INTRODUCTION TO BUSINESS ENVIRONMENT
In corporate terms business environment states about numerous attributes that have considerable impact on business operations. It incorporates range of stakeholders of business like suppliers, distributors, substitutes, consumers, competitors and regulations (Maloney and Stanford, 2010). Business environment needs to develop mission, goals, vision and objectives of British Airways. The organization needs to develop a working environment that is motivating for workforce and employees can grow their career within the business. Here, in this report the organization selected for research is British Airways which is a leading airline company of UK. British Airways (BA) is facing intense level of challenges due to increased level of competition and need to bring unique strategies to sustain in the market.
British Airways has developed a competitive vision and mission statement that assists it to acquire a competitive edge in the airline market. The vision and mission statement of BA states its business goals i.e. to become the favorite global premium airline company of world. Mission and vision play an important role in business as it offers assurance as well as gives excellence in service to its buyers. The main motive of this firm is to provide full service anticipation to its customers. The vision statement of BA is to endorsement for carbon offsetting schemes and minimizes the carbon emission.
The main motive of this corporation is to make its market presence stronger as well as acquire long term profitability. The market where British Airways operates its business is facing unprecedented conditions over the last few decades (Kew and Stredwick, 2005). To sustain in the competitive market they make unique strategy. They take several actions to improve the service quality and make the cost more effective. BA provides its employees chance of sustainable development and also assists in to develop a positive working atmosphere so that maximum profitability can be achieved. The goal of British Airways is to safeguard environment by reducing different types of pollution like air, carbon emission, and noise and create an atmosphere that is soothing for people (Miller and Cross, 2009). Other than all this the corporation also undertakes adequate corporate social responsibilities activities like charity and development of rural areas. The organization mainly gives attention to deliver optimum level of services so that customer satisfaction can be achieved.
The stakeholder analysis defines that association between an organization and various parties that are involved in business, as well as to the level it impacts on each other. With adequate understanding business can enhance its profile and is considered as an important attribute for BA to achieve its business goals. The major stakeholders of BA are as stated below;
Customers – They are the main source for BA to earn maximum profit and they have a minimal impact on organizations process (Pirttilä, 2008). BA tries to keep its existing consumers in process and focuses to attract maximum number of people in business.
Employees – Workforce in BA are strongly associated with the business operations and influence the overall activity of business. It has been observed that any kind of cut downs or decisions have a direct positive or negative impact on employees. Many of the times staff goes on strike to fulfill their demands in BA and to avoid such type of situations management tries to develop a strong relationship with its workforce.
Competitors – BA is a leading airline company of UK and has a turnover of around 8.99 bn pounds. Its major competitors include EasyJet and Virgin Atlantic. However, BA is a market leader and low cost airline have severe impact on business decisions.
Media – They have a great effect on the overall corporate image of business and it covers mainly strikes of cabin crew and other staff members. BA focuses to maintain a prominent relationship with media in order to develop a positive image among public and brand name.
Suppliers – Airbus and Boeing are the main suppliers of BA and they considerably affect business process. BA has its suppliers only for to manage fuel availability and depends on different travel agents from which people book their tickets.
Financial institutions – BA depends on diverse financial institutions to gear its rations and manage the liquidity. Financial institutions have great effect as well as interest in BA as they can refuse or grant fund (Johnson, 2010).
Shareholders – In BA shareholders play a leading role in the financial success and need to be enquired prior to make any business decision such as giving authority for new strategies or changing board members.
Local community – This is one of the most important role that towards BA needs to pay attention as being a good corporate citizen, company need to lower down the carbon footprint and develop efficient relationships with local communities. The company presents itself as a socially responsible firm (Streever, 2007).
Government bodies – The airline sector has to follow a range of legislative policies like domestic, international and European. Governing bodies have a huge impact on BA’s operations and company has formed a bilateral agreement among nations to undertake specific routes operations.
Environmental issues – It includes factors like unfavorable weather situations and volcanic ash cloud effects on the daily schedule of flights (Zhifei and Joo, 2013). Hence, to overcome this BA tries to lower down the carbon emission and other types of pollutions.
In the business operations BA have enforced range of strategies so that diverse needs of stakeholders can be accomplished as well as overall goal can be achieved. As discussed the major stakeholders of business have the power to influence BA in various forms. Hence, their expectations need to be accomplished on a timely manner so that each of the stakeholder’s demands can be fulfilled (Britton, 2007). BA needs to accomplish the requirements of its employees and customers as they play a very important role in offering and availing services of company.
By giving the employees prominent services and timely payment of salaries with fringe benefits their productivity can be enhanced and could be motivated to attain maximum of rewards and incentives (Dettwiler, Lindelöf and Löfsten, 2005). Consumers are the main sources of income for BA and focus should be given to keep them associated with business for long term. In this context BA mainly gives attention to provide its consumers maximum of services and through diverse schemes attract them consistently.
The major competitors of BA are EasyJet and Virgin group, so in order to sustain BA brings different strategies and offer as well as provide full services experience to its buyers (Gnoli and Ridi, 2014). Other stakeholder’s needs are fulfilled by providing them suitable amount of dividend; the rate of dividend is increased every year. Government makes different laws, rules and regulations which can directly affect companies operations. Such rules and regulations must be followed by the company. British Airways fulfill the anticipations of governing bodies by paying timely taxes and maintaining harmonious relations with them.
Economy system is an organized way in which a state or nation allocates its resources and apportions goods and services in the national community. The way a country’s resources are owned and the way that country takes decisions as to what to produce, how much to produce and how to distribute what has been produced comes under this system. There are three types of economy:
- Free Market Economy
- Centrally Planned or Controlled Economy
- Mixed Economy
By the supply of various elements such as land and lab our Production of goods and services get easily influenced by it (Ineson and Kempa, 2007). In mixed economy British airways use to operate their business. On the basis of market condition their economy makes their decision.
A mixed economic system is an economic system that features characteristics of both capitalism and socialism. This system allows a level of private economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims. This type of economic system is less efficient than capitalism, but more efficient than socialism. For having proper utilization of recourses British Airways has to change their rules and regulations as per the different countries. In the controlled economy is an economic system in which economic decisions are made by the state or government rather than by the interaction between consumers and businesses (Langford and et.al, 2005). The production of goods and services is undertaken by state-owned enterprises. The state can set prices for goods and determine how much is produced, and can focus labor and resources on industries and projects without having to wait for private investment capital (Morrison, 2010). In market economy, economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity.
Monetary and fiscal policies are being used by the government to control and influence the performance of the economy (Schmid, 2014). In fiscal policy, government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. In Monetary policy is the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.
Monetary Policy: Monetary policy is what central banks use to manage the amount of liquidity in the economy. Liquidity includes cash, credit and money market mutual funds. The important part of liquidity is credit, which includes loans, bonds, mortgages, and other agreements to repay (Jones, 2013). Central banks, including the Federal Reserve, manage liquidity to guide economic growth.
Fiscal Policy: Fiscal policy involves the government changing the levels of taxation and government spending in order to influence Aggregate Demand (AD) and the level of economic activity. The purpose of fiscal policy is
- To stimulate economic growth in a period of a recession.
- Keep inflation low.
- Basically, fiscal policy aims to stabilize economic growth, avoiding a boom and bust economic cycle.
- Fiscal policy is often used in conjunction with monetary policy (DeVries, 2011).
In fact governments often prefer monetary policy for stabilizing the economy. There are two powerful tools our government and the Federal Reserve use to steer our economy in the right direction: fiscal and monetary policy. When used correctly, they can have similar results in both stimulating our economy and slowing it down when it heats up (Wessels, 2012). The ongoing debate is which one is more effective in the long and short run. In a nutshell, proactive actions from our government are the only way to steer the economy. Monetary policy on its own has its limitations in resolving financial crises. The direct and indirect effects of fiscal policy can influence personal spending, capital expenditure, exchange rates, deficit levels and even interest rates, which are usually associated with monetary policy.
Competition policy and other regulatory mechanisms are two important and inter related areas of public administration and regulatory policy. The main aim of the competition policy is to ensuring that competition in the marketplace is not restricted in a way that is detrimental to society. Both mechanisms play a vital role in improving the quality of regulation and in building healthy and competitive environment (Aandy, 2012). Many steps had been taken by the government to for improving the features of new regulations that includes public consultation and hearing. British airways had set up their business in that market which was highly competitive.
The strength of competition in aviation industry changes from area to area depending on the nature and number of competitors (Hamilton and Webster, 2012). There is a free market condition within the whole Europe for domestic flights. All airlines are free to function on any route and they decide their own fares according to the market conditions it has been allowed by European airline.
Environmental regulations consist of the factors such as emissions to the global atmosphere, disposal of solid waste. To make new rules and regulations for safeguarding and managing the environment performance was the main aim of the British Airways (Kensler, 2007). British Airways provide training to their workforce relating to the environmental performance and increasing awareness of environmental issues. Such training programs help the company to use natural resources effectively.
Every business organization or industry operates in a specific market structure, which is determined by the numbers and characteristics of firms in market. There are a variety of market structures such as oligopoly, monopoly, monopolistic competition and perfect competition market (Maloney and Stanford, 2010). Pricing and output decisions of businesses in the industries are dependent on type of market structure in which they operates. In perfect competition market, there are huge numbers of firms so that no single firm can affect the prices as prices are equal to marginal cost of production and they can only take output decisions. In case of monopoly, the monopolist is the single seller and he decides the prices and outputs as per his choice (North, 2010). Further, in case of monopolistic competition, there are many suppliers but each firm independently takes the pricing and output decisions. In the oligopoly market structure, there are only few numbers of companies who compete with each other.
Aviation industry operates in oligopoly, as there are only small numbers of key companies in the industry. For example, there are only some key competitors for British Airways such as Easy Jet, Virgin Atlantic, Delta airlines and American airlines; but it is facing very tough competition from its competitors. In the oligopoly market structure i.e. in the aviation industry, the pricing and output decisions are little bit complex and they depends upon the strategic interaction among the key firms (Wales, 2009). There is usually very high price war in the oligopoly market structure so that pricing decision of one firm affects the prices of other organizations in the aviation sector. Whenever any of its competitor cuts their prices, British Airways also keeps lower prices and fares along with better services to achieve competitive advantages and to sustain in the market (Sloman, 2007). Companies in the oligopoly market structure have power to change their prices at different level of output, but the output and supply i.e. number of tickets or seats for passengers are fixed so that output decisions are usually restricted in the airline industry.
There are a variety of market forces, which have direct impact on business operations and decisions of companies like British Airways. Every business firm has to react according to these forces and these reactions are known as organizational responses (Coplin and O'Leary, 2013). Some of the key forces affecting organizational responses include demand and supply, advertising and sales promotion, pricing policies, distribution channels, innovations and technologies, consumer preferences, etc. The needs and demands of the customers are continuously changing as per changes in their preferences and cultures. Due to this reason, BA continuously carryout market research and invest a lot of resources on research and development to identify and meet the rapidly changing demands of customers. Along with this, there are very high technological advancements so that British Airways also have to implement new and innovative technologies for offering innovative products and services to sustain competitiveness in the market (Dickinson, 2013). In response of technological forces, British Airways operates with the help of latest technology, as it uses SOA (Service oriented architecture) to integrate more than 600 passengers and airports system.
Further, use advertisement and sales promotion and various distribution channels like online websites, travel agents, global distribution systems; etc has greatly increased in the market, which leads to increase the expenses of the organizations and results in increased prices of tickets (Henderson and Kelliher, 2010). But in the current era of competition, uses of these distribution channels and promotional techniques have become essential to sustain in market and to increase sales of the companies so that British Airways also uses advertising and sales promotional techniques to promote its products and services. Further, due to increased awareness about environmental safety, BA has taken a variety of step to safeguard environment and natural resources. There are a variety of governmental policies including pricing policies, licenses, various law and regulations, etc, which are required to be followed in the airline industry (Kew and Stredwick, 2005). Due to these market forces, British Airways effectively considers the pricing policies and other laws at the time of deciding the prices and taking other decisions to meet the demands of the customers.
Business organizations including British Airways are greatly affected by the working practices and cultures of the nations, where they operate. People of UK are usually friendly and they like helping each other and working in teams, which support BA in achieving the organizational objectives as team working and helping nature of employees leads to increase their working capacities and helps in enhancing overall performance and service quality of the company (Miller and Cross, 2009). BA is popular for its workforce diversity at workplace, as there are a variety of customers from different cultures, who can effectively serve customers of different nations in the best possible ways.
Further, young population of UK likes to work challenging working environment and they fresh and innovative ideas so that British Airways focuses on recruiting yang people to increase their working capacities and quality of work (Pirttilä, 2008). There is an issue of poor industrial relations and organizational conflicts, which do not allow the people and organizations to respond in a positive manner to get the best outcomes. Due to this reason, BA makes efforts create a working environment where people can freely share their views including complaints and suggestions, so that they can be considered to enhance industrial relations and resolve organizational conflicts (Streever, 2007). Further, various cultural and other environmental factors of UK the business functions, which leads to affect the profitability, productivity and service quality of British Airways.
International trade is important for every business organizations including British Airways as it leads to provide an opportunity to operate in a broad global market instead of limited domestic market. With the help of international trade, BA gets opportunities increase their sales and profits by serving increased number of customers. But there a variety of international organizations and factors like WTO, international civil aviation and tourism bodies, etc., which have impact on the international trade in aviation industry (Zhifei and Joo, 2013). WTO i.e. world trade organization provides stability and security to operate in international market along with protecting the companies like British Airways against unfair trade practices in the global market. Further, the international civil aviation organization (ICAO) codifies various principles and techniques of global air navigation along with helping promotion of planning and development of international air transport so that safe and orderly growth of the firms like BA in aviation industry can be ensured (Jones, 2013). Each of these international organizations have some specific rules, policies and guidelines, which are required to be followed by British Airways to successfully do international trade.
Along with world trade organization (WTO) and international civil aviation organization (ICAO), there are many other global factors, which have impact on the organizations like BA. The UK government has made a variety of policies and regulations, which are required to be followed by the companies operating in UK at the time of making their business strategies and taking decisions (Britton, 2007). For example, at the time of deciding prices of tickets of airlines, British Airways have to effectively consider the pricing policies of UK government. Further, the decisions and operations of BA are greatly affected by the economic, technological and socio-cultural factors (Johnson, 2010). For example, at the time of economic crisis in UK in 1995, British Airways had cut down the fares to maintain their earnings and sales. Further, the company has to use latest technologies to effectively compete with its competitors in the global market (Dettwiler, Lindelöf and Löfsten, 2005). Along with this, people with different cultures and societies have different needs and demands, so that the airline company has to use effective strategies to meet the requirements of customers.
European Union (EU) has developed a variety of policies related to travel or aviation sector and competition, which have great impacts on UK business organizations like BA. EU aims to remove unemployment by promoting high level of employment and to encourage businesses to use fair business practices (Gnoli and Ridi, 2014). Due to these policies of European Union, British Airways have to make use of fair business practices and to provide employment opportunities to successfully carry out its business. Out of various EU policies, two major policies having impact on the aviation industry i.e. British Airways are competition policy and cultural policy. There is cutthroat competition in aviation industry, but EU helps the British Airways in effectively doing business and sustaining in the market by avoiding unfair competition in the market (Ineson and Kempa, 2007). EU makes control over the prices and other strategies of airline companies and helps in maintaining fair competition. Further, cultural policy of European Union supports the organization in promoting a working culture, where the workforce is motivated, engaged and developed (North, 2010). These policies work as guidance and support for BA to maintain workforce diversity and to create a favorable and flexible working culture in the organization.
With help of this research report, it can be said that different organizations have different purposes and they have to meet the requirements their stakeholders. The mission of BA is to become the world’s premium airline by providing full service experience to its passengers. There is a very tough competition and oligopoly market structure in the aviation industry. Various international factors including WTO, ICAO, EU and other political, technological and socio-cultural factors have great impact on the functioning of the company.
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