Report Analysis the Business Environment of British Airways
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Business environment of an institution is ever-dynamic and thus, it is very significant for the management to be advanced and lively from all aspects. In order to be adjacent with the environment, the institution needs to have a number of considerations which allow in maintain the rivalry in commercial enterprise effectively (Frow and Payne, 2009). In this report, the concentration is made on different types of organizations such as public, private corporations, companies, international organizations, not-for-profit firms, partnerships and sole proprietorship. Institution selected for the report is British Airways.
TASK 1: Understanding the Organizational purposes of businesses
1.1 Identifying the purposes of different types of organizations
There are various organizations in which some are legally registered under law and some does not need lawful influences. These firms are public, private corporations, companies, not-for-profit, partnerships and sole proprietorship. A hybrid organizational structure is a physical structure that functions in both the public and the private body. At the same time, it aids in accomplishing the national duties and in processing moneymaking market activities.
The purpose of these types of organizations is explained like:
Charity and Welfare (non- profit organization)- National Council of Voluntary Organization (NCVO) are the title-holders in voluntary sector. They help in volunteering and also work for the betterment of society. They do this by connecting, representing and encouraging voluntary organizations. Their main aim is to work for the volunteer movement which is essential for a better society especially during the time of turbulence and change. They work for the purpose of charity and welfare of society (Roy and Ghoshal, 2008).
Establishment (public company)- The Main purpose of an organization is to establish itself within the domestic and international arena. For example, Sainsbury is a public limited company and serves globally. It's business goal is to gain profitability and government income, thereby, accelerating the wealth of its shareowner. Thus, its organizational purpose is to render more customers by supplying qualified products and services (DeWitt, Nguyen and Marshall, 2008).
Profit Maximization (private company)– Another purpose of a company is to maximize the profits. For example, MC. Donald is a private limited company that has been serving variety of products and services and thus, its mission is to be the master for shoppers by delivering brand value in terms of superior quality, better customer service etc. Its vision involves making an international presence in food, conventional store, sanitary etc. By keeping all these in mind, the organizational purpose is to make global interest by expanding dramatically and to earn more profit in the long run.
1.2 The way in which British Airways meets the objectives of different stakeholders
There are many stakeholders of BA. Meeting the objectives of them is important for the firm. It can be explained like:
Ground staff and cabin crew: Employees of British Airways are intrinsic stakeholders and their aim is to acquire fair aid from airlines in terms of wage, rewards, promotions etc. British Airways meets these objectives by intensifying their skills and competencies through grooming and improvement programs. This helps to make them give improved public presentation and by becoming capable of acquiring rewards (Frow and Payne, 2009).
Airways staff: Suppliers are the stakeholders of British Airways that adopt objectives of profiting orders from airline of different services they are dealing with. British Airways meets their aim by being consistent in their orders and by providing tactful information about enhancing the quality of services. Suppliers are not that important in decision making because they are afraid of losing their contract bridge with British Airways (British Airways, 2015).
Passengers: Customers in British Airways are actually the passengers. These passengers are the stakeholders who buy services. Their aim is to obtain quality services at fare prices in which they can find worth against their purchases. British Airways meets these objectives by offering quality services on time while also providing substitute for them (DeWitt, Nguyen and Marshall, 2008).
1.3 Explaining the responsibilities of British Airways and their strategies employed
There is variety of responsibilities of British Airways which it has to fulfil. Some of them are discussed like:
Social Responsibilities– It is important for the organization to provide something to the society against the harm it gives. This is punctually reasoned by the working ways of British Airways. They conduct variety of socially cantered programs which are designed to enhance the living standards of people.
Lawful and Legislative Responsibilities– These are known to bind British Airways for operating under the law. It does this by applying a strategy that can be modified with law (Roy and Ghoshal, 2008).
Situational Responsibilities– These obligations require that airways make least waste in surroundings with optimum utilization of resources and the wastage can be decreased. This is guaranteed by British Airways through initiating different standards of operations within its own role and this makes the firm environmental amiable.
TASK 2: Understanding the nature of the national environment in which businesses operate
2.1 The way in which economic systems attempt to allocate resources effectively
What Is Mixed Economy?
In mixed economy, goods and services’ allocation is done by both government and market forces. There is no specific way of determining the exact proportion of goods and services that must be produced and distributed by public and private sector companies. Thus, both have equal contribution depending upon the market share that they get to share in industry.
Mixed Economy In Case Of UK
In case of UK, the mixed economic system attempts to allocate the resources effectively. Given the challenging economic times and the uninterrupted high prices of fuel, it is essential that British Airways focuses on managing controllable expenditure. The airline has prioritized short-haulage betterment in its drive to untroubled competitive expenditure base (Frow and Payne, 2009). Cracking development has been made with the transformation plan. According to research, during 2013, there were extra focus on driving more income per flight through ancillary services, exploiting underutilized assets such as Avios and increasing the value from leading businessperson contracts.
2.2 Impact of fiscal and monetary policies on business organizations and their activities
Impact of Monetary Policies
- Bank Borrowings– It can be explained like when banks find it low-budget for borrowing money from Bank of England, then British Airways can further borrow the same from banks on the low-budget rate of interest. The cost of borrowing becomes costlier for British Airways, when situation is vice versa.
- Foreign Exchange rate– There is a chiselled relation between interest rates and value of pounds. When Bank of England makes cost of transaction cheaper, then economy starts to see more money flowing out there. In this case, services become cheaper and income for British Airways rises (DeWitt, Nguyen and Marshall, 2008).
Impact of Fiscal Policies
- Expenditure of Business– Fiscal policy can also hike interest rates for which British Airways may have to pay more for lines of credit. Higher rates in interest is known to raise the value of pounds which gives companies like British Airways more purchasing power from suppliers in international market.
- Passenger's Needs– Fiscal policy is associated with the tax and it impacts on demand of passengers by affecting the disposable income they have to pay. Travellers become more alert for their budget plan when taxable services increase and this can affect the income generation of British Airways as well (Roy and Ghoshal, 2008).
- Finance Decisions– Fiscal policy puts a major impact on risk to be taken by British Airways. When there is an introduction of tax bonus for employee’s grooming, then BA may feel assured in hiring more individuals.
2.3 Evaluating the impact of competition policy and other regulatory mechanisms on the activities of British Airways
Impact of competition policy on British Airways
- The policy also caters guidelines for biased practices that are to be adopted in order to boost competition in the market. This makes it challenging for airlines like British Airways (Frow and Payne, 2009).
- There is a different consequence of competition policy on British Airways. It makes the services inexpensive for travellers that are buying those services and in this way; it becomes low-priced for the passengers.
Other regulatory performance on the activities of British Airways
- Security and Legal Amendments- British Airways is best-known for its intense safety standards. Travellers’ security and unit are the chief interest areas. The airline precedes the extremely formulated machines in British Airways and the most innovative and civilized services to ensure the safety of their travellers.
- Worker Policies- The airline staffs is a part of large society. The British labour law of 1974 eyed on workers as well as on administration. This aimed at keeping the worker blissful and creases less running of British Airways (DeWitt, Nguyen and Marshall, 2008).
TASK 3: Understanding the Behaviour Of Organizations In Their Market Environment
3.1 Way in which market structures determine the pricing and output decisions of businesses
There are various types of market structures and they define pricing and output of products and services in a different manner. They are as follows:
- Oligopoly Market- According to this market structure, there are only few organizations in the airline sector. Pricing policies of air tickets are lesser than monopoly market due to rivalry in the market of United Kingdom. This process increases the frequency of consumers due to less cost on air services as compared to monopoly structure in the country (Frow and Payne, 2009).
- Perfect Competitive market– Perfect competition is a market structure in which there is no limitation to get entry and exit for any business enterprise. In this case, there are galore of organizations producing and marketing homogeneous services in the market. Thus, single company like British Airways is unable to influence consumers. Thus, valuation is ascertained by demand and supply forces and consequently, the arrangement of services takes place. Airline gains normal profits in the short run.
- Monopoly market– In a monopoly market structure, there is only individual seller of services. British Airways being a monopolist is the solitary seller of certain services for which company can establish its own level of pricing and organizing. This is because; entry of other enterprise is limited in the business. On another note, this type of structure does not exist in reality (Roy and Ghoshal, 2008).
Critical Review: Organization also considers for recruiting young people for better efficiency in the nation. Corporation is achieving higher profits due to increasing rate of youngsters in UK. On the contrary, frequency of young employees is decreasing in Japan in comparison to United Kingdom. So, these policies also affect the performance of British Airways in Japan. Corporation is unable to earn high profit in this nation. Organization is running its operations successfully due to domestic rules and regulations in Britain. It helps to increase its speed and efficiency in UK. According to Hergibo and (2010), corporation is facing many complexities regarding international policies, trades and tariffs. These things are reducing the profit of organization in Japan.
3.2 Way in which the interplay of various players and market forces form firm’s responses
There are many organizations as well as market forces which form enterprise’s response in United Kingdom.
Rivalry- Airline sector contains various types of corporations which impact business of firm by reducing cost of air services in the nation. For example, British Airways decrease prices of its tickets in the aviation market to enhance its market share in UK. These things contribute effective role to improve the business of corporation in the nation (DeWitt, Nguyen and Marshall, 2008).
Profitability- These factors also impact the firm through increasing price of raw products in the country. For example, there are many materials for British Airways like engine fuel, spare parts as well as maintenance which directly enhance the expenditure of firm. Organization is using many tactics such as utilization of solar technologies to reduce the fuel consumption during flight. In this way, company can overcome from this effect in the nation (Frow and Payne, 2009).
Governmental and the Body- These forces highly impact on the organization by increasing trade, tariffs and taxes in the country. For example, British Airways always take effective steps to overcome from these issues in the nation. Corporation also conducts regular meeting with the government officers to talk about for these things in United Kingdom. Thus, organization gets unique direction by taking their suggestions to solve these types of issues in the nation (Roy and Ghoshal, 2008).
Human Resources- In the airline sector, employees of firm has no more knowledge regarding their field in the firm. These things create more delay to provide effective services for customers in the nation. For example, British Airways are applying huge efforts such as induction of training program and generating awareness about new technologies to reduce this impact in the country. Therefore, organization can achieve more competitive advantages by giving effective air services to consumers in UK. Corporation can sustain in the world for long period of time.
Scientific Forces- These market forces also create positive or negative effects on the organization in United Kingdom. For example, British Airways is also installing new technological equipments with better reliability of consumers and employees in the aeroplanes. These things are giving optimistic advantages to the consumers and staff members during the air travel. In addition, organization is also increasing logistics services in UK. This process is enhancing the business of corporation in Britain. British Airways is installing new gadgets like advanced security system for the safety of passengers and employees in aeroplane to reduce the chances of terrorist attacks (DeWitt, Nguyen and Marshall, 2008).
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3.3 Way in which British Airways is affected by the working practices and cultures of countries
There are many reasons which affect the firm through working practices and culture in different nations. These things can also generate positive and negative impacts in the countries.
- British Airways is concentrated towards multi-faith policies in nation. Government of United Kingdom renders good facilities for foreign citizens to live in this nation. So, organization makes its culture and working practices as per the current situation of the nation (Roy and Ghoshal, 2008).
- In this way, British airways are getting positive feedback from its employees in UK. These things are enhancing the performance of organization in the aviation industry (Frow and Payne, 2009).
- On the other hand, company is achieving negative response with the utilization of Britain policies because Japanese people do not consider fully open culture and working practices in Japan. These people want to follow only their job style in this nation. Thus, they do not work with British Airways.
4.1 Impact of global changes caused by various aviation bodies on British Airways
British Airways operate in a business that is strictly governed by various regulatory bodies such as World Trade Organization, Civil Aviation Authorities, etc. (British Airways, 2015). These bodies influence the commercial activities of BA as well as its performance standard. The implications are discussed under the following headings:
Air Agenda Setting: The prices of airfares of airlines are governed by the international governments. BA air prices need to seek approval from these governments hence; the pricing decisions of company are impacted greatly by these foreign governments.
Flying Rights: Civil Aviation Authority plays an important role in monitoring various decisions of company related to finance, management and operations. It is eligible to take appropriate actions under the Civil Aviation Act 1982 if company's operations are not in line with the regulations of controlling body. In addition to that, the airline’s operations are also regulated by European as well other foreign governments in which it operate its flights (DeWitt, Nguyen and Marshall, 2008).
Allocation of Ground and Port Slots: International Air Transport Authority regulates the decisions of BA related to airport slot allocation. It is very important for the aviation company to get slots at airports to provide attractive schedules to the passengers.
4.2 Other global factors and their impact on British Airways
BA operates in strictly regulated business environment. Its operations are largely impacted by certain governing authorities such as foreign and local bodies which are set by the aviation industry. Regulatory institution ensures that the airline players abide by the regulations and play fair in the market. It also ensures that unethical business practices are kept in check (Roy and Ghoshal, 2008).
European Union Policies impact significantly on British Airways which are discussed in the following points:
- Change of Location: EU policies impact British Airways operations in order to build sustainable strategies. EU policies encourage airline players to minimize the impact of their operations that can harm the environment (Frow and Payne, 2009).
- Rivalry: European Union's competition policy largely impacts the operations of BA. The company has to modify its pricing strategies to offer low fares to passengers in order to hold them.
4.3 EU policies on competition
British Airways need to formulate competition strategies to compete with the rival airline companies. In order to gain competitive edge over competitors, the firm needs to redesign the products and services that are causing losses for BA. For instance, passengers on long haul flights would welcome the company's decision of including entertainment zones in order to keep them engaged. Similarly for cost sensitive passengers, cheaper flight packages with excellent services can be introduced to attract them. More satisfied passengers lead to higher profit margins and strong position among competitors. Along with that, company has to hold on to its skilled and experienced workforce to reduce the cost on recruitment processes which can rather be invested in the best training programs to make them more productive (Roy and Ghoshal, 2008).
The report features analysis of essential aspects that ascertain the business environment of British Airways. The introductory part of report gives clear understanding on the purpose of organization and the intermediate part develop an understanding on national environment that includes fiscal and monetary policies and their implications on BA and its operations. Tertiary and the final part of report deals with the survey of action of aviation firm in its marketplace and environment that regards aviation restrictive structure which determine the schemes of British Airways.
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