Business environment is that field of study which comprises of an analysis of both internal as well as external forces that has its impacts the decisions taken within of company. Such type of analysis is being considered as an important aspect for the company as it enables them in terms of carrying out various kinds of changes in their existing strategy. In order to carry out the present report an organization is selected which is named as British Airways. It is one of a famous and largest airline in UK (British Airways, 2014). The present report tends to showcases about the purposes of different types of an enterprise along with the effect of the environmental condition have on the working of company. In addition to this, it also depicts about an importance of the factors that shape the national business activity of British Airways in an effective way.
1.1 Vision and mission statement of British Airways
Every organization works in accordance with the vision and mission statement made by them. With the help of this, strategic direction of the corporation can be set out which tends enable them in terms of achieving their goals and objectives in an effective way. This has been correctly done by British Airways. In this respect, following mission and vision statement of BA identified. British Airways has the mission to become “Wolds’s favorite airline” by providing utmost quality of the services to their customers and at relatively low prices with that its competitors (Jelušic and BlaÅ¾evic, 2006). It also has the mission to provide such type of experience to their customer at both ground and in flight services which entail them to gain make the use of the services. In addition to this, organization has the vision to become one of a most cost effective airline in world by implementing the concept of sustainable development. This is done by them by reducing the cause of emission that affects the environment of nation in negative way.
Beside this, British Airways has some long term and short term objective that tends to enable them in terms of achieving their tasks in an effective way. They have the short term objective to deliver excellent services to their customers along with providing best possible securities to their passengers. In addition to this, they have the long term objective of increasing the connectivity of their flights by directing presence at global market (Khattab and et.al, 2012). Furthermore, the purpose of varied organization is being assessed. Sole trader is being considered as the sole owner of the firm. In this regard, they have the main objective with regard to improve the profits of the enterprise by meeting the needs and demands of its buyers. In addition to this, partnership firm has the purpose with respect to share the profits and loss occurring within the enterprise. This is being shared by it in accordance with their profits sharing ratio. Furthermore, the private limited company has the main purpose with respect to improve the sales and profits of the enterprise. This type of firm gives more emphasizes on the aspect such as earning high amount of profits. As the result of it, they set high prices for their product. In comparison to this, public limited company works for the benefits of society. They have the main purpose with respect to serve the people of the nation. The cited firm is belongs to the given category only. NGO (Non government organization) has the main purpose with regard to improve the condition of those persons that are in need. In order to fulfill the given objective they takes donations from the different type of firms and individuals.
1.2 Major stakeholders of British Airways
Stakeholders are those persons that have their interests and concerns in the activity of an organization (Li, 2012). They affect and being affected by the decision made within an enterprise. In this respect, there are various stakeholders of British Airways identified and these are all enumerated as below:
Employees: These are those persons that enablers corporation such as British Airways in a way to carry out their goals and objectives in an effective manner. It is because of their efforts only enterprise aim of increased profits and sales are met. In return of this, they expect proper working environment that provide them an opportunity to grow along with the company (Kourie, Botha and Snyman, 2014).
Customers: They are the final user of the services and considered as the source of income for the company. It is the duty of corporation like British Airways to produce products and services in accordance with their needs and demands.
Investors: These are those persons that provide financial assistance to the company such as British Airways which enable them to carry out their plan within given possible time limit or in an appropriate way. In return of their services they expects suitable dividend from the corporation.
Suppliers: These are the persons that supplies goods and services. On the other hand delay in their services may cause major impact on the functioning of corporation. BA list of suppliers involves Boeing and Airbus (Lindelöf, Dettwiler and Löfsten, 2006).
1.3 Impact of stakeholders and British Airways responses
There is huge variation is seen on the policies, rules and regulation of the aviation industry. These changes have impacted the stakeholders on the other hand British Airways has responded to these changes in the following manner:
Employees: There are various kinds of major changes is being seen in the regulation regarding the safety and protection of the employees. These variations have its positive impact on the identified group of stakeholders. On the other hand British Airways has also responded to the change by implementing all kinds of safeguarding policies in their flights (Neely and Kennerley, 2013). Towards employees BA has the responsibility that it must provide an effective environment of working and help them in their career development. In order to fulfill the given responsibility, cited firm is using the tactics like organizing training and development program for its employees.
Customers: Impact on the activity of the customers is seen when political parties prevailing in the country direct their efforts in terms of raising the rates of taxes for aviation industry. Raise in the rate of taxes increases the prices of product that are associated with it. In the case of British Airways rise in the rate of taxes increases price of flight tickets and fuel etc. These all thing have the negative impact on the customers as they will have to pay more prices with an aim to avail the services of airline sector. In this type of condition BA has responded in a way of increasing the quality of services. This makes them feels like they are valued for money. In addition to this, positive impact on the customers is seen when government passes laws relating to the consumer protection (Parker and et.al., 2014). This type of condition influences BA to respond in a way of ensuring safety of their customers from all type of activities such as terrorist attacks. Towards customers firm has the responsibility that it must provide them utmost quality of goods and services. With an aim to comply with the given responsibility, BA is using the strategy like performing through analysis of business environment. It is through this way only, needs and demands of its buyers is being assessed by it.
Supplier: BA has the responsibility that it must provide payment to them in return of their services within the given specified time. In addition to this, firm must also involve supplier in the decision making process. However, the given responsibility is being complied by British Airways by organizing monthly meeting with their supplier in an effective manner.
Investor: Towards investors firm has the responsibility that it must provide them appropriate dividend in return of their services. The given responsibility is being fulfilled by British Airways, by making all the efforts in terms of improving the sales and profitability related condition of the enterprise. With an aim to perform the same, firm is taking assistance from varied promotional strategies such as giving ads in the television and newspaper etc.
2.1 Challenges faced by British Airways due to changes in the economic system
Economic system is the organized way through which government of particular nation tends to direct their efforts in terms of allocating the scare resources to the citizens of nation in an effective way. The country like United Kingdom follows mixed economic system where both public and private organization functions together. In this type of system there are some challenges identified which is required to be faced by BA (Parkin, 2012). The first challenge is related to changes in the policies of government in relation to the rate of taxes. For example, the government of UK has directed their efforts in terms of increasing rate of taxes on private organization. In this condition BA has to pay large amount of taxes to the government of particular nation. On the other hand, prices of such type of taxes have to be recovered by organization from their customers by increasing the prices of airline services. This will demotivate buyer. In addition to this, increase in the prices of raw material such as fuel is another form of government intervention in mixed economy. This occurs as the major challenge in front of British Airways when they have to sale their services at the prices which cannot be afford by normal customers (Prasad, 2010). This reduces the condition relating to the profits and sales of the company.
2.2 Monetary and fiscal policies impact faced by BA
These two identified aspects form an important part of an external environment. This is because with the monetary and fiscal policies cost and operations of an organization can be determined. The rate of policies is being control by the government and affects the functioning of organizations such as British Airways that are prevailing in the nation (Ramanathan and Yu, 2012). The aspect relating to the fiscal policies comprises of following such as changes in the rate of taxes which includes both increase and decrease type of condition. Increase in the rate of taxes raises cost to an enterprise. In addition to this, fiscal policies also include indirect type of taxation such as Excise tax. These types of taxes influences British Airways in way of directing changes in various types of activities such as improving the condition of airports and making more effective provision of ensuring the safety of the customers that are availing the services of airline. Beside this, the aspect relating to the monetary policies comprises of following such as rate of interest and exchange rates etc. Any kind of changes in such type of rates influences organization in terms of directing conges their existing policies relating to the price of the product (Trehan, Jain and Trehan, 2013).
2.3 Effect of regulatory, competition policies and legal changes on the activity of British Airways
There are major impact is seen on the working of British Airways with regard to the changes in the laws and regulations as issued by the government of nation. There are various regulatory policies identified which influences British Airways and pursued them to comply changes in their services. It comprises of following such as Civil Aviation Authority and The Civil Aviation Act 2012 etc (Regulatory laws, 2009). Civil Aviation Authority is the type of authority in UK that regulates different types of airline functions which are related to following such as safety regulation, consumer protection, economic regulation along with air travel organization etc. These all types of regulations affect the activity of British Airways as it influence them to direct changes in their system in a way where organization aim of consumers safety and security can be achieved in an effective way. Another regulation that affects the activity of British Airways is related to Civil Aviation Act 2012. It is the type of act where certain plans are made with an aim to regulate the activity of airline in an effective way. In addition to this, there is various safety acts identified that influences organization like British Airways to comply changes in their safety related policies of environment. This is done by corporation by introducing the concept of sustainable development in their engines (Wessels, 2006).
Apart from this, competition policy has an aim to ensure that organization working in airline industry must comply with fair type of practices. This type of policies influences British Airways in terms of complying with the practice of fair working environment.
3.1 How market structure of airline industry determines pricing and output decision
The market structure of airline industry where British Airways is operating is of oligopolistic. It is the type of structure which consists of few numbers of competitors that sells similar goods and services. The identified market structure causes huge impact on the pricing and output decision as made by the company named as British Airways. In oligopoly type of market structure prices of product are to be set in accordance with the price charged by their competitors (OLIGOPOLY, 2014). This tends to showcases that an enterprise employing in such type of market structure complies with competitive type of pricing policies. It is the type of policies where prices of the product are set by the management of an enterprise in accordance with their rivalry. In addition to this, cost leadership type of pricing strategy can also be used by an organization such as British Airways in such type of market structure. It is the type of tactic where prices of services are set at lower prices with an aim to cover the large base of customers. Just contrary to this is of premium pricing strategy where high prices of airline services are to be charges from the customers. With the help of this strategy corporation can earn profit within short period of time span. In addition to this, cost plus pricing strategy is another technique that is used in oligopoly type of structure. In this tactic prices are set in a manner to cover the initial cost bear by an enterprise (Zdravkovic, 2013). With the help of these identified strategies various output decision can be taken with regard to the services. For example, the organization that follows premium pricing strategy is influenced to follow high quality of services. This showcases the output decision of company.
3.2 How market forces affect the responses of British Airways
Market forces determine the demand and supply of particular industry. These forces have its impact on the decision relating to the pricing taken by company such as British Airways. For example, if there is a demand of airline services in United Kingdom market. Generally such type of demand increase when there is the peak period such as the period of holiday. This increased demand of airline product influences organization in a way to raise the prices of their services in an effective way (Goyal and Goyal, 2013). This will also help in increasing the sales and profits of British Airways in an efficient way. On contrary to this situation when services of airline industry are not in demand then in this manager of an organization has to direct their efforts in terms of reducing the prices of their product or offering some creative advantages to the customers such as discounts and rebates etc. This type of situation occurs when buyer has low disposable income and they cannot be able to afford the services of airline. In the similar way, when there is large number of supply of airline industry which occurs when nation possess many organization that offers similar services with that of British Airways. This influences organization in a way to reduce the prices of product with an aim to gain the competitive advantages (Grewal and et.al., 2011).
3.3 Working practices and culture impact on British Airways
The type of working practices followed by an organization along with the culture of country has its significant effect on the activity of corporation such as British Airways. Every country has the different culture which influences organization functioning in that particular nation to comply with the same. This needs to be followed by British Airways when operating their services at any other nation (Hooper and Greenall, 2005). For example, British Airways has decided to operate their functions in the country like India. India is the country that contains people that are vegetarians and citizens that are non vegetarians does not prefer beef meat as their emotional sentiments are attached towards the same or their culture does not allows them to eat such type of meats. In order to deal out with this of situation British Airways have to direct their efforts in terms of directing various types of changes in their services. However, this is done by them by changing the menu of their food that is offered by them at their flights (Ingenbleek, Paul and Lans, 2013).
4.1 Impact of global changes in the trade regime on British Airways
Trade regimes depicts about the system that imposes tariff and non tariff barriers on the corporation that works under particular nation. Trade regimes which are being introduced by the institutions named as World Tourism Organization (WTO) and similar international enterprise has its effect on the operation of British Airways. For instance, one of the trade regimes in United Kingdom suggest that, it is required by an aviation industry to work towards the betterment of an environment which is done by them by complying with the practice of reducing the effect of emission in their engines (Kew and Stredwick, 2005). This will tends to affect the working of British Airways as it influence them to direct changes in their flight operation which will takes lots of time and money of an enterprise. In addition to this, rise in the condition of air traffic influence the availability of fuel in near future. However, this condition can be handled by introducing more effective trade regimes such increasing the prices of taxes for airline sector in the field of aviation industry. This tends to reduce the entry of new enterprise but hampered the activity of corporation such as British Airways in negative way as it raises the prices of their services.
4.2 Effect of global factors on the working of British Airways
There are various global factors identified that affect the working British Airways. In order to assess the impact PEST analysis is being carried out.
Political: First factor is related to change in the policy of government relating to the safety of environment. Such type of policies influences organization in a way to comply changes in their services. This is done by British Airways by replacing plastic bag with that of paper bag. It is through such type of efforts only organization fulfills their responsibility towards environment (Danielsson, Wulff and Westerlund, 2013).
Economical: Change in the economic condition of nation will also hamper the strategy of BA. For example, organization has decided with regard to increases the fair of its flight. The given tactic will not being followed by it if recession type of condition is being occurred in the nation where it is operating its operation. This is because, in the given situation buyers prefer to choose economic mode of travel. Due to this, the efforts made by the manager of BA with regard to frame the given strategy will be impacted.
Social: On the other hand with an aim to avail such type of services they are ready to spend money. This particular aspect affects the activity of BA as it influences them to employ such type of individuals in an organization that fulfill the desire of their customers in an effe