Business Environment of British Airways

Introduction to Business environment

Business environment is the most important aspect as it includes both internal and external factors which affect the development, performance and outcome of an organization. Present report is based on British Airways which is the second largest airline in United Kingdom in terms of passengers that it carries. Further, report covers the identification of different types of organizations which are operating in a nation and contributing towards economic development of the same. Furthermore, challenges which occurred due to fiscal and monetary policy on business environment have been analyzed effectively. In addition to this, impact of working practices and cultures of countries has been specified with respect to British Airways.


1.1 Identifying purpose of different types of organizations

There are different types of organizations that work in different sectors. These are explained as follows-

Public sector- The public sector corporation is governed by state or government of UK. Main motive behind public sector is to maintain the balance in economy. It facilitates to meet the expectations of stakeholders and deliver good quality of services to them. Furthermore, the public sector organization generates employment in the nation. Furthermore, British Airways is working for providing services to customers and creating balance in economy of UK (Svensson and Wagner, 2015).

Private sector- Private sector is another imperative part and main purpose of the same is to make high profitability. It assists the corporation to work in the direction of growth and success so as to meet the expectations of different stakeholders like shareholders, employees and customers. This in turn can increase the customer base and would enhance the productivity in the same direction (Wantao and Ramanathan, 2012).

Sole trader- It is the single business entity where overall risk is taken by the sole trader. He/she can work for the growth and development of the corporation. However, the main purpose of sole trader is to increase profitability. Thus, main aim of all businesses is to increase the profitability and contributing towards the economy development. However, non-profit organization merely works for the growth of country.

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1.2 Mission, vision and objectives of BA and impact of challenges on stakeholders

The mission, vision and objectives of British Airways has been specified as follows-

Mission & Vision

The mission of organization is to become the leading airline in world. It assists the management to put efforts towards the upward direction of business. Furthermore, vision of British Airways it to respond towards clients as well as customers (Kourteli, 2008). Vision and mission statement of corporation enables the management to work to achieve the specified vision and mission. In this way, company comes to know about the corporate strategies which need to take place.


The objectives of corporation are formulated in accordance with the vision and mission statement. Here, company focuses on meeting rising demand of customers and bringing modification in the services as per the feedback of buyers (Krasniqi, 2009). Further, to make investment decisions to improve the service quality and other facilities are the firm’s short term objectives.

Impact of challenges on stakeholders

The stakeholders play a major role in the completion of business activities because operations of firm are directly or indirectly connected with them. Under this, shareholders are the main party who are directly engaged with the operations of company. For example, economic crisis created barriers which had direct impact on the shareholders because their rate of return was decreased to a great extent (Didonet, 2012). On the other hand, debt crisis affects the performance of firm in a negative manner because employees were not paid as per the set standards. Apart from this, customers want services at affordable prices so as to enhance their level of satisfaction. In this regard, employees get disappointed which ultimately has a negative impact on their performance.

1.3 Responsibilities and strategies of British Airways to meet the stakeholders' need

British Airways is fully responsible towards its stakeholders and management formulates different strategies to meet their needs and demand. Here, company fulfill its responsibilities towards employees by providing them healthy working environment and appropriate salaries. Similarly, customers are provided with services as per their requirement. It helps to enhance their level of motivation and satisfaction. On the other hand, shareholders are invited in the board meeting so as to incorporate their views in the decision making process. Furthermore, rules and regulations laid by government are also implemented by the firm which determines ethical aspects of company. In the same way, corporate governance is considered on the top most factors of British Airways by which its overall productivity and profitability can be enhanced. For example, company took strategic action in order to merge Iberia. This in turn has a direct impact on the prospectus of shareholders (Krasniqi, 2009). Also, it increased the customer base to a great extent and in the same way; competitive edge of the corporation was created. Apart from this, British Airways contact with suppliers to build long term relationship with them.

1.4 Role of economic system in allocation of resources

Economic system is the most imperative aspect for the allocation of resources. It is the only factor through which corporation access to different sources for its smooth flow of operations. There are several kinds of economies like free market, controlled and mixed market. Here, British Airways operate in mixed economy which depicts that it is governed by both private and public sector. In this regard, management of British Airways needs to follow the standard set by government for example; employment and environmental standards. Furthermore, company has authority to access different sources of income and employment so as to ensure smooth flow of production. In addition to this, company can also select the range of products in order to increase the customer base (Hamilton and Webster, 2015).

On the other hand, free market economy gives full flexibility to number of firms to select their sources. Here, government does not put any kind of restriction on corporation bodies and management takes all decisions in accordance with their convenience. On the other hand, controlled economy is that where corporation is governed by regulatory bodies. Furthermore, firm cannot take its decision by own. Thus, British Airways allocate resources as per the set standards as well as regulations of government of country (Fernando, 2011).

1.5 Analyzing the impact of fiscal and monetary policies on business environment of BA

The fiscal and monetary policies have direct impact on the performance as well as operation of organization. This policies are considered by management of British Airways to operation to business at global marketplace with high rate of return. The government of UK formulate several regulations in the form of taxation, excise duty and other related affairs. On the other hand, monetary policies create its impact on the business environment of British Airways by changing interest rate. For example, recession decrease demand of services in the marketplace because purchasing of  power of buyers went down. Owing to this, company has to suffer from loss in the marketplace. In that particular time span, company was unable to meet the expectations of customers as well as shareholders (Jones and George, 2003). Apart from this, changes in tax structure of government has direct impact on the profitability of business. This is because corporation need to pay high tax and accordingly rate of return for he shareholder go down. In addition to this, fiscal policies can have positive impact also in case of change in political parties. On the other hand,  appropriate monetary policies enables management to expand the business in the marketplace and increase customer base in the same direction. Furthermore, change in the monetary policies can bring sudden variation in the prices of products and services which ultimately create dissatisfaction among employees as well as buyers of British Airways (Sloman,2007).

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1.6 Impact of regulatory, competitions policies and legal changes on British Airways

There are several legal changes and regulatory policies as well as competition policies which need to be  actively followed by British Airways. Here, government imposes barriers by increasing the prices of oil. Due to changes in the regulatory policies company also need to increase fares. Furthermore, regulations are formed in order to protect the environment and maintaining fair competition in the marketplace. In case of non-compliance of the set regulations corporation can be fined for misconduct. On the other hand, competition policy states that each and every organization operating in aviation industry need to follow the set standard so as to ensure ethical conduct of business. For example, fine of £270m was imposed on British Airways for price fixing. It was to legal action against the come just because of its misconduct in the marketplace.

Apart from this, legal changes are taking place to ensure security and well being of passengers. Accordingly British Airways changed its business environment and tool control measures to ensure protection of passengers (Herberberg and Rieple, 2008). Furthermore, regulatory authority set certain standard and form different laws which need to be followed by the firm on right time. Therefore, all this factors facilitate to ensure smooth flow of production and assists management of British Airways to meet requirement of stakeholders in an effectual manner.


2.1Impact of market structure on pricing and demand of airline seats

The market structure has several sub part and has direct impact on the prices as well as demand of services. These are explained as follows-

Monopoly market- This the most strict kin of marketing strategy where single seller exist in the market and charges prices as per own will. In this regard seller can exploit buyers by charging higher prices. However, such kind of market has relatively high demand of products and services where customer generally get ready to pay the high prices also (Casile and Blake, 2002).

Perfect competition-It is the another form of market where British Airways operates. Here, number of buyers and sellers are operating in the marketplace. Here, British Airways need to follow the standard set by aviation authority of UK in order to ensure fair competition. Also, company formulate effective strategies to address issues of customers or passengers. Similarly, company get feedback from buyers to incorporate their views to maintain good business environment (Ho, Wang and Vitell, 2012).

Oligopoly market-This kind of market is operated by few number of sellers. They generally focus on the quality of products and services in order to enhance the level of satisfaction among ultimate user of services. This kind of market affected the operation of European airline market in 1990s. At that time most of the corporations were merged together.

2.2 Explaining the ways to shape organizational responses by market forces

There are several market forces which help organization to respond on right time effectively. For example, demand of air travel services are increasing the market and customer also updating their preferences as per the passage of time (Halbert and Ingulli, 2014). On the other hand, government is continuously increasing the fuel prices which in turn force firm to increase the fare. Furthermore, organization can also form several strategies to address issues of passengers and also comply the standard set by government. Apart from this, British Airways adopted effective strategies to promote its services. However, at that time corporation can take into account strategies of revelries and accordingly made the change sin the ad-campaign. Apart from this, recession in the marketplace is also the crucial situation. At this juncture, British Airways change its internal environment and address the need of passengers accordingly. Apart from this, several other forces like technology, political parties and environmental issues also affect the business environment (Miller and Cross, 2009). It enables management of British Airways to change the operation of firm accordingly. For example, in case of technological changes, British Airways try to cope up with the same. It aids to give rich experience to customers and also create competitive edge of the firm in the marketplace. On the other hand, country wise changing working environment generates need of change in the organizational culture in accordance with requirement. This is also made possible by the British Airways so as to retain customers as well as employees for longer time span.

2.3 Impact of working practices and cultures of countries on the performance of British Airways

The working practices and culture of countries play active role in performance management of a particular corporation. British Airways operates in several countries and provide wide range of services. For example, when British Airways provide services in India then it must pay attention on policies and regulation imposed by government. Also, employees must be provided time top time training so as to improve the sales performance. Apart from this, different external factors like political, technological and economical also has direct impact on the business environment. Here, change in political party generate need of change in several kind of regulations like tariff and trade barriers (Legal information, 2015). This affect performance of company in negative manner. On the other hand, economic policies of country impact purchasing power of buyers which in turn company need to change its pricing policies on time to time Furthermore, legal barriers are imposed country wise in relation to employment, protection and other related terms. All these need to be considered by British Airways. For example, company need to follow the safety standard strictly in Europe which are imposed by European union. In addition to this, issues related to slot capacity, route flights and new security requirement are complied by British Airways. Thus, working practices and culture of country are considered by company.

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2.4 Impact of global changes in trade regime 

The global changes has direct impact on the British Airways because it operates in number of countries. For example, World Trade organization and international civil aviation as well as tourism bodies set the standard for the better as well as ethical performance of company in the marketplace. This is because competitions are growing at rapid and accordingly preferences of buyers are also changing. For example, because of price fixing corporation was fined. This was occurred because organization did not follow the regulation laid down by the governing bodies (Hamilton and Webster, 2015). On the other hand, free trade is allowed to British Airway in the some of countries which leads to ensure its rapid growth and expansion at global marketplace. In addition to this global warming assists British Airways or aviation industry to reduce the negative impact on environment. At last, tourism bodies set some standard related to protection and safeguarding of passengers which need to be taken into account by management of British Airways. Also, accordingly internal policies are changed. In this regard, innovative actions are taken  by company to reduce the harmful radiations and follow the set standard effectively. It facilitates to ensure long run growth of company with  increased rate of return and high customer base (Herberberg and Rieple, 2008).

2.5 Global factors impacting British Airways

There are factors which affect the operation of British Airways. These are explained as follows-

Cultural barriers-it is the most common global factors which affect the business environment of an organization. Here British Airways operate in the number of countries where management need to assign skilled and competent workforce. However, cultural barriers affect performance of company in negative manner. However, cultural diversity of firm makes it possible to retain workforce for longer time span (Airline, 2015).

International laws-Every country has different rules and regulations related to employment, ethical conduct and international trade. All these affect business environment to a great extent. Under this, company need to ensure that it follows the practices laid down by the government of each country (Didonet, 2012).

Technological changes-This is another most important factor which need to be considered at the time of providing the services to customer at global level. This is because technology is the key aspect to meet expectations of passengers effectively in comparison to competitors (Svensson and Wagner, 2015).

Economic effect -Unfavorable economic condition of country has direct impact on the business. For example recent recession of UK has negative impact on the sales performance of Britis

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