Environment of business can be defined as the internal and external elements of the association which can make big impact on functioning and decisions of the enterprise. The current research report analyzes environment of British Airways and provides knowledge related to factors which can influence operating condition of the company. The study comprises objectives of business, stakeholder which can make impact on decision making process of the business, impact of fiscal and monetary policies, impact of competition and regulatory mechanisms, impact of local social factors, economic forces, international factors and impact of policies of European Union policies on the organization (Aras and Crowther, 2011). The whole environment of business will be analyzed in the present research report for making effective expansion and development decisions.
Generally there are various types of organization such as private limited companies, companies, partnership firms, sole traders, charity firms, trusts etc. Purpose, missions and objectives of each and every business is different to each other. Normally, limited and private limited companies are doing business for making higher level of profits for its investors or shareholders by providing services and products to society (Budlender, 2000). They try to fulfill needs and desires of the communities by providing unique services and commodities. In other side charity firms and trust are established for social work and main objective of these kinds of institutions is social welfare and social services. Profit is not the major issue of this type of organization and the main focus of management team is on social services by providing best services needed by society. Furthermore, hospitals, trusts, educational organization etc are included in this part.
British Airway is a multinational airline that provides aircraft services to the general public with lowest fare (Carr, Marilyn, Martha and Jane, 2000). It has effective global route network through which they provide services worldwide. It is not social organization and major objective of the company is to increase wealth of the business by fulfilling requirements and needs of the society. Objective can be defined as a specific result which company aims to achieve within a time frame with available resources. Objectives provide map to the association for achieving particular results. Missions are the statement represents purpose of the company. The major purpose of BA is to provide best and cheapest services to its customers. Thus, management team is focusing on the consumer services with low prices. Company desires to become leading global premium airline with customer central policy. This objective can be fulfilled by investing funds on the human resources, customer services, innovation, research and development and services (Fisher, 2003). The enterprise requires all of its customers to enjoy a premium services at every point of their journey, whenever and wherever they travel with flight.
There are various parties of the company which can affect the business and business can be affected by these parties. These are called as stakeholders of the association. Generally, they can be divided as internal and external stakeholders. Following table represents stakeholders, their requirements and management.
Satisfying aims and requirements of various parties: Every stakeholder has its own requirements that have to be satisfied by the management team of British Airways. Normally all the parties of the company are interested in the profitability of the company because they want to earn more money from business operations. Management should provide all the true financial position and data regarding to the association to its stakeholders (McSweeney, 2002). They can make good relationship with various parties in order to satisfy their requirement in effective ways.
Legal responsibilities: British Airways must pay all the taxes and duties to national and multinational government on right time in order to make good relationship with them. Payment of taxes and duties is the major responsibility of the company. They must avoid insider trading, illegal business and unfair activities within company in order to fulfill its legal liability. They have to follow all the policies, rules and regulations of local as well as international government for supporting their nation (Morrison, 2002). They have to follow labor law, companies act, environment regulations, safety and security laws and consumer regulations etc.
Ethical responsibilities: British Airways is the part of society and it must fulfill its social responsibility by performing fair and legal business activities. Global warming and pollutions must be decreased by making effective and efficient policies, plans and setting standards of business. They can use high technology for aircrafts for saving fuel and reduce pollution of environment. Safety and security of air planes is also the major issue of the company and they should make special standards for safety and security (Palmer and Hartley, 2006).
Command economical system: In this system of economy all the natural resources are in under control of central government of the nation. British Airways must follow all the rules and regulations of government regarding uses of economical resources. There may be high level of interfere of government in the functioning of the business (Pugh, 2007). It is not suitable economy for the company which needs to make high level of profits by using resources of the nation.
Free enterprise economical system: It is the opposite economy of command economy in which all the major resources of production and areas of market are free for private organization. It is the economy system in which government does not interfere in the business activities.
Transitional economical system: In this kind of economy system, there may be limited resources of production. Hence, organizations develop products and services on the basis of demand and supply concepts (Taylor, 2006). They evaluate market needs before making products and services.
Mixed economical system: Generally, all the countries of the globe use this type of economy system in which some major areas such as weapons, national security, railways, educations etc are controlled by the government and many other areas are free for private entities. It is the best and suitable economical system for the multinational companies such as British Airways.
Affect of fiscal policy on the activities of British Airways: Fiscal policy can be defined as the planning of taxation and infrastructure expenditure for the particular year or quarter. This policy can make big impact on the business because one changes in the tax rate can increase and decrease income and savings of the general public. It may increase or decrease liquidity of the market (Vikram, 2014). If government desire to control liquidity, it will increase tax rate. This change will reduce cash from market which will reduce sales of the entity. Investment in infrastructure such as roads, pulls, region development etc decides success and failure of British Airways because whole business is depended on high level of infrastructure services.
Affect of monetary policy on the activities of British Airways: This policy play very crucial role in money supply management and inflation control. Interest rate is the major tool of this policy. If government reduces interest rate, then liquidity of the market will be increased and business demand will be also increased (Vinten, 2002). It will be very positive sign for the companies like British Airways.
Impact of competition policy British Airways: It is the policy implemented by the government in order to manage competition level. It has four major parts such as market liberalization, merger control, antitrust and cartels and state aid control. Prices of products and services and new entries in the particular market is controlled by antitrust and cartels. This type of control can make impact on the cost of British Airways because they must charge prices according to regulation.
Impact of other regulation mechanism on British Airways: Enterprise Act 2002, Companies Acts, European commission etc also play major role in the economy (Williamson, 2002). British Airways must follow all the rules and regulations of various authorities in order to perform business operations effectively.
Perfect Competition: It is the market in which high number of producer produces same kinds of products and services with similar or lower prices. Normally, there are high levels of competition in which company must perform effectively in order to sustain in the market. British Airways must provide unique and fast services with lowest prices to fight the competition.
Monopoly: It is the market in which only one producer produces products and services for the society (Worthington and Britton, 2006). He charge very high prices with low quality products and services and there is no competition in the market. Public do not have any alternative seller for same kinds of products. Higher quantity of products and services are produced by the seller with high prices and lower quality.
Duopoly: In this market two sellers of same kind of product and services are available. Generally, prices are decided by both the producer and products quantity will be higher because public do not have many alternative option of commodities.
Demand and supply: Both are the key factors which decide prices of the products and services. Generally, if demand of the commodity is high and supply is low, then prices will be very high. If demand is high and supply is high, then prices will be average.
Income elasticity of demand: If the demands of the products are changed due to changes in income level, situation is called as income elasticity of demand (Aras and Crowther, 2011). If income of public is increased, quantities of products are increased due to increasing demand.
Elasticity of substitution or cross elasticity: Percentage change in the quantity of the commodities by demand of the substitute commodities is called as elasticity of substitution. Demand of services of British Airways will be reduced, if there are many competitors with same kinds of services.
Customer perceptions and actions: Religions beliefs, behavior, new fashions, new technology development etc are the key factors that may decide the success and demand of the particular services and products (Budlender, 2000).
Multinational business provides big market area to the businesses and opens huge scope for the companies that desire to work in global era. They can improve their market shares by selling and providing products and services to whole world. Markets such as BRICS (Brazil, Russia, India, china, South Africa) have very higher opportunities of international trade. These countries are inviting international entities for business by offering various tax benefits etc (Hillary, 2000). Thus, British Airways can get opportunities in the market by entering first.
There are many countries like Bangladesh, Pakistan, and Nepal etc in the world where company can take advantages of low labor costs. They can also introduce existing product in the under developing countries as a new product. Powerful companies such as British Airways can be easily stayed in this kind of market and they can earn higher level of profits by charging high prices. It can utilize scare resources of the nation with very low costs and can provide services with high profits (Hoecklin, 2000). Finally, it can be said that international business is beneficial for the companies as well as general public to get right product at right time with affordable price.
Multinational business provides various development and growth opportunities to business but it also has some negative impact which must be analyzed by the management team of British Airways for taking right action on right time. Environment of local country and other countries can also influence functioning and profitability of the association. The entire environment element can also provide some positive advantages to the business (Keegan, 2008). Hence, organization should make effective decisions at right time for grabbing each opportunity and moderating the threats.
Economic crises of one country can influence economy of every nation because whole world is assumer as on village. International organizations such as World trade Organization (WTO) that control all trade plays very crucial role in this kind of era. This institute provides set of rules and regulations to the companies. Thus, one change in any regulation will make impact on whole functioning of the business.
European Union is the political and economical organization of Europe that offers set of rules, regulations, and policies to the entities of European Union (Mankiw and Taylor, 2006). For example, if European Union limits aviation segment to particular areas for security purpose, then all the companies must follow the regulations provided by the institute. In addition, it is very significant for every association to go behind the rules and policies of it in order to do business easily in the region.
Many a time one policy of this can increase the costs of the entity and then the company must increase its prices which affect the demand. It offers single universal region which includes a free movement of trade, commodities, services, employees, financial resources, between the groups of nations (Mankiw, 2012). It restricts the businesses which are not registered in EU and they cannot get advantages and benefits of EU policies.
The above research report concludes that organizational environment of the business play very crucial role in deciding success and failure of the business. It provides knowledge of various national and international factors that may influence business functioning. The study gives understanding regarding various types of business which has particular objectives and aims (McSweeney, 2002). British Airways must follow all the legal rules and policies of government as well as European Union for sustaining business in the UK.