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 Get 25% off on Assignment Help and Writing Service
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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 Consumers
Their impacts on British Airways 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: ď ś 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 Get 25% off on Assignment Help and Writing Service
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. ď ś 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). ď ś 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: Get 25% off on Assignment Help and Writing Service
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 Get 25% off on Assignment Help and Writing Service
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 Get 25% off on Assignment Help and Writing Service
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 Get 25% off on Assignment Help and Writing Service
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 Perfect market legislations.
Political
Different taxation policies Employment laws Foreign trade regulations Money supply
Economic factors
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, exportimport 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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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 Albert, A., 2011. Stakeholder engagement key to British Airways savings. [Online] Available through: < http://www.supplymanagement.com/news/2011/stakeholder-engagement-key-tobritish-airways-savings >. [Accessed on June 19th, 2014]. Basu,C., 2014. How Do Monetary & Fiscal Policies Affect the Airline Industry? [Online].Available through:< http://www.ehow.com/facts_7568199_do-policies-affectairline-industry.html>. [Accessed on June 19th, 2014]. 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/legalupdates/want-to-own-a-branded-top-level-doman-staking-out-brand-space-on-the-intern>. [Accessed on June 19th, 2014]. Klein, R. S., 2014. Organizational responsibility. [Online].Available <http://www.oxfordbibliographies.com/view/document/obo-9780199846740/obo9780199846740-0055.xml >. [Accessed on June 19th, 2014]. Get 25% off on Assignment Help and Writing Service
through:
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 on June 19th, 2014].
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