Internal & External Business Environment of British Airways


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Business environment is comprises of internal and external environmental factors which influence the business activities (Ahmad and, 2010). The internal factors include employees, policies, working condition of an organization and etc. Similarly, external factors include customers, competitors and government which affect the business activities. The focus of this report is on the analysis of business environment of British Airways which is a airline company operating its business internationally. In this report company's vision, mission, short term and long term goals have been discussed. Further the economic environment of the country is discussed in which British Airways operates. Moreover, the study has been done to assess all the global factors which impact the activities of a business.

Purposes of different types of organizationTask 1

Purpose of organization varies according to their nature. Mainly there are three types of organisation. Description of which are as follows:

Commercial Organisation: The organisation comprised of a group of people with a set of skills, strategy and resources which is put into use to generate profit (Dettwiler, Lindelöf and Löfsten, 2006). After deducting the expenses, the leftover is distributed among employees and shareholders or reinvested in the business. The main purpose of this type of organisation is to generate more and more profit.

Not-for-profit Organisation: These organisations are established for the welfare of people and the society. Purpose of the organisation and people associated with them are not to earn desired profit. The revenue is earned through charity and it is non- taxable. Revenue earned does not get distributed among employees rather it is invested for the welfare of the society.

Public Sector Organisation: This type of organisation are owned, operated and controlled by the government. They provide public services such as military, police, public transit, roads, public education, and health care. Their main purpose is to create social and economic benefits for the country rather than generating profits.

Vision and mission of British Airways

Vision: Vision statement of British Airways states that they want to become the world's most responsible airline. They have developed guiding principles which describes what they need to do to achieve the goals (Dickinson, 2013).

Mission: British Airways is dedicated to provide low fares flights to global destination and along with this, it also aim to provide professional maintenance and quality cargo services for a whole year. Through brilliant innovations, they offer the best by setting industry standards.

Short term and long term objectives of British Airways

British Airway's objective is to increase the quality of services they are providing. Long term objective of business is to be the world's leading global premium airline. Their main objective behind this is to enhance the long term profitability of a company.

Key stakeholders and impact on them from various challenges

Any person or organisation whose interest lies in the organisation is known as stakeholder of that company (Kelliher and Henderson, 2006). Key stakeholders of British Airways are as follows:

Customers: They are the people who are looking to avail the services provided by British Airways. They want easy accessibility and good quality service at a competitive price. They are the most essential stakeholder as they would provide money for the business. British Airways has faced many challenges such as high inflation/deflation rate, delay of flights. Impact of high inflation on customer was that they couldn't afford the high priced air tickets and thus they start losing interest in BA. Sometimes in case of emergency delay of flights affected the customers very badly.

Employees: The interest of these people lies in the British Airways because they coordinate together and work for the organisation to make them successful. Challenges faced by British Airways impact the employees in a negative manner. At the time of recession company has to terminate the employment because it becomes difficult for the organisation to remunerate their employees because of heavy losses to the company.

Government: A major stakeholder for every business is government. Success of any company is important for the government. If the company earns the maximum profit, this means they would pay more tax to them. That is why government take more interest in the company. When British Airways earns less profit at the time of inflation, that time it is a biggest loss to government also as they would get very few percent of tax from the company.

Shareholders: Shareholders have high interest in British Airways because they have invested in the company and in other words they are the owners of the company. The challenges faced by BA would directly impact them. At the time of maximum profit shareholders would get good return on their shares but at the time of less profit they would be deprived of getting return.

British Airways respond to fulfil their responsibilities to the stakeholders

1. Customers: British Airways fulfil their responsibilities by providing best quality services to their customers in accordance with the price they charge. Staff member and other employees behave in a good manner with them. This increases the level of satisfaction among customers.

2. Employees: Responsibility of British Airways towards employee is that they should provide good remuneration to them and motivates them for the achievement of organisational goals. They provide health, safety and good working environment and do not practice any unfair means against the employees (Kourteli, 2000). Employment law is fulfilled by the British Airways, due to which employees are highly satisfied.

3. Government: Proper rules and regulations of the government legislations are followed by the British Airways. They are highly responsible towards Government laws. BA pays proper tax, follows the business and employment laws and does not get involved in any unlawful activities.

4. Shareholders: The Company is responsible towards shareholders by paying proper dividend to them. They provide fair return on investment and have maintained its reputation in the stock market.

Economic systems attempt to allocate resources effectively

British Airways is operating in the UK which has mixed economic system where resources are splits into both public and private sector. This system allows a level of economic freedom to private sector for using their capital but the government interference in economic activities is also there in order to achieve social aims (Krasniqi, 2009). Resources are limited and both the public as well as the private sector compete for those resources thus this increases the level of competition in the country. This type of economic system is considered to be good because if one sector fails to meet public desire then the other sector fulfils the desires and maintain the economic balance. Mixed economy allocates proper resources to both sector. British Airways utilise the resources optimally. Government interfere so that exploitation of society cannot be done for the company's benefit.
Impact of fiscal and monetary policy on business organisation and their activities

Monetary Policy: It is a process where monetary authority of a country controls and regulates the flow of money in the economy through its control over interest rate so that stability of price can be maintained and high economic growth can be achieved. The effect of monetary policy is not only on the organisational activity but also on the whole economy (Murthy, 2014). During Expansionary monetary policy British Airways has to pay fewer taxes to the government and credit would be available at lower interest rates, this would enhance the profit of the company. During Contractionary policy, Government would levy high taxes and interest rate would be more. Therefore, it becomes tough for the British Airways to borrow money from the bank and this would reduce the chances of growth during contractionary period.

Fiscal Policy: In this government adjust their level of spending and tax rates in order to monitor and influence an economy of a nation. When the government increases the tax level, that time British Airways has to pay high tax and firm would have less money to invest for the growth of a business and in turn they would charge high from the customers for their services. When government would lower down the tax level that time British Airways can invest in many sectors, this creates the opportunity of jobs for the people. This increases the level of economy (Business environment, 2015).

Impact of competition policy and other regulatory mechanisms on the activities of British Airways

The aviation industry is very challenging. Every company has invested lot of money for the development of their products and services. All the airlines are competing with each other in order to get competitive advantage. As a global company BA has to face various regulations, competition policies and legal changes of all the countries because it is a private limited company and due to which it becomes mandatory for it to follow all the polices (Arnold, 2004). Accordingly a firm has to design its structure and internal policy. For instance, the implementation of Fair Trading Act 1973, Competition Act 1980, etc. has a major impact on the working of BA because company has to follow all these regulations and for coping up with the competition, company has to bring innovations all the time. This lay pressure on the company and for this purpose, company has to incur high cost with reduces its profitability. When the international law gets change, then company has to again bring changes in its policies which leads to resistance by the employees. Competition policy is aimed to promote competition in the market to increase the efficiency of the company and improve the market condition. Through this policy, customer would have wider choice, company would have technical innovations. Competition policy restricts the British Airways for price fixing and other abuses. It breaks the monopolistic market and allows new entry and wider choice for the customer. British Airways is facing competition from EasyJet, Emirates Airlines.

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On the other hand, government enforce the other regulations such as fair trading, standard customer services, health and safety regulations and environmental policy to forecast the working of a market (Nandakumar, Ghobadian and O'Regan, 2010). These regulations have a great impact on the functions of BA. In accordance with these regulatory act British Airways has to bring modification in their system. They have to provide healthy environment to their employees and the customers ensures the proper safety and security of their workers and customers. For this BA, has to keep safety factor in mind while delivering airline services to their customers. Fair trading should be done by BA. If they charge high prices form the customers then the products and services provided by them should be of ultimate quality.

Task 2

Market structures determine the pricing and output decisions of businesses

There are basically 3 types of market structure which impacts the pricing and demand of businesses and their products or services (Ward and Lewandowska, 2008).

Perfect Competition Market Structure: In this type of market there are large number of buyers and sellers operating in the market and sells homogeneous products. Industry determines the prices and firm has to accept the prices of their products, this makes the prices uniform.

Monopolistic Market Structure: There are very large number of buyers and sellers in this market. Products and its prices of every firm are differentiated. Thus, the level of competition in this market structure is very high. Aviation industry falls under this category of market structure (Francisco, 2015). In this firm determine the prices of their product and services. It enables the British Airways to keep competitive pricing. To create high demand for their airlines seats BA has to do heavy promotion. They have to provide superior quality services to attract more and more customers.

Monopoly Market Structure: There is only single seller but large number of buyers. Single firm dominates the market in monopoly market structure (Yu and Ramanathan, 2012). Here Prices are determined by the firm and industry accepts the price. Monopoly firms earn high profit because of no substitution. Competition level is very low in this market.

Market forces shape organisational responses

Market forces are the economic factors such as demand and supply of the commodity which affects the price, demand and availability of that commodity (Aras and Crowther, 2011). Affect of these factors and the response of the British Airways are discussed below:

Price: If British Airways keep the prices of their air tickets high then the demand would be lower down. Only those customers whose purchasing power is more would willingly pay the higher price because British airways provide superior quality services. If they keep their prices low then customer would be more attracted towards BA. By keeping the prices low, BA should not compromise with their service quality.

Demand: When there is high demand of BA airlines then the prices of the air tickets would get increased. This would generate high profit for them. BA would provide superior quality services (What is Business Environment?, 2015). But this would not get continue in long run because rise in price would gradually lower down the demand for BA. So BA should take care about the consequences after price rise. At the time of lower demand BA should lower down the prices to attract maximum customer.

Supply: BA could not generate more profits when demand of airlines is less but the supply is more. At that time competition level gets lower down because customers are not willing to travel. Organisation has to do heavy promotion and has to lower down its prices to attract more customers. But at the time of high demand but less supply BA has an opportunity to generate abnormal profits which in turn would attract more firms to enter into the industry and this would increase the supply and prices would get lower down. Profits of British Airways would come back to normal profit.

Business and cultural environments shape the behaviour of the British Airways

The behaviour of any organisation is greatly impacted by business and cultural environment. There are two types of business environment which are as follows:

  1. Economic Environment: This environment includes economic system, policies and economic condition of a country.
  2. Non-economic Environment: Natural, demographic, technological, political, legal, social environment falls under this category (Campbell and Craig, 2005).

Culture environment means the ethics, value, attitude and perception of people living in that country. British Airways operates its services in many countries; thus business and cultural environment of every country is different. British Airways has to form its rules and policy of its business according to the environment of the country it is operating. Economic policies, fiscal policies, monetary policies and many other legal laws are different in every country. This highly affects the organisational behaviour of BA. Prices of the products and other services which is provided to customers has to be determined by keeping in mind the culture of the country. Culture of UK is diversified; people are mostly migrated from different culture. For this reason BA recruits people from diverse backgrounds so that in case of any problem they can deal with the customers in an effective manner (Fernando, 2011).

Significance of international trade to UK business organisations

International trade means exchange of goods and services from one country to another. It is important to do international trade to increase the economic growth of a country as all goods and services cannot be produced within a country (Halbert and Ingulli, 2014). British Airways is an international airline operating its business in many countries. Therefore, Significance of international trade to UK business organisation is described below:

Wider Market: If the UK Company produces product and sell them domestically then it will limit their potential. To increase their potential they should do international trade by exporting the goods and services. This would broaden BA's market share and in turn augment the revenue by increased sales and customers.

Less Production Cost: While trading in other countries, BA will produce more. This would lower down their production cost as per unit cost will get decline.

Material Availability: In UK every raw material is not available. For this purpose they have to import raw material. Similarly many such thing such as arms, cars, etc. are exported from UK to other countries. Thus, BA can get the opportunity to exchange goods and services in other countries to enhance their efficiency otherwise there will be very scarce choice for them.

Analysis of the impact of global factors on UK business organizations

Global factors are the influencer which contributes to a result or outcome worldwide. These factors include political, social, economical, legal, technological factors internationally (Kew and Stredwick, 2005).

  1. International Political Environment: While dealing internationally, UK companies are greatly impacted by international rules and regulations. Every country has different political rules and regulations. Before operating in other country, organisation should keep in mind the rules and regulations of that country to have smooth flow of work.
  2. Legal Laws: UK organisation has to follow the international trading laws while trading with other countries. Changes in those laws will impact the organisation's policies and strategies.
  3. Demand and Supply: Global demand and supply will have a great positive or negative impact on the UK organisation. If the global demand and supply is stable then it would increase the profitability of BA but if demand and supply is fluctuating then the company may get loss from one country but profit from other country. This would create difficulty for the organisation while forming strategies of sales and profit maximisation.
  4. Technological Factor: These factors have high impact on the business organisations. Some countries are high tech technologies upgraded but some countries do not. This would create difficulties for BA because in less technological upgraded countries the company could not bring innovations, as resources are scarce. This will have an impact on their reputation domestically.

Impact of policies of the European Union on UK business organisations

UK is a member country of European Union (EU). EU laws are same for all the member countries. After joining the EU, UK has to follow all the rules and regulations strictly like the other European countries (McLeary, 2000). The policies of EU have greater influence on UK business organisation. EU policies such as employment policy, taxation policy, etc. affect the firm of UK in one or other manner. Further, when the employment law changes than UK businesses have to adopt those policy due to the membership of EU. Irrespective of the high recession rate in UK. This is turn will impose pressure on the company to hire employees and this way profitability of the company reduces. Moreover, taxation policy is different in UK and those in EU is completely different which will become difficult for the UK firms to do trading in other European countries.

However, EU also have a positive impact on the UK business organization because the currency for trading is same around all the EU countries. Due to this, UK firms do not face losses during depreciation of exchange rates. They could do money transaction in Euro so there will be no currency depreciation or appreciation loss. Further, all the companies of UK can do trading without any barriers because rules and regulations are same for all member countries (Shaikh, 2010). This will lower down their cost as they do not have to pay custom and export tariffs.

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After preparing this report, conclusion can be made that it is significant for every business to understand its environment. By analysing the business environment, organisation can get success in a more efficient manner. It has been evaluated that BA have made the organisational policies and strategies in accordance with the country's and global rules and regulations. This internal and external environment can have positive or negative impact on the functioning of British Airways.


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