Business Environment


Business environment is external and internal working conditions of organization that influences the functions and operations (Gaskell, 2001). It includes customer, competitor, supplier, and industry trend or government policy. A business activity of company has significant impact on the working and development of plan to achieve the goals and objectives. British Airways has been providing full service to customer by providing the quality services at optimum prices that persuading the customers. In the report, the impact of different policies and forces that affecting  British Airways business actions. In the end, report will examine how market composition shape pricing and output decisions of the organization (Turban, 2006).


1.1 Identification of  the purposes of different types of business firms

The business organization introduce itself with some specific goals and objectives, for that management develop plan and strategy to meet them. The main aim of organization  depends on the type such as public, private or charity. In that process, private company develop the business with the aim of expanding the market and gain the profit. The management of company conduct market research for analysis the trends and perception of customers to develop product and services of their choice which help to improve brand awareness. On the other  hand, public sector firm usually established to give employment opportunities in the society and to protect the industry areas which are highly sensitive in respect of nation’s security. The purpose of organization depends on its type whether it is public or private sector (Woodley, 2006). The charity organizations work for the noble cause to provide the support for people who were not able to earn or having disability mentally and physically. The aim of these organization is to develop opportunities for the needy people to help society.

British Airways has been considered one of the UK’s successive stories of privatization to develop the business and meet the requirements of customers. In 1980’s, management has decided to become private sector organization to overcome the losses. In this situation the company has targeted international as becoming the world’s leading premium airline. Organization has analyze the market and develop new strategy to redevelop the brand value and improve the standard of  services and fight experiences. The top management has sated mission to become “The world’s favorite airline” and organization get success by achieve its objective in 1990’s by becoming the World’s most profitable airline (Diane, 2004). Now British Airways is more afraid about the continuous growth in the airline industry of UK as well as international level as new airlines organizations have been arrived in the market with  new services and technology which influencing the decision of customers. (Namukasa, 2013). organization is looking to expand the quality of services by offering the qualitative and pleasurable flying experience to the customers all over the world. In that process management of British Airways using the technology and new trends of market to meet the desired services of customers and enhances the market image of company (Shaw, 2007).

1.2 Objectives of different stakeholders

Stakeholders of the organization are those who can influence business activities. They have significant role in the functioning of business venture. The Stakeholders of British Airways can be categorized into internal and external stakeholders.

Internal Stakeholder

Owner- The main objectives of owner of British Airways is to earn the profit by improving the quality of services and use of resources effective and efficient level. The main role of owner is to provide the initial guideline to mange the services and craft decision.

Manager- The aim of manager within British Airways is to explain the tasks to staff members and monitors the activity to maintaining standard of services that attract the customers.  (Neal-Smith and Cockburn, 2009).

Employee- If the firm fails to fulfill employees need then employees can make barrier on operational efficiency of the company. Employees work with the aim of developing and offering the services requirements and needs of customers.

Customers- The objective of customer is to utilize the services according to prices of services of British Airways.

External Stakeholders

Government- Government is concerned with the collection of taxes from business project. Government collects different types of taxes from the market like corporate tax on profit, Airport charges for the landing of aircraft in the country (Huettinger, 2014).

Creditors- They can take part in the management decision if the firm has borrowed large amount from the bank. They want to earn interest on the amount they gave on credit to organization.

1.3 The way British Airways fulfill its responsibilities of different stakeholders

Employees: For employees, British airways fulfill their responsibility by framing good organizational policy, providing wages according to company standard facilitating good infrastructure for work, fair and transparent with employees (Kwong and Lee, 2009).

Manager: Company provides high-quality practice related to promotion of employees, best practice for performance appraisal of employees. British Airways management is offering them good salary and facility to encourage them.

Supplier: By offering the payment of raw material for developing food and beverages. In addition to this, British Airways management is involving them in the decision for determining prices. Company meets their objective through efficient working capital management.

Customer: Providing them good flying facility at optimum prices of tickets. British Airways is offering quality services and high standard security for meeting the objectives of customers and visitors.

Owner: They want continuous profit booking for the firm. British Airways is meeting the objectives of owner by maintaining the level of services according to need of customer.

Shareholder: They have invested capital for British airways.  Company is meeting their objectives by providing them good return of investment.

Government: UK national government need the safety and protection of rights of customers and visitors who using the services of airline. British airways can meet government objective by practicing ethical and moral standards of services.

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2.1 Economic systems attempt to allocate resources effectively

In the world different nation follows different economy system to maintain the flow of development and business. There are mainly 4 types of economic system followed Traditional Market, Command and mixed economic systems for managing resources and allocation for development of business. All four economic systems have their own advantages and disadvantages. Traditional mostly followed by new generations for social customs and norms. This is based on consumers and their buying behavior. The perception and requirements of buyers define the market for business organization to develop the products and services  (Gaskell, 2001). The command system is one in which the government hold the power on the ownership and management of the business activities. This is less flexible and it is very slow to adapt changes related to consumer buying behavior. Here, private sector business is restricted (Turban, 2006). In these financial activities, the role of government is almost negligible as this system is dominant by private businesses sector. The mixed system is the combination of market and command economic system to manage the resources and allocation of them to business organizations to meet the objectives. By using this system of economy government and private sector organization contribute in the growth of GDP.

British Airways has been considered one of the UK’s successive stories of privatization to develop the business and meet the requirements of customers. The top management has decided to become private sector organization to overcome the losses. In this situation the company has targeted international as becoming the world’s leading premium airline. The use of Mixed economic system of the UK helps the firm to utilize the resources and survive to achieve growth in the world aviation industry (Shaw, 2007). In the current situation organization can make the decision according to requirements without any interruption of government bodies for using the resources.

2.2 The impact of fiscal and monetary policies on business organizations and their activities

Fiscal policy refers to fix and non-planned expenses of nation that has the significant impact on the economic condition and influence the financial conditions. Government plans revenue source according to planned and non-planned overheads to meet their expenses. This revenue comes in form of taxes. At the time of crisis UK authorities put down rate of taxes  and during inflation government increases the taxes to control excess money supply. The higher  tax rate of fiscal policy has significant impact on the operational activity of British Airways as management has to reduce the expenses in the ground and in-flight activities (Huettinger, 2014).

Monetary Policies refers to monitoring and controlling the supply of money by making changes in the interest and tax rate according to economic conditions of nation which is observed by the central bank of UK.  Due to this British Airways will have to boost its price and this rise will reduce the demand of British Airways service as price has inverse relationship with demand. This will affect the dealing cost of primary investment for organization to develop the business. Increase in the interest rate or hike in the monetary policy will have effect in augment in fuel prices and will also increase the cost of investment  (Kwong and Lee, 2009).

2.3 The impact of competition policy and other regulatory mechanisms on the activities

This policy has been introduces for developing the healthy and competitive business environment which is beneficial for customers to buy the product of good quality at minimum cost.  This policy is being made for protecting the rights of society and consumer. In the current situation companies cannot make monopoly condition in the market as well as  cannot exploit the consumer through price discrimination (Srinidhi and Manrai, 2013).

In the aviation industry follow-up of rules and regulation is monetary for organizations to  to sustain the market position. For that, European commission and UK Government has proposed regulation around commercial activity and operational activity of organizations. The CAA monitors various aspects of airline industry like company’s financial condition, management and operation. British Airways is also subjected to follow rules and provisions related to EU regulations which are made under the provisions of European Treaty.  British Airways is regulated by Secretary of State for Transport and Civil Aviation Authority. By the review of   competition policy, British Airways have to follow fair and transparent pricing and set guidelines to go for strategic alliance with other countries organization. This policy is made to protect consumer values and benefits. (Shaw, 2007). in addition to this, airline organization has to considered the rules and regulation of different countries for managing their operations as well as expand the market to encourage the brand.


3.1 Determine the pricing and output decisions of businesses

For the determination of prices and output decision according to strategy and planning of organization the structure of organization and market plays critical role. According to analysis, the UK government following the oligopoly market structure. In Oligopoly market structure there are few sellers and numerous buyers. As the airlines industry is related with traveling service so here service is same but it can be distinguished on the basis of quality. The biggest advantage for the British Airways is that it is not easy to enter into aviation industry as it requires huge investment and understanding of market to develop the brand value. Here, the chances of unusual losses are high when demand falls significantly. By considering this fact, it can be sated that British Airways has to set the prices of services according to needs of customer and market structure  (Namukasa, 2013). In this market structure, demand of the services plays significant role in the determination of prices of services. British airways has sated  the objective to provide premium travel experience to its customer by providing best services. For that reason role of market conditions and decision for use of resources influence the prices of services. British airline always try to maintain fair price to be in demand and get more consumer (Diane, 2004). The top management of company always try to maintain the prices of tickets to retain the customers as well as revised it by analyzing the condition of UK economy.

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3.2 Ways in which British Airways respond to the market forces

British Airways has develop plan and strategy to deal with the market forces that influencing the operation and customer services. The management of airline company using the following tactics to manage the services:

Upgraded Customer Experience-  organization has updated the quality in products and services to retain the customer. However the fluctuation in the market condition affect the functions of organization but the ground and in-flight services of company attracting the customers  (Goel, 2009).

Premium Services for the customers- The main aim of organization is to offer luxury and quality services according to needs of the customer to deal with the changes in market.

Cost efficient Aircrafts- Company has been regular emphasizing to reduce the cost of fuel of aircraft to decrease cost of operations. British Airways making it happen by buying fuel efficient aircrafts (Cento, 2008).

Launched of new routes- Despite of slowdown in the market demand, company has to identify new routes to generate profit.

Alliances- To start business in other country British airline can do contract with other company to use their infrastructure. That will also help in reducing cost of operation.

Security and safety-  British airline have to add more security features to insure safety of customer and their luggage. It will grow revenue as people trust the company.

These activities will help British airline to provide best service to customer as they are paying to company.

3.3 Analyzing impact of business and cultural environments on British Airways

Airlines companies deals with diverse business and cultural environment as they have their presence in different countries. British Airways is the multinational airline company of UK. The company is operating in many countries and the culture has significant impact on organization (Loukia, 2012). This thing makes complexity in the clear understanding of each country aviation rules and regulations. Political environment related to taxes policy of custom and excise duty highly impact pricing structure of the airline service provider. It affects the business of company as they have to adjust quickly.  Strong or sluggish economic condition of countries affects the growth of the airline. On the other hand cultural environment also has significant impact on British Airways as the company employs are from different ethnic’s backgrounds like religion, nationality, language, values. Company recruits local people from diversified background to understand moral value and deal with passengers of their country. So both business and cultural environment have significant impact on British Airways (Stephen and Treanor, 2012).


4.1 Significance of international trade to UK business organizations

In the business international trade union has applied rules and regulations for maintaining the legal and ethical business process. This includes the transfer of goods and use of resources for development of business. International trade has also brought many benefits to the tourism and hospitality industry of UK. The implementation international tread  of the UK helps the firm to utilize the resources and survive to achieve growth in the world aviation industry. In the current situation organization can make the decision according to requirements without any interruption of government bodies for using the resources (Reynoso, 2010). by following the rules and proposed policies of international tread British Airways has improved in the production activities and standard of services by developing the policies to overcome the impact of market changes by outsourcing of work. One of the biggest components of international treed is oil. Price of oil affects every country and their industry too. It is very hard to maintain low cost constantly.

4.2 Impact of global factors on UK British Airways

Following are the key global factors that having the significant impact on the planning and services of British Airways:

Exports- This is an important element of global services which influencing the services of British Airways as government relay's on the aviation industry for exports of goods. This is being provided more business opportunities to fulfill operation cost (Lawton, Rajwani, and O'Kane, 2011).

Trade Associations- This is positive impact on the business activity of British Airways. British airways can gain profit through goods trading. Trade association provides the opportunities for free international trade but it also sometimes restricts the trade of the member with other countries.

Economic Stability- The financial conditions of UK has significant impact on the services of British Airways as company determine the prices of products and services accordingly (Daniela and Blettner, 2011).

Technology- Every day technology is update and it’s having important role in airline industry. According to the present scenario communication technology is one of the beneficial element for British airline.

Impact of policies of the European Union on British Airways

The European transport policy has major impact on the British Airways. The European transport policy includes provisions related to the following:

Single European Sky (SES)–  This has positive impact on the transparency in business and policies for improvement in customer satisfaction.  European Commission initiative to design and management and regulation of airspace which will be coordinated throughout the European Union (Zagelmeyer, 2009).

Consumer protection legislation-The mass grounding of aircraft across Europe caused the airspace closure due to volcanic ash eruption which makes stress to those customers who are badly affected by such disruption. To ensure no one get suffer in any manner government add consumer act in every organization’s policy.

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From the above study it is considered that the mode of business like private, public and charity define the objectives and goals of organizations. The report has explained impact of competition, fiscal and monetary policy on the business of British Airways and discussed the objectives of stakeholder. In the next part report has provided the information about the international trade union and role of government bodies in business development (Fact sheets, 2013).  British Airways in operating their business in mixed economy system of UK that helping the organization to make changes in the functions according to conditions of market   (Special assistance, 2013). in the end report has discussed the factors that influencing the business activity and standard of services to attract the customers.


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