An organization which is surrounded by various people, resources, media, government,technology, economic conditions, rules and regulation of the government, culture and values ofthe society, domestic and global competitive scenario (Chaiprasit and Swierczek, 2011). Abusiness enterprise and the above mentioned factors have interrelated relationship. Both havesignificant influence on each other. This report is made to give the comprehensive understandingabout the type’s factors which are the part of a company’s business environment. The wholereport is made in the context of business environment of British Airways. In this report, thepurpose of different types of organization will be critically analyzed and simultaneously it alsobeen discussed what activities are done by the management to fulfils the objective of differentstakeholders. In the report, the impact of fiscal policy, monetary policy, and competition policyon the British Airways business activities is also analyzed. Moreover, the report also examinedhow market structure determines pricing and output decisions of business.
1.1 The purposes of different types of organization–
Every organization comes in the market with some objective or purpose which we call
business enterprise mission or ultimate goals that it wanted to achieve from the concernedmarket. The purpose of organization depends on its type whether it is public sector (Governmentfirm) or private sector. A public sector firm usually establish to give employment opportunities inthe society and to protect the industry areas which are highly sensitive in respect of nation’ssecurity (Capon, 2009). On the other hand private company’s purpose of establishment is to earnprofit by adopting sustainable strategy to grow in the industry. The basic purpose of any firm isto make profit by serving its customers in the best manner so that the customer retention can bemaintained. British Airways is one of the UK’s success stories of privatization. In 1980’s, BritishAirways become privatized due to increase in the accumulated losses. British Airways rejuvenateits strategy and made its mission to become “The world’s favorite airline” and company makesaccomplish its mission in 1990’s by becoming the World’s most profitable airline (About BritishAirways, 2014). Now British Airways is more concerned about the continuous exponentialgrowth as more airlines firms have come in the market. In the view of this scenario the companyhas made its mission to become the world’s leading global premium airline (Paul, 2006). The
firm will accomplish this ultimate objective by offering the best qualitative and enjoyable flyingexperience to the customers of all over the world. So this was the British Airways mission. Thevision of the organization refers to the desired end state of the business enterprise. The BritishAirways vision statement states that the firm wants to become the world’s most responsibleairline (Kennerley and Neely, 2003). The company has set goals to reduce carbon emission,recycling of waste and minimization of air an noise pollution.
1.2 Key Stakeholders of the British Airways-
Stakeholders of the organization are those who can influence the business activities or
can be influence by the business enterprise activities. They have significant role in thefunctioning of the business enterprise (Allen and Raynor, 2004). The Stakeholders of BritishAirways can be categorized into internal and external stakeholders.
- Owner- He is the actual business owner of the business. He wants to have sufficient
ownership control over the business and want to earn incremental profits from the
business (Nimwegen and et al., 2008).
- Manager- Manager is the one who make important decision related to the growth of the
business and makes organizational policies and strategies to fulfil the common objectiveof the business eneterprise.
- Employee- Employee of the firm wants to take part in the decision making process of theorganization and wants to get good remunaration for their work (Kennerley and Neely,2003). If the firm fails to fulfill employees need then employees can create barrier onoperational efficiency of the company.
- Customers- Customer are those stakeholders which desires to have the best quality ofproduct and services from the british airways at the best optimal price.
- Shareholder- Shareholders are ones who invested their money in the share capital of the
firm. Shareholders wants to earn maximum return on their capital invested. They want tosee exponential growth of the business.
- Government- Government are concerned with the collection of taxes from the businessenterprise (Nimwegen and et al., 2008). Government collects different types of taxesfrom the company like corporate tax on profit of the firm, Airport charges for the landing
of aircraft in the country and etc. Government also gives emphasis on the safety and
security of the people and for this they perform inspection on the aircraft (Ward and
• Creditors- They can take part in the management decision if the firm has borrowed large
amount of firm from the bank or venture capital. They wants to earn interest on theamount they gave on credit.
1.3 The way British Airways fulfill its responsibilities of different stakeholders-Table The way British Airways accomplishes the objectives of different stakeholder
Ways through whichorganization meetsstakeholders objectives
Appropriate Remuneration,Good working condition,Incentives, Equality, and goodcorporate governance.
By framing goodorganizational policy,providing remunerationaccording to industrystandards, facilitating goodinfrastructure for work, fairand transparent treatmentwith employees (Kusluvan,2003).
Achievement of recognizedposition in the organization,participation in decisionmaking, authority andresponsibility and managementcontrol (Nimwegen and et al.,2008).
Good practice related topromotion of employees,best practice forperformance appraisal ofemployees.
Timely payment of the inputsupplied like Fuel, Food andBeverages.
Through efficient workingcapital management.
Flying with enjoyableexperience by getting the bestservice from the airlinesservice provider.
Facilitating the best serviceby providing good food andbeverages and otheramenities.
Continuous profit booking ofthe firm.
By doing good marketingcampaign and availing thebest services to thecustomers of the firmwhich will bring more salesrevenue for the firm(Fernando, 2011).
Good return on the capital
Through high profit
Competitors want to gainhigher market share of themarket (Nimwegen and et al.,2008).
British Airways willestablish competitiveadvantage in the industrywhich will maintaincompetitive environment inthe industry.
Regular and timely payment oftaxes and safety of people.
By Practicing good ethicaland moral standards.
2.1 Effect of economic systems in allocation of resources effectively-
Across the globe, mainly 4 types of economic system are followed namely- Traditionaleconomic system, Market economic system, Command economic system, and mixed economicsystem. All four economic systems have their own advantages and disadvantages. Traditionaleconomic system refers to that economic system in which new generations followed historicsuccess of social customs and norms (Jennings, 2010). They rely on the practices of their parentsand grandparent. The Market economic system is also called capitalist economic system. Thiseconomic system is based on consumers and their buying behavior. Here, the buyer decides whattype of product they require and how much they are ready to pay for that required product. Inthis economic system the role of government is almost negligible as this economic system isdominant by private businesses. The command economic system is one in which the governmenthold the power on the ownership and management of the business activities (Cheng and et .al.,2007). This economic system is less flexible and it is very slow to adapt changes related toconsumer buying behavior. Here, private sector business is restricted. A mixed economic systemis the combination of market economic system and command economic system. Here, bothgovernment and private business plays crucial role in the development of the country’s economic
British Airways is one of the successful examples of privatization. Primarily the control
and management of British Airways was in the hands of UK government but due to theaccumulation of large losses the firm become privatized and proves to be profitable (Paul andBarbara, 2009). The Mixed economic system of the UK helps the firm to survive and achieveincremental growth in the world aviation industry. Now the company is free from governmentrestriction and management control which helps it to make changes according to the need andrequirement of the customers (Giancarlo, 2005).
2.2 Impact of fiscal and monetary policies on British Airways and its activities-
Monetary Policy is that policy which is made and governs by the central bank of thecountry. This policy is made to control the money supply in the economy. The money supply iscontrolled by increasing or decreasing in the interest rate. This will affect the borrowing cost ofcapital. Increase in the interest rate or hike in the monetary policy will have effect in increase infuel prices of the airlines and will also increase the cost of debt capital if any (Mohamed andLashine, 2003). Due to this impact British Airways will have to increase its price and this rise inprice will reduce the demand of British Airways service as price has inverse relationship with
On the other hand fiscal policy is related with the government planned and non-planned
expenditure which will influence the economic conditions of the country. According to thisplanned and non-planned expenditure government plans its revenue source to meet thisexpenditure and this revenue comes in the form of taxes (Khattab and et.al, 2012). At the time ofrecession government lowers taxes and at the time of inflation government increases the taxes tocontrol excess money supply. Higher taxes will not motivate people to use luxury services asthey will have to pay higher tax (Conklin, 2011). Moreover, it will also gobble up the profit ofthe British Airways.
2.3 Impact of competition policy and other regulatory mechanisms on the activities ofBritish Airways-
Competition policy is made to encourage healthy competition the market so thatconsumer can get the best quality product at the best competitive price. This policy is made tosafeguard the interest of society and consumer so that companies cannot make monopolycondition in the market and cannot exploit the consumer through price discrimination (Allen andRaynor, 2004). In the view of competition policy, British Airways have to follow fair andtransparent pricing policy and have to follow the set guidelines to go for strategic alliance withfirms of other countries where the company wants to establish its presence.
The airline industry is subject to high degree of global, European and UK Governmentregulation encompassing of commercial activity and operational activity. British Airways isregulated by Secretary of State for Transport and Civil Aviation Authority (CAA). The CAAmonitors various aspects of airline industry like company’s financial condition, management andoperation and etc (Zhang and Huang, 2012). British Airways is also subjected to follow rules and
provisions related to EU regulations which are made under the provisions of European Treaty.The airline companies also have to follow International Regulations of Airline (ICAO) which isrelated to Airlines’ rights to flyover, or make stops in, foreign countries for technical reason.
3.1 Determination of pricing and output decisions of businesses by market structures-
It has been seen that airline industry in UK as a market structure is oligopoly. In case ofoligopoly, there are numerous amount of sellers but very few sellers. Airline industry is majorlyconcerned with traveling services. So here, it can be differentiated based on quality of serviceoffered by such airlines. In this particular market, companies have little control over the priceand it is the reason why non-price competition prevails in the market (Berman and et.al., 2009).The biggest advantage of British airways is that it is very little scope of entrance of newcompetitor in the market as it requires huge investment. However, here majority of losses arehigh with respect to abnormal when demand falls significantly. Even in this market, there is aneffect of interdependence relationship when one firms adopts strategic ideas it has direct effecton the demand of other firm. The main objective of British airways is to provide high qualityservice to its customers by providing them with good food and effective services (Blaževic andJelušic, 2006). In such particular market, Price of airline highly depends upon market force suchas demand and supply.
3.2 Ways in which British Airways respond to the market forces-
British airways has adopted various strategies in order to deal with market forces. Thesegiven below are some of the strategy formulated by company in order to back down marketforces:
- Expansion in fleet size- The airlines have expanded its fleet size that allows it to offermore seats or supply to the customers. By increasing the fleet size in different countriesBritish airways able to cater more customers in finest manner (Prasad, 2010). This helpsthe firm to increase its profit.
- Upgraded Customer Experience- Company has received good response towards itsGalleries launges at Terminal 5 and Terminal 3 in UK. Now British airways is planning tocome up with same kind of amenities in other airports such as Milan, Johansburg, andVancouver (About British Airways, 2014).
- Premium Services for the customers- Organization now a days has focused on the
premium services to their high-end customers. With an added advantage of new club
world product in the aircraft Boeing 747 and Boeing 777.
- Cost efficient Aircrafts- British airways has always tried to reduce the cost of fuel
consumption, in order to decrease their overall operation cost. In order to cope with such
situation, they are trying to purchase those aircrafts that are highly fuel-efficient (Shaikh,
- Launched of new routes- There have been consistency in the slowdown of market
demand, rather British airways identified new routes like London to Hyderabad and StKitts that proves to be profit yielding for the firm (About British Airways, 2014).
3.3 Analyzing impact of business and cultural environments on British Airways-
For an airline business, they have to deal with various cultural environment present invarious different countries where organization is functioning. British Airways is in the marketfrom last 90 years and is one of the multinational airline company of UK. Organization iscarrying out its operations in many countries and have to deal in different culture, as it hassignificant influence on the British Airways. British airways have to follow the rules andregulations of different countries related to aviation (Kunnanatt, 2011). It makes hugecomplexities for understanding aviation rules and regulations of each country. Even politicalfactor have greater effect on the pricing structure of airlines provider, due to difference in the taxpolicy with respect to custom and excise duty. Further Economic slowdown affects the growth ofthe airline firms. Even cultural environment has significant effect on British airways, asorganization have employed employees in the business who are from different ethnicbackgrounds. It may with respect to caste, language, religion, nationality, value etc. Organizationhave been recruiting staff from diversified background. It helps in providing greater satisfactionto customer, as these employees can easily understand and deal with passengers of their countryor religion or race (Paul, 2006). Hence, it can be stated that both business environment andcultural environment have significant impact on British Airways.
4.1 Significance of international trade to UK business organizations-
International trade of any nation could be defined as transfer of goods and service outsidethe geographical boundaries of once own country. It also includes flow of capital, movement of
people for livelihood, and flow of finance and technology from one country to other. If anycompany is dealing in international trade then it helps them to increase their revenue. It may bedue to increase in the cargo, travel of people from one country to another for business purpose,and less tariff barrier on import and export through air routes (Capon, 2009). This concept hashelped UK in many economic scopes such as increase in the strategic alliance, organization ofUK expanding their operation in developing economies, increasing production activities byestablishing factories in highly economic efficient companies and outsourcing of work(Kennerley and Neely, 2003). International trade has even helped in the area of tourism andhospitality industry of the UK, in the form of increased benefits.
4.2 Impact of global factors on UK British Airways-
The global factors that can have impact on the British Airways can be assessed with thehelp of following factors-
- Exports- Goods and services exported by company have a significant impact on theBritish Airways. However, if countries will not be having resources that can be used forthe purpose of export, then it will not add value to the airline firms (Ward andLewandowska, 2008).
- Trade Associations- It refers to free flow of goods and services among the member
countries without any restriction. Even payment could be done on mutually decided
currency. UK is the member country of EU. Trade association helps in opening the gate
with respect to international trade. However, even sometimes it restricts the trade of the
member country with other countries. So it can be seen as an obstacles (Fernando, 2011).
- Strategic alliance with foreign firms- This is done by organization in order to develop
their functioning in other countries. This may not be successful always due to lack ofcoordination between the firms.
- Competitive advantage overseas- Organization trying to expand their operation gloabally,
needs to have a strong competitive edge towards the global competitors (Ward and
- Political factors- If other countries will not be having stable political situation, then it will
be difficult for British airways to continue their operations.
- Economic Stability- if there will be sluggish economic growth or downturn then in that
case economy doesn’t encourage strategic alliance.
4.3 Impact of policies of the European Union on British Airways-
It has been seen that European transport policy has significant impact on the BritishAirways. There are various provisions relating to European transport policy such as:
- Single European sky (SES)- It is European Commission initiative in order to design and
manage regulation of airspace. It will be helpful for coordination throughout the
European Union (Written evidence from British Airways plc (EU 03), 2011).
- Consumer protection legislation- This provision came in light when the recent mass
grounding of aircraft across Europe caused the airspace closure due to volcanic ash
eruption that makes emphasis to compensate those customers who are adversely affected
by such disruption.
- SLOTS- This is with respect to allocation of slots across the global network of airportsand airlines. It creates business assurance for operators that will help in the investment innew routes, equipment and employees (Written evidence from British Airways plc (EU03), 2011).
- EU emission trading scheme (ETS) – This scheme is established to sort climate changeby reducing industrial greenhouse gas emissions cost-effectively. British Airways alwaysgo in line with environmentally friendly way to manage its impact on the environment.
The main aim of present report is to critically analyze different types of organization andsimultaneously it have been discussed that what activities does the management do to fulfil theobjective of different stakeholders. In the report, the impact of fiscal policy, monetary policy, andcompetition policy on the British Airways business activities is also analyzed. Moreover, thereport also examined how market structure determines pricing and output decisions of business.The study concludes that British Airways is having better market capitalization in those countrieswhere they have frequent operations. Company is facing challenges by the economic system ofvarious countries of their functioning. Further, market structure of UK has been discussed in theairline industry that reflects highly competition. British airways management continuously focuson maintaining the competitive edge in the market and attain sustainable future in the targetedmarket.
Journals and Books
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Blaževic, B. and Jelušic, A., 2006. Modelling regional economic development. Kybernetes.35(7/8). pp.1190 – 1202.
Capon, C., 2009. Understanding the business environment. 3rd ed. Harlow: Prentice Hall.Capon, C., 2009. Understanding the business environment. 3rd ed. Harlow: Prentice Hall.
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Khattab, A. A. and et.al, 2012. Executives’ perception of political-legal business environment ininternational projects. International Journal of Commerce and Management. 22(3).pp.168-181.
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Kusluvan, S., 2003. Managing employee attitudes and behaviours’ in the tourism and hospitalityindustry. Nova Publishers.
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Nimwegen, G. and et al., 2008. A stakeholder perspective on mission statements: an internationalempirical study. International Journal of Organizational Analysis. 1(2). pp.61 – 82
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Paul, J., 2006. Business Environment. Tata McGraw-Hill Education.Paul, J., 2006. Business Environment. Tata McGraw-Hill Education.
Prasad, V., 2010. Business Environment. Gyan Publishing House.Shaikh, S., 2010. Business Environment, 2/E. Pearson Education India.
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Zhang, A. and Huang, Q. G., 2012. Impacts of business environment changes on globalmanufacturing outsourcing in China.Supply Chain Management: An InternationalJournal.17(2).pp.138 – 151.
British Airways, 2014. [Online]. Available through:<http://www.britishairways.com/en-gb/information/about-ba>. [Accessed on 3rd June2014].
Conklin, D., 2011. The global environment of business: New paradigms for internationalmanagement. [Online]. Available through:<http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtran/875/875vw04.htm>. [Accessed on 3rd June 2014].
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