Introduction to Business environment
Business environment refers to the surroundings where business carries out its operations with the aim to sustain in the market for longer period. In the modern era, environment where organization carries out its operations is highly competitive and in turn, various obstacles are present which prevents management from accomplishing the objectives set. Due to this reason, effective strategies are required with the help of which firm can enhance its internal strength and it provides support to company in conducting various activities. Business environment takes into consideration both macro and micro factors which affects organizational productivity (Grundy and Moxon, 2013). Further, the overall nature of the national environment is determined based on economy of the country where GDP, inflation, BOP are considered. For conducting the present study, organization chosen is British airways, which operates in aviation sector that is one of the UK's largest international scheduled airline. Company has large presence in the market where at present 170 destinations are covered and due to this reason customer base of entity is quite strong. Various tasks have been covered in the report from Global Assignment Help Australia, which involves purpose of different type of organizations, key stakeholders of company, market structure of airline industry etc.
Purpose of different type of organization
Different type of organizations is present which operates in the market and their main aim of existence differs from each other in every context. Based on legal structure business enterprise are classified into public, private, government, voluntary organization etc. Main purpose of private company is to earn profits by rendering services and other type of products to the target market (Arundale, 2007). Private firms offer limited liability for its shareholders and number of shareholders of firm cannot exceed a figure of 50. Further, main aim of public company is to work for the welfare of society where registered securities are sold to the public and they can be traded on stock exchange. Voluntary organizations are those that rely on regular volunteers for conducting its operations. Main purpose of such firms is to render effective services to the target market as per their requirement.
A British airway is a public limited organization, which highlights that enterprise, is owned by investors who have limited liability. Company is based on London Heathrow and its presence is largely felt at London Gatwick. Main mission of organization is to render best in class services and air travelling options to the target market. This clearly highlights that management totally focuses on satisfying need of its target market. Apart from this, vision of company is to reduce its adverse impact on surroundings and to become one of the most favourite company (Shaikh, 2010). On the other hand, various objectives have been developed by enterprise both on short and long-term basis where short-term goals are to determine more routes to fly more planes and this can enhance customer base of enterprise. Further, long-term objective of entity is to decrease carbon emission as well as negative impact on surroundings and offering highly differentiated services. British airway revenue for the year 2014 was £11,719 million and passenger revenue was £10,452 million (BA Annual Reports, 2015). Therefore, this clearly highlights that organization is effective enough in carrying out operations in aviation sector.
Mission: The key mission of organization is to ensure that customer’s have best travelling experience within British Airways. The mission statement highlights that company wants customers feel safe and secure while travelling.
Vision: The vision of British Airways is to reduce its adverse impact on surroundings and to become one of the most favourite company (Shaikh, 2010). On the other hand, various objectives have been developed by enterprise both on short and long-term basis.
Short term objectives: To determine more routes to fly more planes and increase its fleet size. This will also help in increasing customer base of enterprise.
Long-term objective: Further, long-term objective of BA is to decrease carbon emission as well as negative impact on surroundings and offering highly differentiated services.
Identifying key stakeholders of British Airways
Stakeholders plays most important role in organization and they are directly affected by the decisions taken by management of company. Main stakeholders of British Airways are:
Customers: Target market of British Airways is one of the key stakeholder as each service is offered by company keeping in view requirement of its customers. Company is capable enough of satisfying need of customers as different services are offered at moderate prices and this directly enhances their satisfaction level. Further, management modifies services as per change in customer’s trends and preferences (Nimwegen and et al., 2008).
Suppliers: Main suppliers of British Airways are the parties who are providing food items and other kind of items for the convenience of customers. Further, suppliers have some expectations from company where they expect that management will make payment on time for the goods supplied on credit (Jennings, 2010). Therefore, time-to-time payment is made by company to its suppliers and this satisfies their need.
Employees: Employees working in British Airways renders services to the customers of firm and in turn, they expect growth opportunities from management. Therefore, to meet objective of employees as stakeholder, company focuses on their training and development and they are provided healthy working culture (About us: British Airways, 2015).
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Environmental groups: Such groups formulate different laws and policies which company has to follow with the aim of save surroundings from its adverse impact. British Airways has started to take initiative for reducing its environmental impact and this has been clearly stated in the vision statement of enterprise (Campbell and Craig, 2007).
Therefore, in these way these are some of the key stakeholders of company whose requirement are efficiently fulfilled by enterprise and this supports in enhancing business performance.
Steps taken by BA to meet the objectives of stakeholders
Customer’s: To meet the objectives of customers, British Airways value for the price paid by customer’s is ensured. The customers needs are identified by company by obtaining their suggestions, service reviews, feedback etc. Proper steps are taken to provide services as per the need of customer and ensure their satisfaction (Raynor and Allen, 2005).
Suppliers: The suppliers are paid timely and before the due time most of the time to ensure their satisfaction. They are also included in business decisions.
Employees: To meet the needs of employees, company provide them proper training and development opportunities that improve their skills and competencies. Thereafter, safe and healthy work environment is ensured to employees.
Environmental groups: To meet the objectives of environmental groups, British Airways is doing research which will help in identifying new processes that will emit less pollution. Also, steps are taken to reduce the carbon footprints up to 50%.
From the aforementioned part, its clear that BA is taking effective steps to meet the objectives of key stakeholders (Jennings, 2010). However, environmental groups and suppliers are still not satisfied. Therefore, to ensure their satisfaction and minimize conflict of interest company is improving their interaction with all stakeholders.
Extent to which BA meet the objectives of stakeholders
Up to a large extent objectives are meet by British Airways. To resolve conflict of interest among stakeholders a yearly meeting is held where all key stakeholders are invited. Therefore, suggestions are obtained, problems are resolved.
Responsibilities of an organization
British Airways has responsibilities towards each party associated with the organization. Further, management is efficient enough in satisfying need of every stakeholder as it is linked with overall growth and development of enterprise. Company has responsibility towards its customers as they expect standardized services and due to this reason, every department of enterprise applies larger efforts in delivering best services to the target market. Moreover, time-to-time new services are introduced so that customers may not prefer to purchase services of other firm. Organization has responsibility towards its surroundings where it operates and for fulfilling this responsibility various plans has been prepared with the aim to reduce environmental burden.
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Apart from this management has taken steps so as to decrease carbon emission and in turn it is having positive impact on brand image of enterprise. British Airways has responsibility linked with making payment for the goods purchased on credit towards its supplier and this duty is fulfilled by enterprise in appropriate manner (Giancarlo, 2005). Moreover, company has responsibility towards government where it is necessary for firm to pay taxes and duties on time. Therefore, this duty is also performed by company as per guidelines introduced by regulatory authorities. On the other hand, it is well known fact that interest of every stakeholder differs from each other due to which firm has to manage every activity so that situation of conflict of interest may not arise.
British Airways has legal responsibility of providing equal opportunity to its employees where proper growth opportunity is provided to every staff member. Firm follows health and safety legislations for the benefit of its customers and through this; they can safely travel from one place to another. Apart from this, company has responsibility to operate ethically where its each operation is carried out in favour of environment and trading is carried out in fair manner for enhancing reputation in the market (Zhang and Czerny, 2012)
Social responsibility: To fulfil its responsibility towards society, British Airways conducts CSR ( Corporate social responsbility) activity. The company is also providing donations to NHS and UNICEF.
Environmental responsibility: To fulfil its responsibility towards environment management has taken steps so as to decrease carbon emission and in turn it is having positive impact on brand image of enterprise (Campbell and Craig, 2007).
Legal responsibility: British Airways has legal responsibility of providing equal opportunity to its employees where proper growth opportunity is provided to every staff member. Firm follows health and safety legislations for the benefit of its customers and through this; they can safely travel from one place to another. Apart from this, company has responsibility to operate ethically where its each operation is carried out in favour of environment and trading is carried out in fair manner for enhancing reputation in the market (Zhang and Czerny, 2012).
Discuss economic system that attempts to allocate resources effectively
Economic system refers to the system of production and exchange of goods and services. Further, the main challenge present in every economy is to determine the ways through which resources can be allocated within society. Four type of economic system is being present that are:
Pure market: In this type of economic system, government has no role and private companies accounts for all the production. Further, consumers dominate the entire market and decide what can be produced. Apart from this, businesses have to take decision what products must be produced to gain competitive advantage (Brinkman, Navarro and Harper, 2014).
Command economy: In this type of economic system all, the resources are government owned, government holds the power to run all the businesses, and decisions are taken regarding production of goods. Further, private players plays very less role and consumers are given very less priority.
Traditional economy: In this type of economic system, the entire economy is shaped by custom or religion. Further, production takes place as per taste and requirement of customers belonging to different culture (Raynor and Allen, 2005).
Mixed economy: It is the type of economy in which British Airways operate where both private players and government plays crucial role in allocation of resources. Company takes each hand every decision keeping in view taste of its customers and government takes active participation by developing various laws and policies which firm has to comply with it. Resources are allocated as per demand of customers in the market and main stress is on effective utilization so that more profits can be earned with the help of this. GDP of UK is 2941.89 USD billion and GNP is 462267.00 GBP million which shows that size of UK economy is wide. Further, population of country is 64.1 million, which shows large number of people, are living in the country. On the other hand, entire economy is badly affected due to inflation and due to this reason; company like British Airways has to increase its prices so as to recover all the major expenses.
Therefore, in this way resources are allocated in every economic system differently so that available resources can be utilized in appropriate manner. Further, the initiatives of public and private entities is also different. The main consideration of public enterprise is to ensure welfare maximisation in society(Gautam, 2008). . Therefore, new projects are undertaken that generate more jobs for unemployed etc. Thereafter, private entities main consideration is to ensure profit maximisation. With this aspect, private firms invest in those investment schemes that will generate more return.
Some challenges due to fiscal and monetary policy on business environment
Business organizations operating in the market of UK are directly affected due to fiscal and monetary policy developed by government and it directly affects organizational productivity. Fiscal policy is associated with spending of government in the nation and has relation with taxation system of the nation (Worthington and Britton, 2009). Tax rate along with government expenditure changes at regular interval of time and this directly affects overall operations carried out by British airways. Rise in level of tax increases overall expenses of firm, as company has to pay higher tax. The main stress behind introduction of fiscal policy is to control overall aggregate demand so that services can be provided to the target market as per demand. In short, fiscal policy directly influences purchasing power of people living in the society (Zhang and Huang, 2012).
On the other hand, monetary policy is associated with interest rate on borrowings as based on economic condition rate of interest are changed and this affects overall operations of the enterprise. Company is directly affected by frequent changes in interest rate such as due to inflation and large amount has to be paid in the form of interest for the amount acquired. Due to eurozone crisis, interest rate on borrowings obtained through banks was increased and due to this firm has to pay large amount as interest (Venter and et.al., 2009). Therefore, in this way it can be said that fiscal and monetary policy has affected operations of British airways.
Impact of fiscal policy
Since, its clear that fiscal policy refers to expenditure done by government for developing infrastructure etc. Thereafter, the present fiscal policy is having positive impact on the British airways. The government is charging more tax which however reduces the profitability of organization but have positive impact like, government is developing new airports. In addition to this aspect, government is improving the security of passengers, investing in promoting international tourism etc. which will directly increase the business of BA (Raynor and Allen, 2005). . Therefore, it can be said that overall impact of fiscal policy is positive for BA.
Impact of monetary policy
According to the monetary policy, UK government has increased the interest on loans. Therefore, British Airways is forced to pay more on the loans and borrowed amount taken by company. This is also reducing the profitability of company. Therefore, monetary policy have negative impact on the functioning of British Airways.
How British Airways has been impacted by competition policy and legal changes
In the entire business, environment changes take place rapidly in the form of policies or laws. Due to this basic reason, British Airways is directly influenced as government has introduced laws such as competition etc. Government of UK has set some economic goals where every company has to focus on maximum utilization of resources and they must work for the welfare of society. Therefore, this influences overall operations carried out by company. British Airways has to comply with fiscal policy where taxes have to be paid by company accordingly. Apart from this competition, policy has been introduced by government where main stress is on prohibiting firms from competing with each other through unfair means (Gautam, 2008).
British Airways carries out its operations in the market where competition level is quite high and sometime it is possible that unfair methods are used by firm to become leader in the market. Therefore, presence of this act does not allows firm to compete with each other through unfair means. Competition commission as a body has been set up which regulates mergers along with monopoly power in the market of UK. Civil aviation authority is present which regulates the air transport industry. Authority develops various laws and policies, which British Airways and other airline companies have to comply with, and it is necessary to work as per guidelines issued (Wensveen, 2015). Training along with skills policy are present which focuses on training needs of the workforce employed by airline companies and safeguard overall rights and duties of the employees being hired by company like British airways.
Impact of competition policy on British Airways
Due to competition policy, British Airways is required to do healthy business practices only. The impact of competition policy is negative as company has to pay penalty of £270m for violating competition policy. The company was found guilty for fixing prices of fuel with suppliers. Therefore, its important for British Airways to consider competition policy while functioning to avoid adverse legal actions. Thereafter, to ensure smooth functioning it should consider guidelines of civil aviation authority.
How market structure impact pricing and demand for airline seats
Market structure refers to numbers of companies producing identical goods, which are homogeneous. Different type of market structures are being present, which affects overall operations carried out by the business enterprises.
Perfect competition: In this type of market structure, many firms are present which offers same type of products and services to the target market. British Airways operates in the market where competition level is quite high and there are no restrictions present in relation with entry and exit of firm in the market (Lange and et. al., 2015). Therefore, due to this basic reason it has become quite difficult for firm to earn higher profits. Moreover, organization has set low prices for its services as in case if high prices are set then customers may prefer to purchase services of other companies and it can lead to decline in overall performance of the company. Pricing and output decisions are taken by British airways after considering market condition and prices are kept moderate by firm as consumers are having many options in the market. Due to presence of large number of companies in aviation sector customers are dominating the market and output decisions are taken by firm keeping in view the overall market conditions.
Monopoly: In this type of market, structure only one company dominates the market and many entry barriers are present which restricts firm from accomplishing overall aims along with objectives (Blanpain and Flodgren, 2006). Further, organization operating in this type of market structure can easily earn higher profits as no substitutes are present.
Monopolistic competition: The key characteristics of this type of market structure are freedom of entry and exit, differentiated products, and high chances are present with firm to earn higher profits but it is only possible in long term.
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Oligopoly: In this type of market structure industry is dominated by few firms and competition level is low. This allows businesses to charge their own prices for the services rendered and in turn, they can grab opportunities present in the business environment (Campbell and Craig, 2007).
How interplay of different players shapes organizational response
Interplay of different plays along with forces present in the market directly shapes organizational response and affects overall operations carried out by British airways. Supply and demand is affected as many companies are operating in the market due to which demand for seats is affected and company has to supply services accordingly (Moon, H., 2010). Further, in many cases demand for services increase and in such conditions firm has to manage supply so that its customer base can be strengthened through this.
Apart from this customer, perception also plays significant role, as when customer perceive organization positively then it is possible for firm to encourage them to purchase services of the firm. No doubt, many options are present with target market and due to this reason; effective promotional schemes are introduced so that revenue of enterprise can be enhanced easily (Kunnanatt, 2011). Pricing decisions have to be taken by British Airways as per income level of customers and this allows firm to meet with the overall requirement of target market. Apart from this employee skills, innovation, technology etc. also acts as force as through this company can deliver effective services to the target market in case when more advanced tools and techniques are employed.
Supply along with demand shapes response of British airways as in case when demand for services of company are high then company has to increase supply especially at the time of festive seasons company has to enhance its capacity and same is the case when demand is low then company has to decrease its supply. Company strictly performs on the basis of market condition and ensures whether demand level is high or not. Price elasticity of demand supports in measuring the level of change in demand for services and its impact on change in price. In case when demand is high then prices are kept high and vice versa in order to accomplish long-term goals of the business. Further, elasticity of supply supports in knowing the change in quantity supplied due to change in price of services. In case when prices of services are enhances then company has to modify its supply so as to deliver better services to target market (Gautam, 2008). Further, equilibrium point is one when overall demand for services is equal to supply and this type of condition is generally favourable for the business in every possible manner. There are many factors present which affects elasticity of demand and supply in relation with British airways and they are availability of substitutes which are easily present in the market, category of services, proportion of income spent on services etc.
How British Airways has been impacted by working practices of countries
British Airways carries out operations in the aviation industry, UK as a country has transformed into multi culture nation as people from different nation, religion, culture, and background lives in the country. Therefore, this has direct impact on the operations carried out by organization, management of British Airways has to apply larger efforts in managing its workforce as need, requirement of every individual differs from one another, and it depends on culture and religion. Further, firm has to ensure that any kind of unethical practice such as discrimination is not present within the workplace (Cornelissen, 2014). Apart from this government has introduced various laws such as equality act 2010 where it is necessary for firm to provide equal opportunities to the staff members working in organization and management must always work in favour of their growth and development. Through this, it can be easily said that cultural environment has direct impact on business operations as due to difference in culture of individual, their expectations from management are different and in turn, management has to respond accordingly. On the other hand, top authorities of British Airways respect staff members belonging to every culture and religion and this in turn is having positive impact on the brand image of company (Lange and et. al., 2015).
Political: There are various laws and regulations present which affects overall operations carried out by British airways. Government has introduced laws such as safety, environmental and payment of duties that company has to comply with strictly so as to perform better.
Economical: At present economy of UK is adversely affected due to recession and due to this reason company is not able to charge high price for its services as purchasing power of consumers have declined (Zhang and Huang, 2012).
Social: This factor is linked with change in taste and requirement of customers due to which British airways have to bring change in its service range and it influences overall operations of the business.
Technological: Due to change in the level of technological advancement British airways has to adopt techniques so that it can serve its target market in better manner.
Legal: It involves the legal guidelines such as safety standards which firm has to consider so as to provide comfort along with convenience to its target market.
Environmental: This factor is linked with rising environmental burden of company on surroundings in the form of carbon emission. Further, government has developed environmental laws which firm has to comply with so as to save surroundings from its adverse impact (Kunnanatt, 2011).
Impact of global changes on British Airways
Changes taking place at global level has direct impact on the operations carried out by British airways. Further, the economy of UK is growing at faster pace and this is allowing direct opportunities to firm as company can easily expand its operations and this is leading to rise in revenue level along with profitability. Moreover, bodies such as world trade organization works in favour of economy where new trade laws and policies have been introduced and this allows company to grab more opportunities present in the business environment. Due to rise in trade level firm is obtaining more market and in short, it can assist management in enhancing its customer base in short period of time. Further, the emerging markets such as Brazil, India, Russia, and China are providing good market to the company as they are growing (Zhang and Huang, 2012). Further, at global level competition level is rising where new companies are entering into the aviation sector and this directly affects overall operations of British Airways, as firm has to set prices for its services accordingly. Moreover, the conference held by WTO in 1999 totally focuses on covering the aviation sector under trade regime of GATS. One of the main attribute of GATS is that it allows business enterprises to operate more efficiently (Shaikh, 2010.). On the other hand, other international bodies are also present such as international air transport authority, which has direct impact on operations of British Airways as various policies, and laws are developed by a authority which firm has to comply with.
International trade supports business enterprise in enhancing profitability along with revenue of British airways. Firm will be able to expand its business at international level and it provides price relaxation to the target market. By expanding operations into different markets it is possible for organization to take advantage of different factors such as land, labour and capital etc and their is no trade barrier on such resource. All the resources present can be used in appropriate amount and in efficient manner. Apart from this the supportive nature of government of UK is respect with the aviation sector supports country to invest in other countries. This strategy supports in development of the economy and more employment opportunities can be developed easily.
Global factors which may affect British airways
At international level, large numbers of factors are present which may affect overall operations carried out by British airways. Further, legal aspect is one of them where it is the duty of management to ensure that all the laws and regulations developed by various authorities at global level are followed by firm so that company can operate smoothly. Moreover, it is necessarily required for management to strictly comply with the international norms as developed by IATA and other regulatory authorities. Apart from this changes in exchange rate also affects operations carried out by company as due to this risk of carrying out business operations in the market increases. In short, more fluctuations in exchange rate can lead to lower down of profits and overall sales of the entity. Moreover, employment pattern changes at global level where new policies are introduced for safeguarding right and duties of employees and this may also affect British Airways, as firm has to change its human resource policies accordingly (Zhang and Czerny, 2012). On the other hand, custom duties and other type of taxes paid by company may also change and this can lead to rise in expenditure level of the organisation.
Impact of EU policies on travel and competition on British Airways
The policies developed by European Union linked with competition and travel has direct impact on overall operations carried out by enterprise. EU has introduced different policies and regulations, which can directly control overall operations carried out by British airways. Firm has developed different laws which are linked with environment protection, competition etc. (Jennings, 2010). Some of the measures taken by enterprise involve passenger safety measure, passenger rights, and European Union Citizen Rights when travelling in Europe. Therefore, all these policies along with laws and regulations have impact on the functioning of organization (Kunnanatt, 2011). Apart from this competition, policy has been introduced where it is not possible for enterprise to compete with its major competitors through unfair means and strict guidelines have been introduced so that companies can easily compete with one another. Moreover, environmental policy has been developed by considering the issue of climate change and due to this reason firm has to take corrective actions with the aim to save surroundings and its adverse impact on environment can be reduced at international level. EU differentiation policy has been introduced where it is required for every business to differentiate its services from those of other companies operating in the same sector. Further, this policy has to be undertaken by every business especially those operating in aviation sector. This allows British airways to easily deal with the challenges present in the market and has assisted to satisfy need of its target market in efficient manner. It has positive impact on company where with the help of differentiation sales volume of the firm can be easily enhanced.
The above study has supported in analysing the business environment of British Airways where it has been found that organization carries out its operations in the market where competition level is quite high and large number of challenges present affects business productivity. Moreover, at global level it is necessary for firm to comply with the regulatory requirements such as competition, environmental policy etc. This directly assists firm to operate smoothly in the market and has positive impact on the brand image. Further, economy of UK is growing at faster pace and it is allowing British Airways to better respond to the changing need and requirement of the target market.
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