Analysis of the Business Environment Impact on British Airways Report

This report provides a comprehensive analysis of the business environment surrounding British Airways. It begins by exploring the different types of organizational structures and their purposes, then delves into the objectives of various stakeholders, including customers, employees, creditors, and shareholders. The report examines British Airways' responsibilities to these stakeholders and the strategies employed to meet them. It then analyzes economic systems, including traditional, market, command, and mixed economies, and their impact on the airline. The report further investigates the effects of fiscal and monetary policies, as well as competition policies, on British Airways' operations. Market structures and forces are examined, along with their influence on the organization's responses. The report also discusses the impact of business and cultural environments on British Airways' behavior, the significance of international trade, and the influence of global factors and European Union policies. The conclusion summarizes the key findings, highlighting the complex interplay of factors shaping British Airways' performance and strategic decisions.

Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Purpose of different types of organization.......................................................................1
1.2 The objectives of different stakeholders in British Airways............................................2
1.3 Responsibilities of British Airways and strategies employed to meet them....................2
TASK 2............................................................................................................................................3
2.1 Economic systems attempt to allocate the resources effectively......................................3
2.2 Impact of fiscal and monetary policies on British Airways.............................................4
2.3 Impact of competition policy on British Airways............................................................4
TASK 3............................................................................................................................................5
3.1 Market structures determine the pricing and output decisions of businesses...................5
3.2 Ways in which market forces influence the organizational response...............................6
3.3 Effect of business and cultural environment in shaping the behaviour of British Airways..7
TASK 4............................................................................................................................................7
4.1 Significance of international trade to UK business organizations....................................7
4.2 Impact of global factors on British Airways....................................................................8
4.3 Impact of policies of European Union on UK business organizations.............................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment includes all the factors which affect functions of the organization.
There are mainly two types of factors which are internal as well as external. Internal and external
factors include management, customers, employees, supply, business regulations and demand.
Present report is about British Airways which is the largest international Airlines located in UK
(Business Environment and Law, 2015). This report covers all the different types of organization
which exists in business environment. In addition to this, it includes fiscal and monitory policies
followed by the British Airways. Lastly, it also covers the measures which can be taken by the
British Airlines in order to remove the competition.
TASK 1
1.1 Purpose of different types of organization
There are mainly three types of organization, which are private, public and charitable.
Following are the purpose of these organizations:
Private organization: The main aim of these organizations is to earn maximum profits by
attracting more and more customers and by satisfying their needs as well as requirement.
Public organization: For this type of organizations, the main aim is to provide activities for the
welfare of the people and to give individuals employment opportunities (LiPuma, Newbert and
Doh, 2013).
Charitable organization: Main aim of charitable organization is to conduct activities which will
help and support poor and needy individual.
British Airways is one of the largest international airlines in UK. It is covering around 170
destinations and has its airports in 80 countries. BA mainly focuses on providing their customers
with quality services and further it is also emphasizing on expanding their business. Like all the
firms they concentrate on achieving their missions and vision. Their mission is to become the
most favourite airlines in the world. For achieving this mission, they aim at providing high
quality services to their customers by understanding their needs and requirements. Vision of BA
is take important measure which will help them in saving resources like carbon (Porter and
Rivkin, 2012). They aim at reducing the use carbon from its aircraft. Through this vision British
Airlines wishes to create friendly environment image in the world. This will further help in
setting an image among customers that they are very careful and conscious regarding the
environment. Moreover, BA has five strategic objectives which are providing high quality
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services, to become the airline of choice, expanding its business around the world and fulfilling
all needs and requirements.
1.2 The objectives of different stakeholders in British Airways
There are many stakeholders in BA and firm focuses on fulfilling all the requirements and need.
It also emphasizes on maintaining a healthy relationship with them. Following are different
stakeholder in British Airways:
Customers: They are the one from which the business runs. In other words they are the one that
give business to the organization and helps them in earning revenue. All the firms focus on
earning maximum profit and this is only possible when organizations attract more and more
customers. British Airways understands their customer’s requirement and according to their
needs and requirement it provides high quality services (Richards, Wangenheim and Schroll‐
Machl, 2012).
Employees: They are one of the important stakeholders of the organization. Moreover, growth of
the organization depends upon their performance so firm has to motivate them and encourage
them so that they can work effectively. Therefore, British Airways should treat employees as
their most valuable assets of the organization and they should also offer healthy working
environment to its staff (Wild, Wild and Han, 2014).
Creditors: Creditors provide long term and short term loans to the organization. It is very
important for British Airways to maintain healthy relationship with them. Therefore, the firm is
required to perform effectively so that they can earn sufficient amount of profit in order to pay
their debt to creditors on time.
Stakeholders: These are the people who invest in the organizations. It is very important for BA
to maintain a healthy relationship to earn good return of capital employed which is provided by
these shareholders.
1.3 Responsibilities of British Airways and strategies employed to meet them
In order to maintain a good relationship British Airways have many responsibilities
towards their stakeholders. Following are the responsibilities which are followed by BA for their
stakeholders:
Customers: As it has been discussed that firms operate in order to earn high profits and this is
possible only if it attracts more and more customers. Responsibility towards customers is to
provide them with quality services and should understand the problems or issues which they
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face. Accordingly, firm should develop various strategies which would help them in attracting
more and more customers. For example, they can develop new offers which would help in
satisfying customers. Offers like providing high quality in low price or giving them discount
offers, etc. (Budhwar and Debrah, 2013)
Employees: They are the one who represent the firm. They are the face of the firm as they have a
direct interaction with customers and provide them with appropriate information regarding the
services. BA should provide their staff members with healthy environment where they could
work freely. Workers should be provided with proper training so that they can understand their
role and responsibilities more clearly and work effectively and efficiently. Employees should be
provided with proper training or should motivate them by using motivational theories like
Maslow hierarchy of needs theory or Hertzberg hygiene factors and motivator’s theory.
Creditors: They are the one who provide Long term and short term loans. British Airlines should
always pay back their debt. They should adopt cash management technique and should adopt
different strategies which would help them in enhancing their revenue. According to these
strategies they already have a plan by which they know how much they need to spent for each
program. With the help of these strategies they will be able to pay back their debts timely.
TASK 2
2.1 Economic systems attempt to allocate the resources effectively
Economic system is a system of exchange and production of services and products in an
environment. In simple words, it is a system where a business attempts to meet customers’ needs
and wants by providing them with quality goods and services. An economy should be able to
answer what it has to produce, how it should produce and who will be their target customers.
There are many types of economic systems which a country can follow:
Traditional economy system: It is a system which retains the economic position of their
ancestors. This economy relies on success of social customs. Asia, Africa and South America
are few countries which support traditional economy like agriculture (Solomon, 2014).
Market economies: It is a free market economy where government has no control rather it is
based on consumers buying decisions. Firms are free to do business on their own way as there is
no interference from the government. In this economy, large firm dominate the small firm as
they get higher control over resources. With this economy BA will have advantage of using
resources according to their requirement as it is the world’s largest airlines.
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Common economy: According to this economy, government has the power of making decision.
They have played a vital role in production decision. This economy is less flexible as
organization cannot take decision own their own. Through this economy a balanced equal
opportunity of growth and regional development is gained by all the organization even if the
company is large or small (Sørensen, 2012).
Mixed economy: It is the combination of command and market economy where both the firm
and government have equal right of making decisions. With this economy British Airways will
have few exemptions where they will be able to use resources on which government has no
control.
2.2 Impact of fiscal and monetary policies on British Airways
Fiscal policy can be determined as a way with the help of which level of spending and tax
rates are adjusted by the government (Cavusgil, Rammal and Rose, 2014). On the other hand,
monitory can be determined as process in which monitory authority like bank controls the
interest rate by controlling the supply of money. Following are the impact of both these policies
on British Airways:
When Interest rates raises: When government raises the interest rate then, it would affect British
Airways inversely. As because of this firm has to raise the cost of their flight tickets. When the
price of the tickets would raise, then the demand of the customers towards the services provided
by BA will come down and firm will face low profit or it may also face losses (Carroll and
Buchholtz, 2014). Similarly, it the government decreases the interest rates, then organization can
reduce ticket prices. This will be helpful in attracting more and more customers and raised
profits.
When tax rates changes: When changes are made on fiscal policy, then it does effects the firm
in many ways. In this context, when tax rates are reduced, then firm will be able to improve their
services and will be able to satisfy their customers easily (Portugal-Perez and Wilson, 2012).
Moreover, customers will be able to benefited as they will get additional services on same price.
Further, organization will be able to gain more profit. On the other hand, when tax rate will raise,
then firm will not be able to provide better services to their customers.
2.3 Impact of competition policy on British Airways
There are many policies which governs competition in UK. These types of policies are
very helpful in improving efficiency and in making the effective operations of market. In
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addition to this, main aim of these policies is to ensure that firm come up with new ideas and
innovations in technology aspect which will be helpful for promoting the efficiency of dynamic
in the market. These policies are beneficial for customers in reducing the price level and in
having more substitutes for same product (Tayur, Ganeshan and Magazine, 2012). It looks after
that the supply of commodities is with accordance to demand. Further, one of the main roles of
these policies is to provide access to mergers where competition may be compromised or it can
block mergers so that conflicts may not occur. According to fair trade policy in UK, it focuses on
protecting customer’s rights and in maintaining fair competition among the firms. Fair
competition means that the firm is not involved in any kind of unethical practices. Main
competitors of BA are United Airlines, Inc., Japan Airline Co. ltd. and Deutsche Lufthansa AG
(Reeves, Love and Tillmanns, 2012). These types of policies are very helpful for the British
Airways to run their operations in a systematic and in ethical way. It also guides them to follow
all the policies effectively and in providing their customers with quality services.
There are few regulatory mechanisms like Office of Water services Regulation Authority
(Ofwat) and Office of Gas and electricity market (Ofgem), these mechanisms focus to have a
comfortable regulation and economically sound for the powerfulness of customers, investors,
market, etc. These laws and mechanisms are very helpful of British Airways to act effectively in
maintaining their standards and in performing effectively (Hair, Wolfinbarger and Page, 2015)
 It also restricted the monopoly formation the British airway can change the set the price
for the other competitor in the market. UK policy are reliable that reflect the other person
that are the well beings of the business for determining the price of substitute product
quality with the innovative price in the business for securing the market shares and
potential.
 That the time manager have duty to take responsibility in decision related to training and
efficiency method for the business.
 They identifying the demand and preference of the consumer and analysis and evaluate
the business. British Airways reduce the price according to the consumers but its
operation cost in increase and company can reduce the profit margin.
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TASK 3
3.1 Market structures determine the pricing and output decisions of businesses
A structure where numerous organizations offers and operates uniform services and
products is known as market structure. These market structures are highly affected by pricing
method and promotional strategy which is adopted by the organization. These are many types of
market structure. Following are few structures:
Perfect competition: In this market, there are large number of buyer and seller involved and both
have ample information regarding services and products. BA does not come under this market
structure as it has few competitors (Chadee and Roxas, 2013). In this market, firms compete on
the basis on price and quality. Company applies different strategies in order to attract customers.
It further offers customers with discounts, additional services for free, etc.
Monopoly competition: In this type of structure there is only one seller but there are large
customers. These products or services do not have any substitutes and as a result the product and
services offered by these firms are very high. British Airways do not come under this
competition as it has few competitors (Beaumont, WHITAKER and PEDERSEN, 2013).
Oligopoly competition: It is a market types where few firms compete. BA comes under this
market structure. Its main competitors are United Airlines, Inc., Japan Airline Co. ltd, etc. In this
structure firm have to adopt different strategies and schemes which will help them to attract
customers on their side. If any of the organization applies innovative offers or schemes, then it
will inversely affect other organizations (Isik, Jones and Sidorova, 2013).
Monopolistic competition: In this market place there are many sellers with many substitute
products. In this market customer prefer those services or product which provides them high
quality service in low price.
3.2 Ways in which market forces influence the organizational response
Firms have to adopt different strategies in order to attract more customers. Following are
the market forces which affects organization's response:
Supply and demand: In today's world, global economic condition changes frequently and as a
result organizations have to make changes in derivative strategies and in formulating raw
material purchasing strategies (Rogerson and Rogerson, 2012). Organizations should be able to
maintain their supply of products and services even after fluctuation in business environment.
These market forces highly influence the demand and supply of a firm. Even in such situation
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British Airways should be able to provide their customers with timely services. When supply
would be high, then the BA should be able to supply their services accordingly so that all the
customers could be satisfied. Demand will affect negatively when British Airways will not be
able to supply accordingly.
Technology improvement: Technology plays a vital role in providing customers satisfaction
with improved services. Organization should always update their technology so that customers
can be satisfied according to their needs (Vahlne and Johanson, 2013). British Airways will be
highly affected if they do not make changes in this technology. They will be not be able to
compete with their competitors effectively.
Customer’s perception: Organization should make change according to customer’s trend and
requirements as perception of customers highly affects the organization. This can affect BA, if
they do not make changes according to the requirements of customers. In this context, market
research are very helpful so as to know the needs and wants of customers. (Bryman and Bell,
2015).
3.3 Effect of business and cultural environment in shaping the behaviour of British Airways
When organizations make decisions regarding their expansion of business, then these
environmental and cultural factors affects directly. Following are the factors which affects the
business and cultural environment:
Political factor: These are the factors which creates friendly environment in the country. In other
words, it is referred to policies which rules government in developing business friendly
environment. Government of UK adopts friendly policies for organization which are favourable
for the aviation industry. These laws, acts and policies are developed according to the culture
which is followed by the particular country (Gaskill, Van Auken and Kim, 2015). In with this
context, BA are supported by government of UK in providing them opportunities for them.
Economic factor: Inflation rate, employment rate, interest rate, etc. are few factors which
contribute in Gross domestic products (GDP). Environment should be scanned by British
Airways in such a way that economic factors may not affect the firm as these factors have high
impact on business and environment (Beynon-Davies, 2013). By proper scanning firm will be
able to take appropriate steps through which they will be able to overcome the issues.
Social factors: Social factors are affected by customer behaviour, expectations and their
perception. Firms should come up with new innovations so that they can satisfy the needs and
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requirements of their customers. Moreover, human resource should be managed effectively so
that services could be delivered efficiently (Siewiorek, Saarinen and Lehtinen, 2012). If British
Airways do not follow these things, then they will be affected by these factors.
Technological factors: Use of improved and updated technology is very helpful in attracting
more and more customers. In addition to this, it is helpful in improving the efficiency. British
Airways provides their customers with high quality services by using the improved technology
as it is helpful in delivering higher quality service at the lower price (LiPuma, Newbert, and Doh,
2013). Changes take place frequently and it would be helpful for the firm to understand
customers needs and wants effectively.
TASK 4
4.1 Significance of international trade to UK business organizations
Exchange of capital, services and goods across overseas and territories are known as
international trade. In other words, it is the exchange of services and goods to different countries.
There are many benefits as well as negative impact of international trade. Following are the few
benefits:
It is very helpful in expanding the business. Different countries have different culture and
accordingly they have better options and have large target audience in international trade.
In different countries there would be many competitors and through international trade. When
the competition will increase, then firms will adopt different type of strategies in order to
compete effectively (Porter and Rivkin, 2012). As it was discussed, according to change in
culture preferences and expectations also changes and organizations have to make changes in
these services or according to the demand. Moreover, in order to enter into the market, it is very
essential to reduce the price of the services or products so that it could get easily accepted by the
new market. Further, international trade is very helpful in increasing the increasing global market
share.
There are also negative impact of international trade. Among which in international trade, it
consumes lot of time as in order to cover the whole market it takes time in developing an image
among the customers. In addition to this, organizations need to have license for trading and it
should be performed according to rules and regulations (Richards, Wangenheim and Schroll‐
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Machl, 2012). Moreover, there are cases in which firm fails in meeting the demand of
commodities and shortage of these goods may cause inflation (Kew and Stredwick, 2005).
4.2 Impact of global factors on British Airways
Global factors are very helpful for the British Airways in operating their business globally
and in their own country. There are many global factors by which British Airways gets affected.
Following are the factors which affect BA:
Increases in competition: Global factors have increased the competition. However, due to
increase in competition, business of BA has come down (Wild, Wild and Han, 2014). British
Airways have many businesses which are been operated in different countries. But all the
businesses around the world is been affected due to competition. In this contrast, the only way to
compete effectively is by providing quality services to their customers.
Increase in unemployment: Due to unemployment people tent to pay less and as a result airlines
have to pay heavy bills on jet fuels on quarterly and yearly basis (Budhwar and Debrah, 2013).
As a result, it has increased the cost of the air tickets.
Taxes and exchange rate: Rate of exchange differs from country to country. This is one of the
major factors which affect the organizations revenues and profits. However, firm finds it difficult
in expanding the business, if the tax and tariff rates are high. With accordance with the case, BA
will face major threat if UK changes its exchange rate frequently (Solomon, 2014).
The global factor may be include the economic, socio economic, political, environmental,
geographic areas and culture of the country and political rules and conditions. It may be reason
of that the threat of the establishing the UK business to the fast economic growth of the Russia,
Brazil, India and effect may be development of the country in the significance basis.
Globalisation policy also help to develop and expand the business in export market with not any
barrier for trading between the country. It may be merger and acquisition of the take place and
opportunity to develop the sustainable growth in the market place. They also promote the
developing the economy by outsourcing and hiring the employees and labours in the wider range
to different country.
4.3 Impact of policies of European Union on UK business organizations
Following are the impact of European Union on UK business:
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 Inflation policies: Monitory Policy Committee (MPC) is very helpful in setting up
interest rates and it also makes sure that there is no increase in price. When individuals
borrow or spends money on huge amount, then it surely leads to increase in interest rates.
This results in difficulty for individuals in borrowing money (Cavusgil, Rammal and
Rose, 2014). This inversely affects the price. So it is very essential for the UK to have a
control over inflation rate. Environmental policies: Government plays a major role in stimulating employees. In
UK, government promotes effective business which results in providing job opportunities
and it is competitive in the international market. It enables to contribute effectively
towards the increase in GDP rate.
 Taxation policies: By paying taxes on time, organization can help their government.
Taxes paid by the firms can be utilized in various projects like developing countries,
constructing roads, etc.(Sørensen, 2012) It will help UK in improvising the services of
the country and in attracting more and more outsiders.
There are the many policies undertaken by the European country that also affect the UK business
in the climate change act may be target that they reduce the carbon emission. That will be impact
of the productivity in the term of using the machine for production process of the product. That
create the negative impact of the business. Regional policy that can grant the firm to improve the
sales, purchasing power and profit of the business. Social policy also relate the business specific
healthy and safety, opportunity and compliance policy which affect the business. It also includes
the legal framework and its related to the operation of long term period.

CONCLUSION
From this report, it can be articulated that stakeholder are very important for the growth of
business. Customer is the most important stakeholder as they are the one because of which a firm
can determine that the business is growing or not. Further, British Airways comes under
oligopoly competition because it has few competitors. In this regard, it is required that British
Airways must offer sound services to their clients so that they can able to retain high market
share. In this regard, company can offers different schemes and discount in order to get rid from
increased competency.
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