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Business environment has a wider scope including intrinsic and extrinsic factors that can affect various organizations that are operating internationally. Studying the business environment of a specific firm helps in assessing the way in which various factors affect the functioning of organisation like political, economic, social, technological, etc. (Boons and Lüdeke-Freund, 2013). In the present report, the firm, British Airways has been chosen which is the second largest airline operating in UK.
The study work presented below includes a brief explanation of the concept of business environment affecting overall performance of various business organizations. The report thereby includes determining the impact of international trade and several factors driving a change in international aviation industry. A discussion is made on fiscal and monitory policies introduced by the respective government. The organization's pricing and output decisions are undertaken according to the market structure prevailing within airline industry. Impact of policies of European Union upon organizational structure of British Airways have also been covered in the report.
1.1 Purpose of different types of organizations
Organization is an association or institution that is established to achieve a specific set of goals and objectives to accomplish or attain different purposes. An organization includes a specific structure that might be simple or complex. Purpose for which an organization is existing in the market determines its own set of objectives and targets. Following mentioned is the list of organizations having different purposes to be aligned with organization's objectives:
- Profit making organizations/private firms: An organisation that is operating in specific business environment with the sole objective of making maximum possible profit by efficiently producing goods and services to satisfy maximum level of demand.
- Non Profit-making organization/public firms: These organizations are working specially to render social services to the society for providing financial or social assistance to members of the society. They provide such services for a social cause that does not include profit motive (Carroll and Buchholtz, 2014).
- Government Organizations: These organizations are regulated and governed by government of respective region. The objective of these organizations mainly to focus on protecting the interest of citizens of nation and ensure that none of the business activities would exploit customers with means of selfish policies.
British Airways is an organization that was established by the government of United Kingdom to manage two nationalised agencies including British Overseas Airways and British European Airways by merging both of them under single association of British Airways. Company has been working with the vision of providing increased air connectivity to customers across the globe. Moreover, mission statement highlights the objective of providing better air travelling services with reasonable fare (Gupta, 2013).
1.2 Meeting stake holder's objectives
Stakeholders are individuals or personnel having specific interest with respect to company. The activities performed by firm directly or indirectly affects each of them. These stakeholders are assumed to be associated with the organisation for their own interest. Company's overall performance can be accredited to contribution obtained on account of participation or involvement of each of these shareholders. British Airways has attained a positive image in the society with respect to satisfaction rendered to various stakeholders including creditors, investors, customers, government agencies, media, etc. Below mentioned is the list of various stakeholders focusing upon determining the extent to which organization meets their objectives:
- Creditors: Creditors have been providing company with required financial assistance. British Airways has been successful in earning required percentage of net profit, thereby ensuring returns with adequate interest to various creditors within specified time range.
- Investors: Investors are the individuals who have investing their hard earned money with an objective to safely invest for acquiring additional amount on taking a risk to invest the same. British Airways has been extremely efficient in delivering adequate returns to its investors.
- Government agencies: Government has been intervening in the aviation industry to a greater extent as the aviation industry is a rapidly developing sector. The contribution of airline companies has been immense in current rate of GDP and GNP. British airways has been providing required information and details to the government to analyse economic growth and undertake required decisions.
- Employees: Interpersonal skills and efficiency of employees for effectively providing service to British Airways has enabled to deliver high quality services to customers. On contrary to this, company has been providing its employees with list of opportunities to enhance their carrier development plan.
- Customers: Customers are the most important aspect for achieving extra ordinary position in the market. Cited entity has been providing its customers with quality assured services at a reasonable rate of fare. Transportation has now been made super convenient for the entire society (Jennings, 2014).
1.3 Responsibilities of organisation and strategies adopted
British Airways is the world's largest company with respect to number of travellers travelling within a year. Company is not working in isolation and it has been coordinating activities performed by each of the stakeholders. Stakeholders have been providing the firm with financial assistance as well as required contribution for accomplishing list of goals and attaining the targets that are set to secure a permanent position in competitive environment. For operating in a social environment, it is necessary for company to serve the society to develop an idea of sociology on global basis. For serving various needs of society, company must carry out special campaigns and programs to promote the beliefs and assumptions with respect to women empowerment, global environment and education. Company has adopted the strategy of aligning with Corporate Social Responsibilities for accomplishing social obligation.
Moreover, it has adopted the strategy of providing services at a reasonable rate. This has enabled company to attain competency against competitors within industry. Firm has been following the strategy of risk management that includes designing structures and plans for analysing future threats that can impact adversely. Alternative policies are designed in advance when such situation will be confronted with. If particular project does not indicate appropriate performance in future, company might terminate the same (Jennings, 2015).
2.1 Economic system allocating resources for British Airways
Economic system of UK has been managed and controlled efficiently to effectively allocate various available resources that is, physical, human, capital, entrepreneur and information by making them easily accessible to the cited company. The economic condition prevailing in economy directly impacts the way in which each sector of economy attains various resources. Government must efficiently analyse the total supply of labour and align the same with total demand.
Providing a wide scope of employment opportunities to employees indicate expertise of government in managing them that directly impacts British Airways in a positive manner. Information resources includes required data and information with respect to organisation as well as customers for carrying out various transactions that are easily available to the cited enterprise. Entrepreneur is that element of market which is required to be managed equally as other resources in economy. Economy must be stable enough to provide these entrepreneurs with opportunities to utilize each of the resources efficiently as observed in case of British Airways. Thus, it can be analysed here that the economic system of UK has provided company with ample of advantages to be exploited (Kim, Suresh and Kocabasoglu-Hillmer, 2013).
2.2 Impact of fiscal and monitory policy with consideration to British Airways
Fiscal and Monitory policies are the measures undertaken in economic parlance to control the economic structure of a nation. These policies directly affect the economic system that allocates resources efficiently within different sectors of economy. This section includes detailed explanation of both these policies and their respective impact with consideration to British Airways.
Applying monitory policies to control the supply of money by using expansionary or contractionary measures is under the control of national authorities. Expansionary measures are applied to provide increased access to currency by increasing the supply of money within economy to overcome increasing unemployment rate and recession. On the other hand, contractionary measures include shrinking the supply of money to slow down the rate of economic growth to overcome situation of inflation prevailing in nation.
Whenever, expansionary policies are adopted by the central bank or currency board, it provides company with measures to provide more employment opportunities to increase the supply of labour. Contractionary policies imposed by currency board however restricts British Airways from undertaking new projects requiring huge investments of funds on account of decreased net profit due to inflation prevailing in the economy. It also impacts customer’s spending power due to decreased supply of money that negatively affects company's net profit (Yuan, Macve. and Ma, 2015).
Fiscal policy is an economic tool used to determine the rate of government spending and tax collection from citizens belonging to specific economy. Whenever the supply of money is in excess that that is required, government tends to decrease the expenditure on public activities as well as pull the excess supply of money by imposing increased rate of taxes. Fiscal policies tend to decrease company's net profit as customers are not in favour to pay increased amount of taxes on purchasing travelling tickets.
2.3 Impact of competitive policy upon operations of British Airways
Various measures adopted by European Union include application of competition policy to enhance and promote the idea of competitiveness within aviation industry. Single sky strategy adopted by the member countries have enabled cited entity to coordinate their activities for promoting overall economic growth of the region and ensuring that none of the activities performed by any company would exploit the benefits of other firms in industry. Competition policy has improved the quality of services provided by British Airways (Levi, 2014).
3.1 Market structures
There are different types of market structures which help in determining the price and output decisions. It includes perfect competition, monopoly and oligopoly as well as duopoly market. In perfect competition market, there is large number of buyers and sellers which are present in the market place. Along with this, there is free entry and exit in the market which helps the entity in attaining high profit and in this market structure, they are selling heterogeneous products that help in attaining the targets. In monopoly market, there is only one seller which helps in managing the business. Along with this, members of company have to sell the product at a reasonable price which helps in attaining the targets. In duopoly market, there are only two sellers which help in attaining the targets at high competition and it exists in monopoly and perfect competition market.
In oligopoly market, there are large number of suppliers present which influence the decision of company and in this, they are having authorities that they do not possess the rights to make changes in price of products and services (Bøllingtoft, 2012).
British Airways is following perfect competition market as in this market, free entry and exit is there at the time of high competition and entity is earning high profit or revenue which helps it in attaining the targets on time.
3.2 Market forces shaping organizational behaviour
Market forces describe the relation between supply and demand of products and services within competitive market. Major reason of organisational response helps in the supply and demand of products in the market and for that, employees of British Airways has to do the work with proper capability so that they can supply the product with same quantity as a demand in the market so that they can gratify them as per the needs.
Purchasing power of entity helps in determining elasticity according to the flow of resources prevailing in economy. The level of competition has been increased which is having huge availability of substitute products. There is a probability which helps in emphasizing the products and services of business and it helps in attaining the success and targets (Wild, Wild and Han, 2014).
3.3 Business and cultural organization
British Airways has attained an image of a role model among its competitors. Business environment consists of various factors that have been positively impacting the overall performance of organisation. Globalization has widened the scope of Business and Cultural environment. Company's internal as well as external factors have aligned to confront the organization with opportunities to maintain a permanent position in industry. Internal factors including customers and employees have been aligning efficiently with company's policies. Moreover, firm has adjusted with external elements such as political, social, technological, etc. Cultural environment indicates a common set of beliefs and assumptions adopted by customers and employees. Company has adopted a broad mind set for accepting diversities in ideology (Zhang and Huang, 2012).
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4.1 Significance of international trade
With the advent of globalization, traders and producers across the globe have been confronted with opportunities to expand the limited scope of national business. International business is the backbone of modified business environment that has enabled various companies to provide goods and services to customers across the globe using latest means of distribution of products. International trade has built up an environment wherein it is more required for the producer and buyer to come in direct contact in a specific market place. Customers can now shop online whatever be their location. International trade has provided an expanded scope for business using modified means of communication and transactions that imply use of technological means and methods. Large scale companies have acquired a prominent position in the UK market by receiving bulk orders from across the globe that have enabled them to attain higher profit targets.
The concept of international trade has provided list of benefits for various companies, customers, etc. in UK and thereby enabling various countries to strengthen their relationship with each other through large scale of exchange of goods and services (Vahlne and Johanson, 2013). Thus, various developed countries have been providing opportunities for developing countries to exploit the benefits of advanced technologies which have enabled them to attain expertise in same and thereby, boosting the economic sustenance of countries that are in requirement of same.
4.2 Impact of global factors
List of factors have been analysed that exists in international business environment. It includes the use of PESTLE analysis which is an abbreviation of Political, Economic, Socio-cultural, Technological, Legal and Environmental factors. Various UK based organizations that are operating in international business environment are confronted with positive as well as negative impacts of the factors mentioned above. These are factors that are beyond the control of companies especially that are operating within airline industry of UK. Political factors include international political stability which determines the level of coordination among various companies as well as international trade policies framed by government of different economies.
It is important for the government of countries of UK to develop and maintain a suitable political environment which will continue to provide a wide range of opportunities to companies operating in UK to expand their business activities over the globe with assistance of low tax rates, tariffs and subsidies granted by the UK government. The widened scope of business in international market has merged various countries together to analyse the impact of each of them for determining the global economic condition that indicates overall impact of each economy with context to entire globe. The concept of global economy has been prevailing in a common market place that is international market environment (Business, 2012).
It has been analysed that many developing countries such as India, China, etc. have provided a wide range of scope for British Airways to exploit the benefits of these developing economies with increased air connectivity. Ideology and assumptions followed by major section of customers in global market are influencing the demand pattern directly that has provided companies of UK with list of opportunities to provide services in markets across the borders.
Technological revolution in international market has provided list of tools and techniques that have been adopted by British Airways to modify their services provided. Increasing awareness for maintaining standards to preserve environment has influenced company to reduce the impact of global warming by using eco-friendly tools and techniques to ensure minimum emission of pollutants. Legal factors include acts and regulations passed by aviation firms of different economies that directly put an impact over the activities to be performed by British Airways as these are required to be considered importantly for framing employment and safety rules (Hair, 2015).
4.3 Impact of policies of European Union
European Union is a political-economic commission which coordinates 28 member countries of Europe. It was established to promote the idea of merging these member countries to operate in a single market environment that would enhance the overall economic condition of United Kingdom. The section determines each policy of European Union and its respective impact as below:
- Single market: Traditionally, there were a lot of restrictions imposed upon aviation companies which has now been liberalized to a great extent. The policy confronted British Airways with a wide scope of investment to be made outside national borders of UK member countries. Liberalized environment now has enabled company to frame its own policies with respect to air transportation and fares.
- Aviation strategy: Policies framed under the context of aviation strategy focused mainly on providing increased air connectivity to customers across globe at a reasonable fare cost. This strategy was adopted to promote an idea of overall development of Europe by improving the standard of living of citizens.
- SESAR: SESAR was introduced with consideration to the concept of single European Sky wherein usage of tools and techniques was encouraged to efficiently attain the objective of managing air traffic through Air traffic management research programs (Lee, Olson and Trimi, 2012). Idea of Single sky would not be successful without effective application of the latest techniques and tools.
- Single European Sky: Rapid increase in number of aviation companies implied upon necessity to develop Single Sky concept which would concentrate mainly on reducing the congestion caused on account of increasing air carriers in the air space. Single European Sky has efficiently reduced the pressure of managing increased traffic which initially caused delay in flight arrival and departure.
It can be concluded from the above report that European Commission has highlighted the fact that aviation industry is one of the most income generating sectors of European economy. It is extremely important to control the activities and services of entire aviation industry to ensure long term sustenance of current economic stability of countries that is a part of European Union. British Airways has acquired a unique position in international market of aviation industry after EasyJet. It has been aligning successfully with the policies of European Union and thereby acquired European market with a plan to expand air connectivity to various parts of globe.
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