Business environment means combination of all internal and external elements that affect the functions of organization. It includes elements like customers, clients, rivals, government agencies, rivals, laws, etc. Both external and internal elements determine the organization's operational actions (Malmi and Brown, 2008). These elements are not in the control of firm but they can directly affect the functions of it. The nature of business environment is dynamic or impulsive because it keeps on changing which are unpredictable. So, it is difficult to find the exact nature of business environment and thus, firm needs to continuously analyze it.
In this report, business environment of British Airways has been discussed to understand its purpose, mission, vision, objectives and the assessment of organization. This report contains various concepts of firm's stakeholders and culture with including policies/regulations of government players which impact BA.
1.1 Business type and its mission, vision, and objectives
There are different types of firms like private, public, cooperative, etc. The private firm is owned by the group of some private investors or by the founder of it and the firm’s shares are not traded publicly (Freeman and Whish, 2007). British Airways is a privatized company. The main purpose of privatization is to boost the productivity and profits of the organization. In public company, ownership is shared by the management, members of board and shareholders. In this, a firm's shares are openly traded and distributed. The purpose of a public company is to enhance employment opportunities for the welfare of society.
Mission, Vision, and Objectives of British Airways
Vision- BA's vision is to become the most reliable and responsible airline of the world and their long term vision is to be the world's first leading global premium airline.
Mission- Mission of BA is to be the undisputed leader in the world for the next millennium as well as to be the first choice airline for all customers.
Objectives- The Main objective of BA is to fulfill all requirements of travelers and to make them feel homely and comfortable. The company focusses on both short and long term objectives.
Short term objectives:-
- To increase the market share and to boost the value of shares.
- To build the leading position in the world.
- To deliver a healthy return to shareholders.
- To develop guiding principles and rules to achieve the goals.
Long term objectives:-
- To expand the business to lead the position.
- To become the airline of first choice of customers.
- To upgrade the customer service and experience.
- To improve the margins and achieve customer satisfaction.
1.2 Key stakeholders of BA
Being a global business firm, BA has a broad variety of stakeholders and company's actions, policies and goals directly affect these stakeholders. They are like creditors, directors, employees, suppliers, shareholders, etc (Besley, Persson and Sturm, 2010). They are also involved in managing, directing and development of company's operations. These stakeholders are like:
Customers- They are concerned with the services and time punctuality as well. BA always focuses on their needs and requirements because they are the end users of their services.
Suppliers- They supply raw materials, goods, and services to the firm and their main concern is to get satisfactory payment on time.
Government- It expects from the company to obey all the rules and regulations, pays taxes on time and abides by the policies and framework.
Shareholders- They are the owners of the firm as they hold the shares of the company. If a company will not perform well, the value of shares will get down and shareholders will not invest in the company's share. They concern on income or return on their investment (Avlonitis and Indounas, 2004).
Employees- They are the internal factors and assets of the organization. The main concern of employees is to have job security, truthful communication and compensation.
1.3 BA respond to fulfill its responsibilities to stakeholders
Stakeholders expect from British Airways to do well because they invest and own the company and they also want that their investment value should get increased. BA fulfills the requirements and responsibilities of stakeholders. To understand the power and interest of stakeholders, power index matrix is used.
Monitor- their both interest and power levels are low. So, they are least important and to inform these type of stakeholders firm takes minimum effort to inform them by presenting annual report by via newsletters, website or mail shots (Smale and et.al., 2006). Stakeholders like general public, unrelated business firms, and administrative employees come in this category. ex- receptionist
Keep Informed- they should be considered, kept informed and consult on interest area because their level of interest is high but power level is low. In this category stakeholders like competitors and customers are involved (Beugelsdijk and Eijffinger, 2005).
Keep Satisfied- their level of power is high but interest level is low. In this category stakeholders like government, regulatory bodies and suppliers are considered.
Manage Closely- they are the key players because their both power and interest levels are high. So, these type of stakeholders should be kept satisfied. Stakeholders like investors and top management employees are involved in this category.
2.1 The Impact Of Economic Systems Of Uk On Allocation Of Resources
The economic system controls the resource allocation within the company by developing a control on production system and exchange of goods and services within the market. The system helps in defining the power, control and role of various authorities and business units as well (Yu and Ramanathan, 2012). The impact of economic system of the organizational functions can be understood by analyzing type of systems and role of different authorities within the system as well.
Command Economy: It is a system where the sole power and control of making decisions regarding allocation of resources and distribution strategies for the same lies in the hands of government. Market forces such as demand,supply, cost and output decisions etc have insignificant role in business decisions (Zhu and et.al., 2012). The economy is slow and has low impact on the organizational growth and development. Countries such as Japan, China, Korea etc has adopted this system.
Market Economy: These are the economies where the government has minimum control in business decisions. The overall economy is governed and operated by the market forces such as demand, supply, economies of scale, cost and output decisions etc. Consumers are the kings/queens within the market. All the production and manufacture related decisions are taken by the producers (Jain and et.al., 2014). They are the ones who who decide, what is to be produced, how it is to be done and what process and resources are to be allocated for production.
Mixed Economy: This economic system is the one where the both government and business units has considerable participation in the organizational decisions. The organizations develop effective measures of working thus working as per the regulatory framework of the company. Majority of the countries have adopted this economic system to develop an effective system of working.
British Airways focuses on delivering effective aviation services within the global economy. The impact of economic system is significant on the organizational working as this UK based business units has to develop policies and measures as per government regulations. However market forces operating within the economy helps in shaping the company operations effectively.
2.2 Assessing The Impact Of Fiscal And Monetary Policies On British Airways
The economic polices of the government has significant on the development and growth of the companies. These policies helps in shaping the business operations and effective the profit margins for the firms (Capon, 2009). Monetary and fiscal policies are significant economic policies which has the power to make develop the infrastructural base of the organization.
Fiscal policies are the effective tools used by the government to stabilize the market by various measures such as tax rates, government spending etc. which has a direct impact on the growth rate and profitability of the companies (Fiscal Policy vs. Monetary Policy, 2015). The business operations of BA has a direct impact of fiscal policies. The increase in tax rates enhances the cost of company which results in increasing prices for the business. If taxes and expenses are lower than it directly affects the profitability of BA (Block, 2004). Taxes and expenses are high than the value of money will also increase, it directly affect the organization because many customers can switch to the other substitute like train.
The policy by which monetary authorities and regulatory committees controls the money supply is called monetary policies. It helps to ensure the price stability as they focus on inflation rate or interest rate. If the interest are low, it benefits the economy by increasing the investments. Through this, more employment and people have more freedom to travel through the airline. Higher interest rates have the opposite impact: lower sales and profit. BA keeps a close check of these measures on the growth of the company. This policy helps the company in determining the spending rate of the people thus support in forecasting the demand efficiently.
2.3 Analyzing The Impact Of Competition Policies On BA
Competition policies have an effective impact ion business working measures within the economies. These policies are developed and formed in order to create an effective growth measures for the business. Competition policy 1998 is a framework which has been developed in order to create an effective impact on the organizational growth (Freeman and Whish, 2007). This policy helps in enhancing the fair working of the company and ethical working measures as well. British Airways is working in an highly competitive. Competition policies helps the company in developing am effective system of working for the company in a well regulated measure.
The policies regrading advertisement has helped the organization in developing ethical practices for advertisement minimizing any kind of manipulative information. Moreover fair trade practices restricts the company in using unauthoritative power to disrupt effective working practices of other business units (Why is competition policy important for consumers, 2012). This has helped in developing effective measures of working within the organization to enhance the ethical working of the businesses.
3.1 Analyzing The Market Structures And Its Impact On Pricing And Demand Of BA For Airline Seats
In market structure, there are no. of buyers, agents, sellers and they determine the prices of goods. There is a level of confidence and the differentiation of the products.
Market Structure is Categorized in 4 Types:
Perfect competition- Market where many buyers and sellers are present but none being able to determine the prices of goods. In this sellers are free to sell the goods to any buyer and buyers are also free to purchase to any seller. In this market homogeneous products are available. If airline industry shapes perfect competition then prices of BA will be charged competitively (Ekins and Lees, 2008). Here, prices are decided based on the competitors prices such as Etihad Airways, Lufthansa and other related. With the help of it, company can able to attract large number of buyer towards it. There will be many airlines in industry and large number of customers as well. So, customers are free to travel from any airline and the demand of airline seats directly depend on the prices and services quality.
Monopolistic- Market where large no. of sellers and firms but the products are not homogeneous because each firm has a specific characteristics, brand and quality services so, the firms have freedom to set the prices. This structure falls between both monopoly and perfect competition. If BA shapes in monopolistic then BA has to provide good and quality services and other facilities to the customers as compare to other competitors so, customers will attract towards it
Oligopoly- Market dominates by the small no. of sellers or firms because competition is low so, they have the power to change and control over the prices. If airline industry shapes oligopoly then BA has the power to change or raise the prices according to the demand (De Vries, 2009). Company focus on the needs and the requirements of the customers. To attract the customers company can offer some offers.
Monopoly- Market where many buyers are available but only one seller is present to sell the goods and the services. Single seller have the power or control over the supply and the prices. If BA lies under monopoly structure then prices are decides on the demands of the customers. The main goal is profit maximization. So, when the demand is high BA increases its prices and earn the profit (Xahir, 2012).
3.2 Impact Of Market Forces On The Decision Of British Airways
Market Forces- This can be define by the relation between demand, supply and the prices. In airline industry when the demand is high and the supply is low then the prices of tickets would be high but if the demand is low and the supply is high then the prices of tickets would be low. At the time of London Olympics BA has painted the plane with dove design. On that time the demand was high and the supply was low so, the company sets the high prices for London tickets (Snyman, Kourie And Botha, 2014). And after completion of the Olympics the prices of return tickets were higher. Same condition with festive season, sports activities, vacations time period, tourism and weather disruptions.
Different Players- In airline industry the increased competition directly affect the market forces. At the time of special occasion like cricket matches or carnivals the competitors gives special offers or discounts on air tickets to attract the customers towards them. So, BA also introduce some low price tickets where travelers can enjoy their quality product in low and affordable prices and in the vacation time period they attract customer through the special packages of different countries with the discounted prices (Sun and Yannelis, 2007). Company introduces some new schemes to gain the attention of travelers.
3.3 Analyzing The Impact Of Cultural Factors On Working Of BA
BA's main objective is to deliver the worlds best aviation services in terms of cost quality and comfort. Employees want secure and fulfilling jobs with good, friendly and flexible working environment along with the personal development and the rewards. To assess the requirements of consumers efficiently BA closely analyze the cultural factors of different countries. This helps the company in analyzing the needs and requirements of the consumers to develop a competitive edge within the market.
Company provide different facilities for both short and long route flights. For the longer routes organization provides facility of lunch & dinner, private cabins, entertainment screen, pillows and blankets are also available (Trehan, Trehan And Jain, 2013). Assessing the cultural needs the services are planned and developed to generate effective demand. For example Indian residents prefer vegetarian food thus the food and beverages are developed to attain those needs for Asian routes. Moreover cultural factors also helps in developing demand as companies adopt these measures and develop high market demand as well.
4.1 Significance Of International Trade to BA
International trade is exchange of goods, capital and services to different countries and it involves the government activities. This helps in business expansion because it gives the opportunity to be exposed in new market. The benefits of global trading plays the major role in growth for the company which are discussed below:
Expansion- Global trading gives the opportunity to expand the business in new market. In new market there would be new competitors and demand. If the demand is high than prices of air tickets will be high, it will be beneficial to company (Oakland and Tanner, 2007).
Competition- BA's business is directly affected by the competition because in market more competitors are available and due to new market the demand also increases and market share of BA also increases.
Unemployment- If BA starts its business in new market than it would be great opportunity for that country because it will decrease the unemployment.
Tax Rates- Tax rates differ from country to country. This is the major factor which affects the BA's profits and revenue. If the tax rates are high than BA finds some difficulty to expand their business in another country. Company takes the benefits form the low tax rates.
4.2 Impact Of International Business Policies On BA PEST Analysis
Political- The airline business is highly influenced and governed by the regulatory bodies. The business decisions and operations are influenced by regulations and policies. To lend the flight in another country first company have to take the permission from the country's government and they have to also follow the laws, regulations and policies (Oatley, 2012). For the convenience and safety of customers government have introduced security policies.
Economic- The changes in growth rate, inflation rate and fuel price affects business because if prices of fuel increases than company will also increase their ticket prices. According to this the price changes the spending of customer will be decreases and many user will switch to other like train etc. The main motive of company would be cost reduction.
Social- Changes in customers behavior and demand directly affects the growth of the company. Due to the recession many customers have cut back their spending on air travel expenses.
Technological- In airline industry technology plays a important role. Like internet and mobile phones etc are used for checking-in process. BA also maintain a corporate website which handles the queries and reservations of customers (Xahir, 2012.). Company have managed to increase its customer satisfaction with the help of technology. With the help of advanced technology they have developed their services and airports.
4.3 Impact Of EU Policies On Working Of BA
European union has effective role in developing the business prospers in the continent to enhance trade relations within the country and develop regulatory measures to carry out business operations. These policies help the company in creating wide growth impact. This policy has helped the company in targeting potential and single market to serve. EU has helped BA in minimizing trade restrictions and easing norms and regulations for the business practice. BA has enhanced business growth widely through EU trade measures. For example trade agreements between countries has minimized the needs for legal formalities for flights and airports thus carrying out operations have become easy and flexible. This has developed gropwth measures for the company as well as the host country. The associated disadvantage for the same is that it has increased the competition level for the company.
The policies regarding employment helps the business in analyzing the impact of employee policies within the regions. These policies enhance the ethical working practices for the business. Competition policies of EU helps in developing effective and fair measures of competition within the economy. EU has created wide impact on the aviation department causing negligible impact on growth and development of the industry. It has helped BA in creating an effective growth prospects as undue competitive pressure and unfair working practices are controlled by the regulations. Open skies policy for example has helped the company in connecting to more than 28 countries without trade restrictions. This has helped in enhancing target market and enhancing aviation growth for the organization. This has allowed BA to fly from either of them without any restriction on number of flights, number of destinations, number of seats, price and so on. Moreover, the company closely check and relate to the aviation policies of EU to analyze the demands of the company and abide those to minimize the risk of legal implication of the company's working.
The above report provides a deep insight about the impact on business environment on the business operation of the company. This has helped the company in creating effective impact of growth and development on the organization. On the basis of report it can be analyses that BA has developed an effective measures of working within the company thus has helped the business in enhancing growth measures within the economy.
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