Business Environment

Analysis of Business Environment in an Organisation

Introduction to Business Environment

Business Environment refers to combination of external and internal factors which impact working of a business including management, employees, suppliers, customers, competitors and government etc. However, all these factors have direct as well as indirect influence on the functioning of the company so it becomes necessary for firm to consider all these factors. For conducting the present research, British Airways has been given and its business environment have been analyzed so, as to know effectiveness of operations which is being carried out by this airline company in UK. British Airways is one of the largest airline company of UK and also carries second highest number of passengers in the country. In first part of the report operational activities of British Airways were analyzed which also includes the different policies of country which makes impact on the business of British Airways. Further in second part the impact of market forces and global factors on the operations of British Airways were examined.

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Task 1

1.1 The purpose of various types of organization

Every organization operates to achieve certain aim and objectives. Further different organizations operates for different purposes such as profit earning, growth and development of society. Major types of organization and their purpose are mentioned below as:

  • Private organization- These are the organization which operates with main purpose of increasing sales and profitability. Further all their efforts are directed towards one particular goals which is to enhance their customer base (Fey and Birkinshaw, 2005).
  • Public organization- these are the organization which operates with a prime purpose of offering quality products and convenient prices to the people in market. Rather than looking only after higher sales and profitability, these organizations also seeks for ways through which economic development can be done.
  • Non-profit organization- The main purpose of these organization is development of society. Further all their operations and activities are done for social development and eliminating issues of society such as child labor (Gasparotti, 2009).

British Airways is a public limited company which aims at providing better quality of airline services to the people in market (British Airways, 2015).

1.2 The key stakeholders of British Airways and extent to which organization meet their objectives

Stakeholders refer to those individuals or groups who have their interest in the functioning of a company. They can impact or can be impacted by the organisations operations, policies and strategies. Some of the main stakeholders are shareholders, employees, creditors, directors, government and the society. It is very essential to meet the objectives of them they are key element of a firm. British Airways is capable enough to meet objectives of its stakeholders and it has been discussed below,

  • Owners : The owners of the company invest their money in an organisation and thus have stake in company so, the main objective of owners associated with BA are linked with the growth, profitability and sustainability of the company. Further, the company meets their objectives by timely distribution of profits in the form of dividend and hence this maximizes their wealth (Bernard and Jensen, 2004). However the company is also carrying out efficient operations and make its owners proud for being associated with them.
  • Employees: They are the people who work hard for the success of British Airways. The main aim of employees is to get timely salary and incentives, also they want proper payment accordance to the work performed. Thereafter, the purpose of staff members is to get career advancement, proper training and development. Furthermore, the company ensures that employees get their performance appraised on time thus provide them with proper salary, bonus and other incremental benefits (Ormanidhi and Stringa, 2008). BA ensures that its employees gets proper facilities at work place and healthy work environment. It also provide proper training, development and motivation for their career growth.
  • Government: They are the regulatory bodies that govern the functioning of an enterprise. The basic purpose of the government is to ensure that company perform its operations within the regulatory framework, fulfill its social responsibilities and also help in sustaining economic growth of an economy. Furthermore, the BA who work internationally makes sure that the host country's government is satisfied with practices of company. This involves enhanced employment opportunities for residents, timely and proper payment of taxes and also providing necessary energy supplies.

1.3 Different responsibilities of British Airways as an organization and strategies employed by it to meet them

It is the key responsibilities of British Airways to take care of all the stakeholders in effective manner (Eifert, Gelb and Ramachandran, 2005). In addition to this , the stakeholders are the one which have direct or indirect impact on all the stakeholders. It is the key responsibilities of the airlines to provided better and quality services to all its customers. The price charged regarding the same are also required to be convenient. On the other hand, the organization is also responsible for providing better working conditions and pay to all its workers. It is the responsibility of British Airways to maintain and manage better relations with all its suppliers and make payment on time. It can be stated that the organization has always been able to meet all its responsibilities (Nimwegen and et al., 2008). For example British Airways always try to improve the overall, quality of its services in order to make sure that the customers are made available with best quality of airline services. Further it also takes care of the fact that better working conditions and pay are provided to the employees so that they stay motivated. The suppliers are encouraged to take part in the decision making process which helps in developing long term relationship with them. The organization also ensure that it fulfill all its responsibilities towards government by following all the laws and regulations. British Airways also takes care of its responsibilities towards environment under which it is operates. For this purpose, it has started using more sustainable practices to lower down the negative impact of its operations on environment.

Task 2

2.1 Types of economic systems

The economic system represent the method of production and distribution of products and services. Further, it determines the method in which the resources should be allocated in the society. Majorly, there are four kinds of economic system which are explained as follows:

  • Command economic system: In the command economy, the allocation and distribution of resources is done by centralized bodies (Economic System, 2013). The decision about flight services and its pricing is taken by government. In this pricing of airline services is also decided by the government of UK. The main benefit of command system is that it help in optimum utilization of resources. Therefore, private bodies play a negligible role in this system. It is necessary for British Airways to follow commands provided by UK governance in proper way to meet goals.
  • Free market economy: This is type of economic system where allocation of resources is done on the basis of market forces. Therefore, the pricing decisions and service decisions are made by organization after considering demand and supply forces (British Airways, 2015). In this economy system the British Airways decide its service pricing by effective focus on overall market conditions. Company is free to take decisions as per organizational need and market analysis.
  • Mixed economy: In this type of economy, both private bodies and government plays important role in the distribution of resources. The main benefit of this economy is that it maintain the equilibrium between private and public players which is further advantageous for society and various customers (British Airways, 2007). Therefore, it can be said that British Airways also operates in few mixed economy market. Therefore, flight arrangement, pricing and other necessary decisions are taken after considering the needs and preferences of customers (Dragnic, 2014).
  • Transitional economic system: It is type of economic system that is changing from command system to free market or mixed economy. The main reason after this change is due to restructuring of economy after global and liberal trade policies. Therefore, the economy of Cuba, Bulgaria etc. is changing into transitional economic system.

2.2 Impact of monetary and fiscal policies on the functioning of British Airways

The business organizations are directly impacted by the fiscal and monetary polices formed by government. Thereafter, these policies also impact the productivity and profitability of organization. The monetary policy means the procedure through which the monetary bodies of UK regulate the supply of money in the economy by making changes in the interest rates. With this aspect, monetary authorities administer the interest rate and assures development and progress of economy. With the assistance of monetary policy, government controls the inflation level of country (Gasparotti, 2009). In addition to this aspect, in August 2015, the inflation level of UK reduced to 0 % which is further the prices of airline service offered by British Airways is also reduced which is in turn increasing the demand of airline services. Further, the monetary policy aims to reduce fluctuations in prices of necessities and other essential goods and services which relates with the Airline sector. In UK the monetary policies are framed and employed by Bank of England and determine the interest rate on basis of which banks can lend funds. For example, the interest rates are reduced by the monetary authority than, British Airways can borrow more money at reduced cost. Further, this amount can be used by organization in its expansion and development projects (Doving, 2010).

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Thereafter, fiscal policy refers to expenditure done by government regarding infrastructure development etc. by making changes in taxation policy. The changes in tax rate as per the fiscal policy of country have direct impact on the overall operations of British Airways. Therefore, the rise in taxation means, the company is required to pay more tax which will increase the overall operating cost of firm. Therefore, the company will shift the burden of taxation on consumers by increasing the price of airline services offered to customers. Therefore, the demand of costly products and services is likely to reduce. At present, the bank rate of UK is 0.5% which is lowest rate as compared to many countries (Fernando, 2011). Therefore, British Airways can borrow funds at low interest and make fruitful investment decisions. Therefore, it can be said that both fiscal and monetary policy have positive impact on the functioning of company therefore they must be considered while making business plans and strategy.

2.3 Impact of competition policy on the functioning of British Airways

The competition policy is a regulation framed by European Union to ensure free and fair competition among various organizations functioning in country. The main aim of competition policy is to ensure healthy trade practices by ensuring avoidance of use of dominant market position. The main objective of competition policy is to promote healthy competition by making market function in smooth and better manner. Further, the polices assure the interest of customers is safe and they get value for the price paid by them. Thereafter, it also maintain proper price competition among suppliers. The competition policy was introduced in 1998 and since than it is impacting the operation of aviation industry of UK.

Management of British Airways is required to follow the competition policy strictly. With this aspect, company ensures it is indulged in healthy trade practices only with its competing firms. In their operational activities company is required to ensure that they are not having adverse impact on the environmental practices. Unfair mergers and acquisitions cannot be done by company in order to make reduction in the competition. This legal and competition policy had positive and negative impact on the operational activities of British Airways. It is because With these policies company is required to make positive changes in their operational activities to provide better services to the customers. Further, they are able to built positive image. However, they have to face rigidity in their operational activities due to legislation framed by legal authorities.

Task 3

3.1 Pricing and demand for airline seats in different market structure

There are various types of market structure that are operating at present and determine the pricing decisions and output decision of company functioning in it (Halinen and Törnroos, 2005). They can be further explained as follows:

  • Perfect competition: In this type of market structure, there are large number of buyers and sellers offering homogeneous products and services. Therefore, the competition level in such type of market is intense and any new company can enter the market and existing one can leave the industry. In this, industry determine the price of the airline seats and firm only accepts it. Further, the demand of the airline seats of BA will be perfectly elastic thus, the price of the seat does not affect the demand of the seats (Fey and Birkinshaw, 2005).
  • Monopoly market: In this type of market structure where there is single organization dominates the market while, there are large number of buyers. Therefore, competition in monopoly market is negligible as there are too many entry barriers that restrict other companies to enter the industry. Thus, the price is determined by the BA itself and the demand for the airline seats is downward sloping that higher the demand, higher will be prices.
  • Oligopoly market: In this type of market structure, there are few business entities that dominates the industry. However, the competition level in such kind of market structure is low and prices are charged on the basis of unique features and other benefits provided by company to its customers (Ekins and Lees, 2008). hence, the price is detremined by the market leader and demand for the airline seats will be according to the features provided by the firm.

3.2 Impact of organizational forces on the functioning of British Airways

There are several forces which affect the functioning of British Airways to a great extent. It consists of external factors like technology, political parties and changing need as well as preferences customers who are accessing services of British Airways (Eifert, Gelb and Ramachandran, 2005). On the other hand, other forces like policies of government for increasing the fuel prices. These all make significant impact on the performance of corporation. In this regard, corporation need to increase the prices of fare and accordingly also need to take care of preferences of large number of buyers (Cavusgil and, 2014). Apart from this, sudden change in technology is also the crucial factor which generate need of change in overall business environment. Owing to this, British Airways incur cost and cope up with change so as to create competitive edge in the marketplace. Therefore, production should be done according to the demand of products and services in market. However, to determine the demand of its products, company can take help of market research, surveys and make prediction after analyzing past sales (Chaiprasit and Swierczek, 2011). With this aspect, company can also ascertain the needs and wants of its prospective customers and further use this information while manufacturing products and services. In addition to this, supply and demand must be matched or shortage should be matched effectively.

3.3 Impact of business and cultural environment on the functioning of British Airways

British airways is the corporation operating at global level with increased rate of return. It ensured inclusion of number of employees from wide network. Here, functioning of corporation is greatly impacted by rules and regulations of specific country. Also, economic policies makes huge difference on the performance of corporation (Nimwegen and et al., 2008). Here, management of British Airways ensure inclusion of cultural diversity and treat all workforce with respect in order to motivate them to work with integrity. Further, the company matches the needs of diversified range of customers by employing workforce of various culture and religion. This also help company in complying with the requirements of Anti-discrimination policy of UK. According to this policy, organizations operating in country should not do discrimination on the basis of caste, creed, religion, nationality etc. while giving employment opportunities to various individuals. Therefore, to maintain the policy of unity in diversity company equal opportunity to various candidates of assorted backgrounds and culture (Bansal, 2012). In addition to this, safety standard of Europe and other related regulation of different counties where BA operates need to be taken into account. Also, other working practices such as legal barriers imposed by government of country are taken into account so as to create competitive edge of the firm in the marketplace.

Task 4

4.1 Impact of global changes in trade regime caused by regulatory organizations

In order to attain growth and enhance profitability in business, management of British Airways is planning to expand its operations in foreign market by starting flights services in different nations. In this manner, they will be first organization having air transportation services to large number of nations. Therefore, company can get the first mover advantage and increase its customers base and market share. This will further enhance the productivity and profitability of business enterprise. With this approach company will be able to enhance their customer base and can attain cost advantage for the expansion. (Adler, 2007). The international trade will also help in making effective utilization of available resources in order to attain economy of scale.

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The international trade will induce company to develop innovative and unique services for the customers in order to enhance the level of satisfaction. For this aspect, company is required to comply norms developed by regulatory authorities such as WTO, international civil aviation and tourism bodies are developed to ensure fair operations. Objective of these organizations is to promote fair trade and economic development.

4.2 The impact of global factors on the business of British Airways

There are number of global factors that affects the business of company is and impact the different functions carried out by company. The global factors affecting company are as follows :

The political environment of UK affects the functions of British airway. It has been witnessed that the company is intending to function at international level therefore, it is important for organization to adhere the rules and regulations laid down by government of respective host country (Anderson, Sweeney and Williams, 2011). Further, it is important for company to follow the rules and regulations laid down by UK government. Therefore, British airways should pay tax and other duties on time.

The economic policies of country have direct impact on the operations of British airways. The fluctuation in currency rate as well the interest rate fluctuation affects company in manner. For instance, the increase in expendable income of citizen of host countries is likely to increase the demand of companies offering (Ormanidhi and Stringa, 2008). Therefore, the GDP, GNP, fiscal and monetary policies of country can have direct impact on the goods and services offered by company.

In order to operate smoothly in domestic as well as international market, it is crucial for organization to strictly adhere the legal policies of respective country. This will increase the goodwill of company in the eyes of government and customers. British airways do healthy competition with its rivals, provide fair wages to workers, give equal employment opportunities to individuals etc (Bernard and Jensen, 2004).
Technical factors refer to the modern tools and technology that assist company in manufacturing innovative and upgraded products and services. By using up graded technology BA attain competitive advantage over its domestic and international competitors. It further assist company in modifying the quality of its product and services.

4.3 Impact of European Union policies on the functioning of British airways

The main aim of policies designed by European Union is to create a healthy and competitive environment of business. The government wants to create employment opportunities for the business therefore, it allows company to come up with employment opportunities. The EU government has designed Anti-Trust, which is allowable to penalized the company who are not operating as per the law (Ormanidhi and Stringa, 2008). British airways is induce the young and talented individuals of country to work for company. As per the employment policy, business entities operating in UK are needed to enhance the employment opportunities for individuals in UK first. Thereafter, proper working environment, wages and training and development opportunity is provided to staff. This further enhance the recognition of company in home country. However, the policies designed by WTO, it is essential for companies to function within the guidelines generated by it. Further, WTO ensure operation of global business in smooth manner without any hindrance. British Airways ensure it perform it functions in fair and just manner. According to health and safety policy, it is important for company to ensure healthy and hygienic surroundings for workers. In this respect, company should take significant measures to reduce risk exposure of workers. Considering, this BA implement safety instrument within its aircraft and airports like, fire alarm, extinguishers, parachute etc. Mock and safety drills are organized to give training to employees to prevent various hazards. Furthermore, Anti-discrimination policy state that equal job opportunities and payment should be provided to individuals doing same kind of work, having same knowledge etc. The main aim of this policy, is to discourage discrimination on the basis of caste, creed gender, religion and beliefs etc.


The report presented above concluded that, business environment has a significant effect on the organizational and functional activities of British Airways. The competition policy have strong impact on the functioning of company so it is important for company to consider EU policies strictly. Due to this aspect, policies of business should be in accordance with these provisions for the prevention of unfair trade practices. The organization is suggested to consider the global and cultural factors while operating business in the abroad countries. There has to be given effective consideration to the needs and preferences various stakeholders.


  • Anderson, D., Sweeney, D. and Williams, T., 2011. Statistics for Business and Economics. Revised. Cengage Learning.
  • Bansal, P., 2012. The Oxford Handbook of Business and the Natural Environment. Oxford University Press.
  • Bernard, A. B., and Jensen, J. B., 2004. Why some firms export. Review of Economics and Statistics.
  • Camacho, L., 2012. ReferenceUSA and Mint Global: a comparative examination of two business directories. Reference Reviews.
  • Cavusgil, S. T. and, 2014.International business. Pearson Australia.
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