.2 Challenges faced by BA due to fiscal and monetary policies....................................................7
2.3 Impact of regulatory, competition policies and legal changes in the airline industry on BA....7
Task 2 ...................................................................................................................................................7
3.1 How market structure of the airline industry impacts pricing and demand for seats................7
3.2 How interplay of players and market forces shape BA's responses.........................................8
3.3 How BA has been impacted by the working practices and cultures of the countries where it
operates............................................................................................................................................8
4.1 Impact of global changes in trade regime caused by organisations on British airways............9
4.2 Other global factors which may impact BA............................................................................10
4.3 Impact of EU policies on travel, competition or aviation on British Airways........................10
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................12

Illustration Index
Illustration 1: Key Stakeholders of British Airways.............................................................................5

INTRODUCTION
Business environment of BA consists of internal and external environmental factors that
influence the decision making process of company. The report identifies various of these factors i.e.
the stakeholders, UK's economy and governmental regulations as a part of the external environment
that affects the business activity of the airline company (Needle, 2010). For this purpose, the firm,
British Airways has been chosen that is the prime airline operator in United Kingdom. This airline
is the largest service provider to various air passengers that are travelling across the world. The
report also evidences market factors, European Union’s policies and global factors that are
responsible for hampering the growth potentials of British Airways in the global market.
TASK 1
1.1 Identification of purpose of different types of organisations
Purpose of different types of organisations is discussed as below:
Private Company- A private company is formed with the objective of profit making. The firm is run
by private owners who are responsible for the entire decision making process of company.
Public Company- A public company is an entity formed by raising capital from public (Samy,
Odemilin and Bampton, 2010). Their main objective is to fulfil the needs and requirements of their
customers and shareholders.
Voluntary Organisation- A group of voluntary individuals form an organisation to fulfil their
purpose that is formed by their common interest.
British Airways is a public limited company that is run by capital raised from public
offerings. International Airline Group is the parent company of BA. The firm’s shares are traded on
London stock exchange (Upchurch, 2010). British Airways is known to be the leading cargo and
travel service provider in UK. The airline company is limited by shares i.e. its shareholders liability
is limited to the extent of their investment. British Airways is run by the dual responsibility of its
directors and its members. Company is liberally striking to fulfil the needs and requirements of its
investors and customers.
1.2 Identification of mission, vision, short- and long-term objectives and key stakeholders of British
Airways Mission- To provide the best international and domestic air service through carriage of

passengers, mail and freight services. Vision- To become the leading, responsible and best airline company worldwide
(McCormick, 2013). Short term objectives- To enhance the passenger’s experience by providing them with
premium services and experience.
 Long term objectives- To increase its international market share and to increase the growth
potentials of company.
Key stakeholders of British Airways are its customers, employees, managers, owners,
suppliers, government, creditors, shareholders and society (Adler and Gellman, 2012). Company
aims to fulfil the requirements of its shareholders on timely basis to generate profit for the firm. Customers- To provide premium services to its customers, BA aims to provide value for
money. Company supplies various facilities that are available with low cost tariff to its
passengers to provide them with the premium flying experience. Employees- To meet the needs of safety and to provide job satisfaction to employees, BA
have formulated various human resource policies and strategies in order to increase the
employee participation and to generate job contentment as well (Business Stakeholders:
Internal and External, 2015).
 Government- The airline firm abides by rules and regulations formulated by government and
the European Union to maintain cordial relationship with the authorities. Thus, BA has
formulated its international market strategies in accordance with these regulations.
1.3 BA in fulfilling responsibilities to its stakeholders
British Airways responsibilities are to understand the demands of its stakeholders and to
Illustration 1: Key Stakeholders of British Airways
Source: (Boundless, 2015)

supply services to fulfil their needs and requirements. In order to comply with these services,
company has taken these initiatives. Environmental legislation- The firm has formulated strategies to reduce global warming by
lowering its carbon emission on the environment (Alderighi and et.al., 2012). In order to
achieve this, BA has strike to use renewable source of energy to generate sustainable
measures towards global warming. Employee legislation- Company provides safety and health facilities to maintain employee
participation at the workplace. BA has anti-discriminatory policies which lets it to generate
equal opportunity for its diverse group of employees.
 Fair Trade- Organization also maintains its relationship within international market for
abiding to fair trade policies that are formulated by European Union and WTO. Company
abides by the regulations that are formulated by various countries (Franke and John, 2011).
It operates to generate cordial relationship in the global market. By the above headers, it is
clear that the firm is constantly innovating to meet the objectives of its stakeholders.
BA constantly aims to fulfil its responsibilities in order to attain customer satisfaction from
its services.
2.1 Economic systems attempt in allocating resources in UK
An economic system is a system that facilitates production and exchange of goods and
services in order to allocate the resources in society. Different types of economic systems and
resource allocation is as follows- Command- This system consists of production of goods and services through a centralized
body of power i.e. the central government of UK. Government steps up to allocate the
resources to the manufacturers and producers (Carroll and Buchholtz, 2014). The
government owns all processes that are involved in the production, exchange and allocation
of resources in the economy. Market- It is a free economy that is run by private associations of people. Economy is
controlled and run by people and by no intervention so, the government has right to produce,
exchange and allocation of resources is solely in the hands of individuals of economy.
 Mixed- This economy is a mix of both command and market economy (Wild, Wild and Han,
2014). The market is free of government rule but is operated by the government in various
industries.
Airline industry of UK is governed by a mixed economy. Main power to the industry rests in
the hands of government with the formulation of policies but the power to operate in the market is
left with the decision making of management of British Airways. The growth potential of business

in the economy of UK is high with the high scope of business prospective in the economy.
2.2 Challenges faced by BA due to fiscal and monetary policies
British airways faced many challenges in the last decade due to fiscal and monetary policies.
They are discussed as below- Impact of monetary policies - The Bank of England is the apex authority to set the monetary
policies for UK (García, Gómez and Molina, 2012). The supply of money in accordance
with the growth rate is affected by the interest rate of bank. If the interest rate of bank will
be higher then, company will have to find alternative sources to raise investment for the
operations of British Airways. This created problems for the firm to manage its cost-price
policies of its services. Company has to raise base fare charges to maintain capital that is
raised from market borrowing in return declining its market share.
 Impact of fiscal policies- These policies are the government adjustments towards the tax rate
and level of spending capacity if individuals. High rate of taxation in UK led customers to
reduce their spending capacity (Grundy and Moxon, 2013). The customer bough alternative
cheap methods of transport in order to save money. Tax rate policies also increased the
issues for BA as company was now entitled to pay high rate of tax to the government. This
impacted the cost strategy of BA in the past decade as firm had to reduce or increase the fare
charges when it started losing its brand image in the market.
2.3 Impact of regulatory, competition policies and legal changes in the airline industry on BA.
Airline industry of UK is facing dwindling changes due to the impact of regulatory,
competition policies and legal changes. They are-
 Impact of regulatory- The regulatory committee of UK government is formulated to
monitor the business activity of the company (Afonso and Sousa, 2012). British Airways has
to abide by these policies in order to safely operate its business in United Kingdom.
 Impact of competition policies- The competition act of United Kingdoms government was
formulated to maintain the competitiveness among the airline industry. This was to raise
awareness about the competitors strengths and to control the pricing wars built due
 Impact of legal changes- Change in the legal frameworks or policies of UK impacted the
business of British Airways (Hansen, 2013). The company has to abide and regularly check
on these advancements to imply them in there business strategies.
TASK 2
3.1 How market structure of the airline industry impacts pricing and demand for seats.
The oligopoly market structure few firms dominate the market. Production and distribution
of goods and services is decided by those few firms. On the other hand, In a monopoly market one

single seller dominates the entire market, by producing and distributing goods and services at
his/her own will (Oum and Yu, 2012). As compared to other markets, In an perfectly competitive
market few firms sell identical products., they themselves decide about the pricing and cost of the
product in the market. On the contrary in an monopolistic market there are more then sellers or
firms selling differentiated products in the market.
Airline industry of UK serves in a oligopoly market i.e. there are few firms serving in the
industry. In this market the demand and pricing strategy are based on market forces and competitive
strategies floating in the industry. For example, if any one competitor of BA reduces flight base
charge and this creates diversion for the companies customers. British Airways may decide to
outrun the competitor by reducing its tariffs also (Felices and Wieladek, 2012). On the other hand,
demand is speculated by market forces of customers choice. If the required number of passenger for
a destination exceeds then the average, it is cited to that the companies tickets are in demand.
3.2 How interplay of players and market forces shape BA's responses
Market forces of like customers perception and actions, demand and supply, price decisions
and interplay factors of core competencies, labour market trends, employees of an organisation
shape British Airways business in many ways. They are Customer Perceptions and Actions- Passengers perception towards services provided by
British Airways have a huge impact on the companies business cycle. Trends in tourism and
attractiveness of certain destination influences the customers perception towards the
company (Johnson, 2013). BA researches about these trends of perceptions and expression
of customer in the market, and accordingly decides for formulation of pricing strategy for
the company.
 Core Competencies- BA's competitive advantage lies in its outstanding technological and
innovative advancements it brings to is business. The company was first to introduce
Concorde induction in the fleets of the company (Chhokar, Brodbeck and House, 2013). The
company imports technology and constantly empowers its employees to work in bringing
innovation in aviation.
3.3 How BA has been impacted by the working practices and cultures of the countries where it
operates.
British Airways is impacted by the culture if countries and the factors prevailing in the
cultures in the following ways. Impact of business environment of counties- As BA operates in various international market,
thus numerous factors of politics and legality of the particular countries affect the business
of the company. Countries rules, regulations and its legal system are to be abided by the

company in order to successfully run its business in the country. Environmental factors of
lowering carbon emission, use of sustainable resources and social factors of taste, preference
of customers also influence business strategies in the respective country (Kinnison and
Siddiqui, 2012). Thus, BA has to constantly change its strategies in order to meet its
customers demand.
 Impact of cultures on the company- As BA works across the globe, its business frameworks
reflects the culture of various countries it operates in. The airline company has to emulate
various cultural significances in the culture of the country. This is due to the fact that
country supports anti-discrimantory policy as its policy to undo discrimination faced by
employees of different countries and cultures (Cowper-Smith and De Grosbois, 2011).
Culture embarks diversity in the business of the company and helps to import skills and
talent of respective country in the airline company itself.
4.1 Impact of global changes in trade regime caused by organisations on British airways.
There are numerous global factors that affect the trade regime in the international markets of
British Airways. They are-
 Global
Growth- As a part of global market, BA has to constantly strive to increase its global growth rate in
the international market. Fluctuations in the growth rate of the company affects the goodwill of the
company (Adler and Gellman, 2012). The company starts to loose its productivity in the
international market by losing growth prospects. World Trade Organisation- WTO is an authority responsible to in managing the travel
industry of UK. The organisation works by managing roles of different organisation in the
aviation and airline industry. The organisation aims to increase and development scope of
tourism in the world. In order to do that the organisations supports to increase passenger
traffic in the airline industry. Associations of British Travel Agents- ABTA is a leading travel magnets body who works
for safeguarding the rights and interests of passengers of UK. The associations provide
services to support the safety and informational requirements if passengers travelling
through British Airways (Carroll and Buchholtz, 2014). The company has to formulate its
policies in accordance with the association to avoid any mishap with the passengers as well
as ABTA.
 International Civil Aviation- United Nations specialise agency i.e. International civil
aviation works to formulates code and conduct for aviation worldwide. The agency works
for the development of air transport being operate by British Airways in the international to

generate growth and revenue for the company.
4.2 Other global factors which may impact BA.
Various other global factors like the regulations of Earth summit and G20 impact the
business activity of British Airways in the following way- G-20 Summit- The G 20 summit consists of a group of the most powerful economies of the
world like, Germany, India, United States of America, Australia etc (García, Gómez and
Molina, 2012). The summit was established to bring industrialisation and to discuss the key
issues faced by these economies. The airline operators of these economies consisting of G20
have to follow the summits guidelines for operations in the aviation industry. In compliance
to the same British Airways has to follow the meetings of G20 to abide by the developments
the summit brings along with it for the airline industry.
 International
competitiveness- In the international market the rate of competitiveness and innovation is very
high. British Airways has to follow the competition law formulated by the countries it operates in.
The law is formulated by various country to regulate the competitiveness of the company in the
market (Samy, Odemilin and Bampton, 2010). British Airways in order to follow these laws have
to formulate its pricing strategies accordingly with its competitors to decrease the impact of high
priced services in the market. This is to regulate the rising spirits of competition in the international
market and to develop healthy competition among the competitors.
4.3 Impact of EU policies on travel, competition or aviation on British Airways.
European union is responsible for the formulation of various policies of British Airways.
They are as followed- Competition policy of EU- This policy was formulated to regulate competitiveness among
the airline industry (Oum and Yu, 2012). In order to do that EU formulated competition laws
designed for protecting rights of consumers by controlling pricing of services in the industry. International Aviation policies- To enhance the scope of aviations in the economies, EU
signed bilateral agreements with several countries as per these agreements the countries and
EU in dual efforts will regulate the traffic of flights, passengers, air control and etc.
 Travel policies- These policies provide with various facilities to the passengers in order to
safeguard their rights towards safe travelling (Kinnison and Siddiqui, 2012). BA has to
mandatory follow the policy to provide insurance to the passengers to save them from any
travel hazard.
CONCLUSION
From the research on the business environment of British Airways it is concluded that the

external and internal environments factors play a crucial role in impacting the business activity of
the company. The report also studies the objectives of BA in fulfilling the requirements of its
stakeholders. International trade regimes and the impact of various association's like, ABTA, WTO,
EU etc. are responsible to affect the decision making authority of British Airways. Global factors
that are floating in the international are also playing an important role in the formulation of
strategies of the company.

REFERENCES
Books and Journals
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Carroll, A. and Buchholtz, A., 2014. Business and society: Ethics, sustainability, and stakeholder
management. Cengage Learning.
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GLOBE book of in-depth studies of 25 societies. Routledge.
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practices in the airline industry. Journal of Sustainable Tourism. 19(1). pp. 59-77.
Felices, G. and Wieladek, T., 2012. Are emerging market indicators of vulnerability to financial
crises decoupling from global factors?. Journal of Banking & Finance. 36(2). pp. 321-331.
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Hansen, A.H., 2013. Fiscal Policy & Business Cycles. Routledge.
Johnson, H.G., 2013. International Trade and Economic Growth (Collected Works of Harry
Johnson): Studies in Pure Theory. Routledge.
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