LSBM Unit 1 Business Environment

This is solution of LSBM Business Environment Assignment given in BTEC HND Business course. Here LSBM refers to London School of Business and Management

Executive Summary

This report would aim at the discussion of various applicable aspects of business environment in the context of an UK based organization named as British Airways. First section of the report would discuss the purpose of the organization with the help of stakeholder analysis along with the responsibilities of organization towards various stakeholders and would analyse how organization is fulfilling its responsibilities towards its various stakeholders. Next section of the report would discuss the national business environment of UK by detailed discussion of various economic systems and the fiscal and monetary policies of UK along with the impact of regulatory and competition policies of UK on the business of the organization. Next section of the report would aim at discussion of market structures, market forces along with the business and cultural environment of business in the UK. Last part will aim at the discussion of international trades, global factors and the influence of policies of European Union on the business. So, this report will discuss and analyse all the important concepts related to business environment in the context of British Airways.

Introduction

British Airways (BA) is the largest airlines of UK which is headquartered in Waterside, Harmondsworth of England. This report would discuss all the concepts in the reference of this organization only. BA is considered as UK based largest organization as it has the largest fleet size all over the world. This organization was established in 1974 after the merger of four main airlines of UK named as British Overseas Airways Corporation, British European airways, Cambrian Airways and Northeast airlines. Organization has reported 10 billion as its revenue in year 2011. It becomes much necessary for the organization to assess the business environment that persist for its business in UK and at international level also. This report would discuss all this in details.

Organization’s Type

BA is the private organization which emerged after the merger of four main airlines in UK. The main business of BA is the airline business and has the largest fleet size and providing the services of its business to most of the destination serving the passenger in best possible manner. Mission statement and vision statement of any organization differ in a manner that mission statement describes the basic functions of the organization for the society in the terms of services or products delivered by it while vision statement talks about long term goals of the organization or can be said as the future point of view of organization. Mission statement of the organization reads as “One Destination seeks to ensure our customers fly confident that, together, we are acting responsibly to take care of the world we live in”. The vision statement of the organization states as “to become the world’s most responsible airline”. The goal of the organization is to be the most exclusively first choice of all kind of passengers looking for airline services. In order to achieve their goals, organizational structure and values play an important role and BA is sure to achieve these goals by following these values. Various guiding principles described by the management ensure that the organization would be able to achieve all its goals and objectives in effective and efficient manner (Vignali, 1999). 

Stakeholder Objectives

                All the individuals or groups who have some interest in the business of organization due to some direct or indirect impact on their business or daily routine are considered as the stakeholders of the organization. These stakeholders have some objectives that are necessary to be met by the organization. The main stakeholders of BA are its shareholders, customers, suppliers, managers, employees and government. Below section would detail out the objectives of these stakeholders in the detail and how BA is meeting these objectives in order to keep stakeholders interested in the business of BA:

1. Customers expect the delivery of goods or services of acceptable quality and receive the value for their spent money. Organization is meeting the objectives of its customer by providing the best kind of airlines services to its all customer in a friendly environment.
2. Job satisfaction, job security, payment of salary along with an acceptable work environment for the employees are the main objectives that employees expect to be served by the organization. BA ensures that unions are not going on strike and provide the exposure of work to the employees by providing suitable work environment.
3. Main suppliers of BA are Boeing, Airbus and other main oil suppliers. The main objective of these suppliers is receiving payment for the supply of goods and services along with getting regular order. BA serves objectives of suppliers by paying them and creating re-orders to the same supplier.
4. Shareholders expect the continuous flow of revenue of the organization and they expect that the organization keep them informed about their future plans and associated risks. BA ensures the completion of these objectives.

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Responsibilities of organization

                All organizations have some kind of social, legal and moral responsibilities towards various stakeholders discussed in the above section. It becomes necessary for the organization to identify its responsibilities towards them and use different strategies in order to fulfil those responsibilities. Below section would discuss the responsibilities of BA towards its employees and the environment and would also discuss how it is meeting those responsibilities:

1. BA has various responsibilities towards its employees like the job security of all the employees along with the payment of salary on the time. Job satisfaction for employees plays an important role in the business of the organization. Organization need to ensure that all these responsibilities are fulfilled by organization in order to lower down the turn out from the company. BA has effective compensation and performance system which ensures compensation related responsibilities of the organization. BA provides a suitable work environment to all the employees in order to keep them satisfied.
2. Environment is the important resource for all kinds of business. It has become important to keep the environment sustainable so that the coming generations can also us the surrounding environment in a safe manner. It is the responsibility to ensure a sustainable environment and helping the weaker section of society to make them socially strong. BA has a strong corporate social responsibility program which ensures the accomplishment of these responsibilities by the organization (Muyldermans, 2010).

Economic System and resource allocation

All organizations operate and conduct all their business in an economic system. Basically an economic system can be defined as a system which combines all the processes which are required in the production, circulation and distribution of the products or services along with all the processes that motivates and organize the labour to conduct all the defined activities. Such a system also includes the infrastructure which is used for production, circulation and distribution of these finished or unfinished goods and services. Economic system play important role in the resource management for all the activities as it involves all the required processes. Various kind of economic systems prevalent in different countries are as follows:

1. Market Economy
2. Planned Economy
3. Mixed Economy
4. Traditional Economy

BA operates in a mixed economy. In a mixed economy most of the decisions are dependent on the demand and supply curve along with the objectives and goals of the organizations. So decisions are made by the firms themselves and by states as well. Mixed economy is basically a combination of planned economy and the market economy, so it is the mixture of both kinds of systems. Mixed economy has the advantage of efficient resource allocation. In such an economy private firms have a good opportunity for the growth of their business and the firm has to complete the requirements laid by the various stakeholders along with the requirements of government. Overall such an economic system helps the organization in doing its business in effective and efficient manner.

      Mixed economy is better for the organization as it gives freedom to the firm due to the presence of free economy and lays down the strict rules as well due to the nature of planned economy. Such an economic system is beneficial for the firms and society both. Free economy impacts the customers in negative way while planned economy creates more pressure on the firms and creates problems. Barter and traditional systems are old day’s systems which are not much evident these days due to the modern day economic practices in the organizations.

Impact of fiscal and monetary policy

            Two main policies for the measurement of the economic strength of any economy are the monetary and fiscal policies of that economy. These policies defines various key factors of financial resources  of economy i.e. tax rate, interest rate, exchange rate etc. These rates are important in the operations of businesses as they have direct impact on the actions of the firm. These policies also impact the GDP of the economy as GDP is the result of the performance of the businesses in that particular country. UK is being placed at sixth position in terms of largest GDP economy while at eighth place in terms of largest of PPP (purchasing power parity) economy in the world. UK has a GDP of $2.44 trillion in 2012 with an expected growth rate of 3% per year. Recently IMF has asked UK to align its policies in order to achieve higher growth as the current policies are not much favourable for the businesses in country. Recent fiscal and economic policies of UK are not encouraging the demands for goods and services by the citizens so can’t be termed as favourable for the businesses. These policies affect the business of BAS as these have a direct impact on the demand of customers for the airlines services due to the direct link of BA’s business to the purchasing power of passengers (Paleologou, 2006).

Effect of Competition policies on BA

            Competition policies are important for the organizations as the competition play a direct role in the businesses of all kinds of organizations. Countries define the competition policies in order to have a fair competition in the market as fair competition helps in the mutual benefits for firms and consumers both. Governments and various marketing forces have an impact on the competition policies of the country. There was an issues faced by the organization in last decade of 2000 by its competitor Virgin Atlantic and then competition commission played an important role in solving the dispute between these two firms and ensured a better market scenario for both the organization. The problem faced by both the organization was emerged due to the some pact that happened during a joint venture which was not fulfilled by one of them and competition commission interfered to make the scenario better for both the firms.

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Regulatory Mechanisms and its influence on BA

There are various regulatory mechanisms that are defined by the government of the countries which govern the business in order to keep the market helpful for all the stakeholders and the environment at large. These regulatory mechanisms are defined for all kind of organization and some regulations for specific kind of business. BA operates in an environment which has direct impact on the sustainability of the surroundings. So, the regulatory mechanism defined for the pollution, air pressure etc. play an important role in the business of BA. Cross border business is also the main function for the BA, so the rules for the trade of cross border are important to be taken care by the organization. BA has been impacted by the Fair Trading Act, 1973 defined by Office of Fair Trading and Enterprise Act, 2002. These acts are being defined in different interests. Fair trading act aims at ensuring the treatment of the customers in a fair ways and the consumer rights protection (Bhar, 2011).

Conclusion

The above discussion about the business environment of the UK helped in understanding the various important aspects of business environment prevailing in UK. This repost helped in direct implementing various concepts learnt during the course. The concepts like fiscal/monetary policies, purposes of businesses, objectives of stakeholders and responsibilities of BA towards the various constituent, competition and regulatory framework prevailing in UK are being implemented in this report and would help the reader in understanding these concepts in detailed manner in an easy way.

References

Christos Kollias, Susana-Maria Paleologou, (2006) "Fiscal policy in the European Union: Tax and spend, spend and tax, fiscal synchronisation or institutional separation?", Journal of Economic Studies, Vol. 33 Iss: 2, pp.108 - 120 Girijasankar Mallik, Ramprasad Bhar, (2011) "Has the link between inflation uncertainty and interest rates changed after inflation targeting?", Journal of Economic Studies, Vol. 38 Iss: 6, pp.620 - 636 Leo-Paul Dana, Daniella Vignali, (1999) "British Airways plc", International Marketing Review, Vol. 16 Iss: 4/5, pp.278 - 291 Ramakrishnan Ramanathan, Andrew Black, Prithwiraj Nath, Luc Muyldermans, (2010) "Impact of environmental regulations on innovation and performance in the UK industrial sector", Management Decision, Vol. 48 Iss: 10, pp.1493 - 1513

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