The business environment of an organization represents all those external factors which directly or indirectly affect its functioning. It comprises those macro factors that create opportunities and threats to the business. This concept is fruitful to predict upcoming changes and events that will take place in an organization. It plays important role in balancing business policies with respect to government laws and guidelines. In the present report, British Airways (BA) is used as case study to analyse its business environment. It is a major airline company in Britain that carries its operations in the domestic and international territories. The report introduces to various external factors that influence business operations of mentioned aviation company.
In an economy, there are different types of organizations operating to provide its products and services in the market. On the basis of its purpose and goals, business entities can be classified as...
British Airways comes under private sector organization segment with a vision to be one of the world's leading global premium airlines. The company prepares its policies that led it to be the largest international carrier in the UK market. British Airways mission is classified in three key areas. Firstly, at global level, it attracts repetitive passengers for business or leisure travel purpose to build strong goodwill. Secondly, it ensures that the travellers receive the highest quality of service while moving from one destination to another. And thirdly, maintain the attribute to provide the latest equipment, product and services to aviation industry.
The individuals or group of persons who have invested in the company and acquire their importance directly and indirectly in the business entity are considered as its stakeholders. They play role in planning, organizing, operating and monitoring of an organization to accomplish the laid down objectives. Each stakeholder in British Airways performs his own role and responsibility; also cooperate in enriching the decision-making process of the company. On the counterpart, the aviation entity fulfils the objectives of different stakeholders in the following manner:
Owners and shareholders
This group is considered as the backbone of Aviation Company as they invest capital and are the major source of finance. Their main objectives are profit maximization, growth and expansion of the company.
Skilled and qualified manpower are important to operate airways in effective manner. For them, job security, status and salary benefits are main the objectives to be attained.
Clients and customers
British Airways always focuses on providing comfortable and high quality trips to its passengers. The company possesses numerous business and leisure time travellers as its customers.
The government bodies are responsible for managing an economy. The UK government prepares policies related to taxation, foreign trade, employment laws and many more in order to monitor economic growth. They demand better job opportunities, environment protection and corporate social responsibility from the aviation entity.
British Airways is responsible towards its stakeholders to ensure that their demands are fulfilled. From the above section, it is derived that every stakeholder has different expectation from the mentioned aviation company. The shareholder on one hand requires higher profits and increasing growth prospects for the company. While, the employees make efforts to achieve desired outcomes for the organization in return acquire job safety and satisfaction. The clients or customers of British Airways desires for safe, speedy and comfortable rides. Also, the government authorities lay interest in employment generation and environment protection activities. In order to achieve these objectives, the company prepares following strategies...
An economic system denotes the method used to allocate, produce and distribute trading commodities and services. It is an organized way through which manufactures of a nation allocates its resources and apportions services in the national community. There are generally four types of economic systems present in the global market that have their own attributes. These key economic systems are discussed below...
Traditional economic system
Products and services produced in this type of economic system directly influences customs, traditions and beliefs of the society. Barter system is followed in this traditional approach and resources are allocated in such manner that minimal wastage is done.
Command economic system
The command economy concept is based on notable feature of centralized control over country's resources. It indicates that optimum utilization of resources is done by federal government or authority. This economy generally prevails in North Korea, Cuba in order to posses and develops valuable resources of the country by the higher authorities only.
Market economic system
It is also referred as free market economy as the government does not control vital resources of any major segment of the economy. The demand and supply of goods is determined by the people and producers themselves. Countries such as Singapore, Australia adopts this type of economic system to expose the resources effectively.
Mixed economic system
British Airways follows mixed economic system which is mixture of market and command system. The market is more or less free from the government ownership except few key areas. The company is able to operate and formulate its schemes and policies according to market demand with few restrictions from government authorities.
Impact of monetary policies
The central Bank of England frames the monetary policies for country's economy to determine the size and rate of growth of money supply in the market. British Airways also faces various challenges when interest rate, buying and selling of government bonds and bank reserves are modified by the central bank to maintain supply of money. For instance, change in bank interest rate influences British Airways loan policies. Low bank interest rates in the economy will motivate mentioned aviation company to apply for loan and increase its capacity to invest in new projects. In this manner company is benefited to explore more opportunities in the market.
Impact of fiscal policies
On the other hand, UK government monitors the market economy through effective monetary policies. The fiscal policy usually involves changes in taxation and government spending policies. When the taxation policies are favorable te economy is empowered with higher investment. On the contrary, when high taxes are levied in market British Airways increases its tariffs and fairs to meet the desired increased rate. Although it hampers rigorous flow of passengers or travelers as they substitute mentioned company's services with other modes of transportation or rival corporations.
British Airways avails aviation services in both domestic and international market and faces strong competition from its rivalries. In order to ensure that business activities of one organization does not hamper the potential market of another business entity there are few regulatory bodies and policies are framed.
Competition policy intendeds to prevent collusion among British Airways and other firms for excessive market power condition in one hand only. This is monitored by keeping an eye on mergers and acquisitions of British Airways. The Competition Act 1998 and The Enterprise Act, 2002 act as two prominent tools to monitor the aviation entities anti-competitive activities. Competition Act framework identifies and monitor restrictive business activities of the company. Further it takes care that the mentioned business entity does not formulate monopoly policies to acquire dominant market position.
Competition and Market Authority a non-departmental public body in UK is responsible for investigating mergers and acquisitions in the market. The Enterprise Act 2002 gave Competition Commission powers and independence to make decisions on inquires and issues related to competition problems. This regulatory body is responsible to monitor British Airways mergers and acquisitions in the market. Like for instance, it takes care that agreement signed for ownership between the mentioned aviation group and other organization is clearly defined with fair norms and regulations.
British airways is the leading premium airline transport company in Uk and across the globe. Determining the pricing and output decisions of the concerned company thus becomes a crucial segment. The company identifies and examine these decisions by clearly analysing the market structure in which it operates. Broadly, market structure reflects the number of industries generating goods and services which are identical and homogeneous in nature. The structure is segmented into the following market on the basis of business relation.
Perfect competition market
This market consist of numerous buyers and sellers which specializes in selling a homogeneous product.
This market consist of few numbers of firms who sells either the homogeneous product or a differentiated product. There exist no barriers to enter a firm into the industry in short run. But in case of long run, there applies restrictions to enter a firm in the industry.
This market reflects the situation under which the firm sells differentiated goods and services. It is characterized by large number of sellers. With reference to the above market structure, British Airways operates under Oligopoly structure of market because it deals with the competition among the few firms in the air transport industry. The pricing and output decisions are thus determined by adopting the Kinked demand curve. It says that since the British Airways industry is a pure oligopoly and generates differentiated products in terms of tourism and travel, it therefore makes its price rigid. If it does not do so and lowers the price, its competitors will follow the same criteria to avoid loosing its audience. As a result the company fails to increase its overall demand by reducing its price. In that perspective, the concerned industry always makes a rigid price to attract its customers under oligopoly market structure.
Forces of demand and supply reflects the overall response of the concerned organisation. It represents the collective interests of sellers and buyers on the quantity and price of products offered and services rendered. In the context of British Airways, the following forces acts as a crucial phenomenon in organizing the general aspects of industry response.
Demand Supply analysis
British Airways determines its market force by supplying the exact quantity of product as demanded by its audience in the line of tourism and travels. It matches its equilibrium by meeting the demand supply chain and thereby fixes its price to produce its output.
With this analysis, the mentioned company develops a unique product and service as a substitute to beat up its competitors and attract a set line of customers and the target market.
Cost effective analysis
It helps the industry to build a competitive workforce by evaluating and comparing the cost of its action and their effects in travel and tourism sector. The one which generates cost effective services are taken on a prior base.
Cultural and business environment plays a significant role in shaping and organizing the behavioral aspects of the cited industry. It broadly reflects the social factors that affects the business of the organization such as traditions, ethical standards, values and norms along with the literacy level. Since British Airways predominantly operates in UK, therefore, the industry has a huge impact by the working practices and cultures of the said country. People in UK prefer high privacy during the working hours and thereby finds little difficulty in adapting a change or exploring to outer scenario. As a result, the company implements the measures which complies both the perspective of meeting the employee- customer satisfaction and gaining the set objectives of the organization. It provides its employees with the freedom and compatibility to work accordingly and generate effective results. What is important to the organization is its effectiveness and efficiency in developing a product and not by giving pressure and work load to its employees. The cultural and ethical norms in UK is generally open and not so complex.
When the exchange of goods and services take place across the global boundaries it is termed as international trade. This type of trade give rise to world economy where the price, supply and demand of products is influenced by global events. Import and export becomes the two major activities performed by various companies of different countries. UK government received many advantages from the concept of international trade, some of them are as follows:
British Airways also took advantage of international trade by expanding its aviation services in the potential markets. Now, it undertakes international flights along with domestic trips that has increased its passenger capacity and maximized profit of the business entity.
Globalization has opened new horizons for British Airways to serve in the international boundaries. In order to establish strong position in the market the mentioned aviation group needs to adopt effective international marketing strategies. As the company will deal in international currency so it needs to uplift its standards according to currency in global market. Transactions will take place on the basis of global currency that will enhance profits of British Airways.
Another aspect of global factor influencing British Airways global business is that there is expansion of target market. Now, apart from domestic territories company provides its aviation facilities in many developed and developing countries. Every market areas has its own geographical conditions and varying client demands that enforces managerial group of company to enact policies accordingly to satisfy their needs.
Different policies have been formulated by the European Union (EU) and these policies are implied on countries who are within the EU. Therefore, it is the prior duty of the BA to follow all the rules and regulations formed by EU. Cited firm have to follow the open sky policy so that they will be able to create a free environment. Apart from this, BA employs many employees around the globe. Therefore, it is their duty to provide them better working condition and allowances. Cited firm also have to follow Employment Act, 2002 in order to give safety along with providing better working hours to their employees.
Moreover, they have to follow competition policy significantly because the firm is global leader in the aviation industry and by implementing any wrong step, their goodwill will pamper and with that other competitors will try to get ahead who are working in the same industry. Environment act also need to be followed as mentioned firm have to reduce the carbon emission which is generated from their aircraft. Further, by reducing reduce harmful effect on external factors, policies framed by European Union can be helpful for BA for creating a positive image in the minds of their passengers.
The above report concludes that British Airways implements various strategies to meet objectives of different stakeholders of the company. The company operates in mixed economies system and make effective use of resources availed in the market. Competition Act and Competition Market Authority monitors its competition policies strictly. Further the report concludes that the organization uses open sky policy and environmental policies to accomplish its social responsibility towards economy.