The document discusses the business environment of British Airways (BA). It covers several topics:
1. Organizational purposes - BA aims to be the world's favorite airline and provide excellent customer experiences. Its stakeholders include employees, customers, suppliers, and competitors.
2. National environment - BA operates in a mixed UK economy. Fiscal and monetary policies impact the aviation industry through passenger purchasing power. Competition policies regulate alliances and mergers.
3. Market environment - BA faces perfect competition. Porter's Five Forces and PESTLE analyses show factors like substitutes, suppliers, regulations, and demographics shape BA's responsibilities and operations.
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Business environment for british airways
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Business Environment
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TABLE OF CONTENTS
INTRODUCTION ......................................................................................................................1
LO 1 Organizational Purposes of Business ..................................................................................1
1.1...........................................................................................................................................1
1.2...........................................................................................................................................3
1.3...........................................................................................................................................4
LO 2 Nature of National Environment in which BA Operates .....................................................5
2.1...........................................................................................................................................5
2.2...........................................................................................................................................7
2.3...........................................................................................................................................8
LO 3 Behavior of BA in its market environment .........................................................................9
3.1...........................................................................................................................................9
3.2...........................................................................................................................................9
3.3.........................................................................................................................................11
LO 4 Assessing the Significance of Global Factors That Shape National Business Activities ....13
4.1.........................................................................................................................................13
4.2.........................................................................................................................................13
4.3.........................................................................................................................................15
CONCLUSION.........................................................................................................................15
REFERENCES .........................................................................................................................16
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INTRODUCTION
In the aviation industry, the company that has made its mark with regards to quality of
services and experiences is British Airways (BA). In order to remain successful, BA has always
presented itself as the organization that is highly competitive and has predetermined goals and
objectives on the path of which the entire business of it walks. In this research report, an
evaluation will be conducted on the business environment of British Airways and also the
objectives of different stakeholders of the organization will be studied (Punzel, 2013). Further
this study will also help in determining the ways in which aviation industry is impacted by
different economic and other external factors that prevails in the country. By the end of the
report, the learners will also be able to evaluate the impact of market structure that they have on
the pricing as well as the output decision as well as the overall impact of global and EU
(European Union) factors that are active in UK (Drexl, 2012).
LO 1 Organizational Purposes of Business
1.1
Every business organization has its own aims and objectives that it wishes to attain
through proper planning. The business organizations have their own mission, vision statement,
core competencies, etc with the help of which they are able to align its goals with that of the
company’s (Tran, 2003). In the similar way, BA also has its mission statement by which it
picturesque its ability to create a high class brand image for its firm. BA is a public sector firm
and the mission statement of BA states it aims to become the world’s favorite airlines and also
provide excellent experiences of its services to its customers both in flight and on ground (Hatch
and Schultz, 2008). The vision of BA is as mentioned below:
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To guarantee environmental targets by accomplishing them within the predetermined
time period leading to cost reduction for the benefit of its customers.
t wishes to offer carbon offsetting.
It also visions to reduce the negative effects on climate change that is caused by Aviation
industry with the cap on the total emission by 50% by the year 2020 (Souiden and
Diagne, 2009).
Thus it can be said that every business today is formed to meet the needs with a
predetermined goals which then are attained while remaining in the provided business structure.
So in order to meet these targets, companies work under different ownerships like private,
public, partnerships, joint ventures, sole proprietors, etc. Other than public sector, explanation to
different forms of business are as follows:
Sole trader: Sole trader or proprietors are the ones that run a business of their own and are
individually responsible for all the profits and losses. This is the simplest form of
business and can take place in any locality and at any time. Any corner shop in a locality
can be the example of sole trader (Kumar, Massie and Dumonceaux, 2006)
Private enterprises: On the basis of free market capitalist system, a private firm is the one
that is jointly owned and run by private individuals. This can be any non-government
business or formed by shareholders’ investments. Wal-Mart, Ernst and Young can be few
examples.
Joint ventures: It is a form of business where parties agrees to form a business for finite
time and puts in new assets by contributing equity. The control is exercised jointly by
them on revenues, assets and expenses. For example, Sony Ericson is a joint venture
between Sony and a Japanese company Ericson (Nataraja and Al-Aali, 2011).
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1.2
Stakeholders are the ones who have some or the other form of interest in the profits and
operations of the business and have complete interference in the decision making as well because
of which the business performance is greatly impacted (Hooper and Greenall, 2005). The
important stakeholders of BA are its employees, customers, government and administrative
bodies, suppliers, and all other business clients. Each of them plays an important role within the
business enterprise that can be attained with the higher degrees of performances in an effective
manner (Huettinger, 2014). The stakeholders of British Airways along with their influences on
the organization are as provided below:
Stakeholders Their impacts on British Airways
Consumers They have great interest in the types and class of services that the
airlines provides to its travelers because they also look for the
comfort that they can make out from the airline and also for the
value of their money (LeClair, 2000). They are very important
elements in making business a successful one so the company also
has to offer the quality services to them in return with right charges
(Chapple, merman and Rudkin, 2010).
Employees They are the backbone of the business and have direct impact on
their performances with any of the business decisions and also vice
versa. They also help and support BA in its organizational
operations in certain progressive manner (Rose, 2006). So these
employees should be paid equally and should also be provided with
other different benefits like discounts or free flights to them or their
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families, timely wages, bonus and all other forms of incentives in a
fair manner (Fraher, 2013).
Suppliers They are the ones who provide major support to make the right
inventory available on right time. The major suppliers of BA are
Airbus and Boeing and BA is dependent on them to a great extent
for getting the fuel, food, entertainment and all other facilities and
these people are also very interested in the success of the company
depending on which they make their decisions to do business with
the company. Thus BA should maintain healthy relations with all of
its stakeholders (Basu, 2014).
Competitors British Airways plays a very fair game with its competitors and
never motivated any kind of price wars with them because this
would have deteriorated their quality of services (Raktabutr, 2006).
Other than this, BA has also put force on provisions of better
services in comparison to other aviation businesses which makes BA
a market leader (Cahill, 2011).
(LeClair, 2000)
1.3
There are different strategies that BA has employed in form of its responsibilities so as to satisfy
its business stakeholders that can be classified as follows:
Ethical responsibility: BA has a major responsibility that is shared under its ethical head
towards all of its stakeholders along with its employees all those who are related to the
business organization (Chapple, merman and Rudkin, 2010). There are different
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corporate social responsibility activities that BA undertakes which helps in reducing the
wastes of different natural resources, prevent environment from pollution, carbon
emission and other factors that are affecting the society.
Social responsibility: the social responsibility of British Airways is to get an
involvement from everybody especially the ones who are directly or indirectly related to
the company. BA also has to be very fair and transparent in its business deals to its
stakeholders (Rose, 2006). This can be attained by offering them the quality services at
affordable costs and also by attaining loyalty with its customers. BA is equally
responsible towards its business shareholders by treating them fairly and also making
them available the desirable share from the profits. The organization should also
contribute with different charitable and also should control the pollution (Fraher, 2013).
Legal responsibility: Looking towards this responsibility of BA, it can be said that it is
that act that the organization needs to perform by working under the boundaries that are
formed under legal head or by government as well as EU (Basu, 2014). For instance, staff
at BA should be paid their salaries on time followed by the provisions of equal and
reliable pay. Other than this, there are also different interventions of the organization that
forces the company to be in line with the administrative regulations such as taxes,
interests, etc (Raktabutr, 2006).
LO 2 Nature of National Environment in which BA Operates
2.1
Economic system can be defined as the one that assists in undertaking the business
activities in a planned manner so that all of its resources can be utilized in an efficient manner.
This helps in carrying out all the business operations on economic scales and on the basis of the
same, the economic systems can be classified into three forms that are as shown below:
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Planned economy: In this form of economic system, most of the important decisions are
taken by the government with respect to the business decisions that are
taken for effective production and distribution of resources in the
economic systems for fixing up the commodity prices (Albert, 2011).
This system can also be known as command economy where
government has the major decision making power and allows
minimum flexibility as well as any chances of change (Klein, 2014).
This economic system also tends to pay attention towards the use of
different and varied sources for the development rather than using
resource allocation (Bhattacharya, Sen and Korschun, 2011).
Mixed economy This form of economic system is followed in UK and most of the
developed and developing countries of the world. It consists of various
elements of market and the planned economic systems in a
proportionate manner (Hatch and Schultz, 2008). Both private and
public sector reforms takes on the business decisions in an integrated
form with equal importance to both which allows great deal of
flexibility. The reason behind the same is that it features both capitalist
and socialist economies and also enables the management of all the
political and economic approaches to business (Marangos, 2013).
Market economy In it the central or the state government has barely any part to play and
customers’ buying decisions and behaviors are the ones that drive the
entire economy (Blythe, 2008). In it, the market assumptions play a
major role that helps in attaining the correct direction which is
important for the overall economical growth. It has also helped in
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focusing to reduce the subsidies that are implemented on different
sectors in relation to the pre determined prices and regulations
(Cattaneo, 2010).
(Cahill, 2011)
If looked on to British Airways, this organization runs its business in a mixed economic
system. In this economy, the government interventions are at very minimal level and are
subjected to only certain cases like if proper legal format is not followed or if over pricing of
services is causing any kind of customer exploitation, etc. Thus it can be said that innovative
approaches of BA has helped it to earn revenues and also supported the technological changes
leading to creation of world class standards (Albert, 2011).
2.2
The fiscal and monetary policies have critical impact on the economic systems and also
the basic business operations. In case of monetary policies, when any changes are brought in the
interest rates in short term than there is likely to be a major effect on the long term interest rates.
Lower the interest rates, larger will be the profits which would lead to increased purchasing
power as well as the investments of people (Klein, 2014). Such changes in the rates of interest
have a direct impact on profits, sales, stock prices, etc. On the other hand, if looked on the fiscal
aspect, these policies are related to the changes in the taxation policies and rates that are in
relation to the spending of the people. Here as well, the low tax rates help in bringing in
investments and also provide more liquidity in business (Bhattacharya, Sen and Korschun,
2011).
Aviation industry in UK is largely impacted by economies of the country and as per the
report of Transportation Association of Europe; there are around 2 million people who travel
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using airlines. All the monetary policies of the country thus have impacted the traveling ability of
the people because the interest and tax rates get increased. This in return lower downs the
purchasing power of people making less number of flights (Hatch and Schultz, 2008). Similarly,
fiscal policies in relation to the rules, regulations and other legislative actions which clearly
depicts that there is deregulation in the entire airline industry which further leads to the increase
in the number of travelers with lowered air ticket prices. Along with it, different security
measures are also required to control the terrorism activities which in return increased the costs
of services which surcharged the customers in return (Marangos, 2013).
2.3
There are different competition policies that are governing the aviation industry entirely
and have always emphasized on three different aspects of business such as alliances, mergers and
cooperation between airlines and all of these are governed under IATA which is International
Trade Transportation Association. It also intends to attain as well as encourage healthy
competition with sufficient mechanism for safeguarding the unhealthy competitive activities
(Blythe, 2008). FAC (Federation Aviation Commission) helps in standardized safety and
infrastructure of transportation activities. Other competition policy regulation is Civil Aviation
Requirement (CAR) which helps in setting up the capital requirement with regards to certain
nonscheduled carriers and also the related service providers. The Civil Aviation Act of 2012
proved very helpful in setting up regulations for air flight traffic movement (Cattaneo, 2010).
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LO 3 Behavior of BA in its market environment
3.1
Market structure for every business helps in determining the pricing and output decisions
as there are different forms of structure that exists namely monopoly, monopolistic, perfect,
oligopoly, etc. Further explanation to the same can be as follows:
Monopoly: Over here, owner of the business has an authority to make prices for its
products on the basis of market demand and consumer likeliness. Because of this reason,
there is only one seller and number of buyers. Competition here is low as there exists a
restriction of new entry and because of this fact, seller earns higher profit (Punzel, 2013).
Oligopoly: In this form of market, there are number of buyers and sellers and depending
upon the market needs, price alteration can be done. With help of this, sellers do earn
considerable amount of profits as they determine the prices themselves.
Perfect competition: For organizations like BA, the determined market structure is
perfect market as the prices in this market are analyzed after market analysis as well as
prices of the competitors. In this market, the bargaining power of the buyers is high
(Drexl, 2012).
3.2
Different market forces play a great role in shaping up BA’s responsibilities such as
buyer’s perception, supplier’s power, competitors, demands, substitutes and others. All these
roles can be better understtod with thehelp of image provided below
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Figure 1: Porter's five force analysis of British Airways
(Source: Cattaneo, 2010)
All these factors of porter’s five force analysis help in framing up the organizational
responsibility towards its customers because they expect better services from their providers at
the affordable prices with comfortable flight timings and air routes (Tran, 2003). The important
market force that can be named over here is availability of substitutes like for example there are
also many cheap land and water transport facilities that are available. Customers these days
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demand extra facilities as they now have learned to take out full value of their money which has
also created problems for BA. The organization has also been successful in gaining market value
as compared to its competitors resulting in doubled profits as well as the passengers by 8.9% per
year (Hatch and Schultz, 2008).
3.3
Business and culture environment consists of all those factors that affects a company’s
business operations. It also includes consumers, industry trends, regulations, suppliers, etc. these
factors impact the attitude of a firm and the ways in which it deals with different parts of
organization. The PESTEL analysis showcased below will help in clarifying the impact of
different factors:
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Figure 2: PEST (LE) analysis of BA
(Source: Rose, 2006)
Business environment of British Airways consists of different people who come from
different geographical, cultural and demographical backgrounds whether they are the customers
or employees which makes it very important for BA to fulfill all of their expectations. Different
strategies can be formulated by the company which is framed on the basis of people’s
expectations and in return which will drive the moral and ethical values out of the same (Souiden
and Diagne, 2009). Like for instance, cultural environment for BA will help in getting to know
the traits that are expected by the consumers. This in return will prove very fruitful for the
company as it will help in bringing about the innovative services and also gain maximum
understanding of the entire business scenario (Kumar, Massie and Dumonceaux, 2006).
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LO 4 Assessing the Significance of Global Factors That Shape National
Business Activities
4.1
At international level, trading includes import, export, utilization of resources, etc within
different countries which shows that how much are these practices important for British Airways
as in return they will help in gaining competitive advantage and also enable the business
undertakings in an efficient manner. BA will also be able to carry on its trade and other
international activities with mutual understanding. Thus when every country tends to share the
advantages of manufacturing the products and services, then the same thing can be further traded
as well (Nataraja and Al-Aali, 2011). So British Airways should not imagine any of its business
success without giving due consideration to international trade and activities that take place in
UK. There are also many of the reasons that justifies the importance of global trade such as cost
of production, material, market horizons, etc which shows that there are many opportunities that
global trade has provided to the business which will help in taking the business profitability to
great extent (Hooper and Greenall, 2005).
4.2
There are many global factors that put their impacts on the entire aviation industry in UK.
These factors not only affect the demand that comes on the basis of nature of business,
geography, scales, etc in international market but also impacts the supply of the products where
implicit and explicit trade policies affects the overall business environment like those of safety
and security (Huettinger, 2014). The PEST analysis segment as explained in figure 2, there have
been different global and political factors that have impacted the functioning of BA which can be
explained as follows:
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FACTORS IMPACT
Political Perfect market legislations.
Different taxation policies
Employment laws
Foreign trade regulations
Economic factors Money supply
Unemployment
Business cycle
Availability of energy and cost
Disposable income
Socio cultural factors Population and demographics
Attitudes towards work and leisure
Level of education
Income distribution
Technological factors Speed of technology transfer
New developments and introduction of online booking
and ticket generating portals
Government spending on research.
(Fraher, 2013)
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Similarly there are many other factors as well such as trade blocks, privatization, export-
import markets, globalization, etc. All these factors have restricted the new entries into the
market and also the growths (LeClair, 2000).
4.3
Since the European Union came into existence, there has also been the introduction of
new challenges that came up such as natural and economic crisis, demographic changes etc. This
has also represented that aviation is the third largest active sector of EU which helps in
improving entirely the employment rates in EU (Chapple, merman and Rudkin, 2010). So the
contribution of British Airways in European Union and its aviation related policies can be said as
slots for allocation to EU airports. Single Europe Sky undertakes the air traffic management and
air traffic routes. There is also consumer protection legislation that is also set up according to the
highest possible standards (Rose, 2006).
CONCLUSION
Thus it can be said that BA should give equal importance to all of its stakeholders so that
business operations can be undertaken smoothly. This report has also helped in knowing the
steps that BA can undertake in negative conditions or the ones that arise from economic crisis in
aviation industry. This will help BA in standing strong in the competition and earning higher
profits. All these factors have helped British Airways to be the market leader in Aviation
industry not only in UK but also in the entire world.
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REFERENCES
Journals
Chapple, S., merman, L. and Rudkin, K., 2010. IFRIC 13: accounting for “customer loyalty
programmes”. Accounting Research Journal. 32(2).pp.124 – 145
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Management. 19(1/2).pp.109 – 126.
Hooper, D. P. and Greenall, A., 2005. Exploring the potential for environmental performance
benchmarking in the airline sector. Benchmarking: An International Journal. 12(2).pp.151 –
165
Huettinger, M., 2014. What determines the business activities in the airline industry? A
theoretical framework. Baltic Journal of Management. 9(1). pp.71 – 90
Kumar, S., Massie, C. and Dumonceaux, D. M., 2006. Comparative innovative business
strategies of major players in cosmetic industry. Industrial Management & Data Systems.
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LeClair, T. D., 2000. Marketing planning and the policy environment in the European Union.
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Nataraja, S. and Al-Aali, A., 2011. The exceptional performance strategies of Emirate Airlines.
Competitiveness Review. 21(5).pp.471 – 486.
Rose, A., 2006. Measuring operational safety in aviation. Aircraft Engineering and Aerospace
Technology. 78(1). pp.26 – 31
Souiden, N. and Diagne, M., 2009. Canadian and French men's consumption of cosmetics: a
comparison of their attitudes and motivations. Journal of Consumer Marketing. 26(2). pp.97
– 109.
Books
Bhattacharya, B. C., Sen, S. and Korschun, D., 2011. Leveraging Corporate Responsibility: The
Stakeholder Route to Maximizing Business and Social Value. Cambridge University Press.
Blythe, J., 2008. Essentials of Marketing. FT Prentice Hall.
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Cattaneo, O., 2010. International Trade in Services: New Trends and Opportunities for
Developing Countries. World Bank Publications.
Drexl, J., 2012. Competition Policy and Regional Integration in Developing Countries. Edward
Elgar Publishing.
Hatch, J. M. and Schultz, M., 2008. Taking Brand Initiative: How Companies Can Align
Strategy, Culture, and Identity Through Corporate Branding? John Wiley & Sons.
Hatch, J. M. and Schultz, M., 2008. Taking Brand Initiative: How Companies Can Align
Strategy, Culture, and Identity Through Corporate Branding? John Wiley & Sons.
Marangos, J., 2013. Consistency and Viability of Capitalist Economic Systems. Palgrave
Macmillan.
Punzel, T., 2013. Risks and Decision Making. GRIN Verlag.
Tran, H. V., 2003. Competition Policy and Global Competitiveness in Major Asian Economies.
Edward Elgar Publishing.
Online
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airline-industry.html>. [Accessed on June 19th
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Cahill, S. A., 2011. Want to own a branded top-level domain? Staking out brand space on the
internet. [Online]. Available through: < http://www.stites.com/learning-center/legal-
updates/want-to-own-a-branded-top-level-doman-staking-out-brand-space-on-the-intern>.
[Accessed on June 19th
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Klein, R. S., 2014. Organizational responsibility. [Online].Available through:
<http://www.oxfordbibliographies.com/view/document/obo-9780199846740/obo-
9780199846740-0055.xml >. [Accessed on June 19th
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Raktabutr, T., 2006. Analysis of Organization: British Airways. [Online].Available through:
<http://thanabut.blogspot.in/2007/05/1-introduction-this-report-is-written.html >. [Accessed
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