Business Environment Assignment - British Airways

Introduction

Business environment of any organization is made of various different elements and is further impacted by numerous factors. Some of these factors are in control of the organization, while many others are not. The decision making process of any organization rely heavily on such factors and adequate strategies need to be made to gain maximum profit with the existing business environment to the business organization. As the business environment is rapidly changing across all industries, it is equally more important for the business organizations to develop adequate strategies and decisions in a rapid manner, and then implementing the strategies quickly.

In the presented paper, the business environment of British Airways is analysed for various factors that influence the organization (Endres, 1989). The paper also analyses the organizational structure of the organization as well as the resource allocation process influencing factors. Impact of various local and global factors on the organizational decision making process of British Airways is assessed in this paper. The paper also evaluates and sheds some lights on the organization’s Corporate Social Responsibility (CSR) factors.

Task 1

Identify the purposes of different types of organization

Organizations are created on basis of a social agreement that takes place between the various stakeholders in an organization who aim to make efforts in collective manner to achieve a single organizational goal (Worthington and Britton, 2006). In common business reference, the policies and decisions of a business organization are influenced by the environment, but the organization itself remains separate from the environment. 

At present times, there are several types of organizations that exist. The organizations can be broadly categorized into the following five categories: 

Commercial organization: such an organization remains functional in business environment with the aim of achieving financial success. The decision making process in such organization is centrally focused on higher revenues.

Non Profit organizations: in contrast with the commercial kind of business entities, the non-profit organization have no aim of earning profits from their practices, instead, they serve the purpose of helping others and community service.

Public sector organization: The organizations active in the public sector are generally owned and governed by local governments (state or federal). Such organizations generally have a self-supporting business model (Bove?e and Thill, 2000). In most situations, the aim of such organizations is to provide government services to the general public. 

Non-government organizations: NGOs are separate from the functioning methods of a commercial organization as these organizations do not get involved in any kind of business activity. The services provided by such organizations rely primarily on volunteers and public funding. Aim of NGOs is to support a social cause in most cases.

Co-operative organizations: In a co-operative organization, the governing authority is distributed among its members in equal manner. Such an organization follow the concept of democracy in decision making process. 

Describe the extent to which an organization meets the objectives of different stakeholders

The aim of British Airways is to make sure that by the business activities of it, it is meeting with the requirements of its stakeholders. In case of the British Airways, the company has different stakeholders as mentioned below:

Company employees: British Airways has the responsibility towards its employee to provide them safe workplace environment and a competitive and motivational business environment. The organization meets its responsibilities by following global standards of workplace safety, and also engages in activities of skill enhancement for its employees.

Company shareholders: The shareholders of the company have the aim of making profits from the growth of company. British Airways addresses the needs of its shareholders by continuing to develop effective business strategies that allows the organization to grow in short term as well as long term manner.

Customers: The responsibility of British Airways towards its various customers is fair pricing of services, transparency and higher safety regarding the services it provides (Lenssen, Louche and Van Den Berghe, 2005). The company provides these features to the customers and ensures that global standards for passenger safety are strictly followed.

Society: British airways is involved in a group of different airline companies that facilitates self-regulation to make sure that the services offered are adequately appropriate and safe on grounds of ethical considerations. 

Explain the responsibilities of an organization and strategies employed to meet them

As an organization, British Airways has many different Corporate Social Responsibilities (CSR) towards its different stakeholders, local community, customers and environment. The company needs to follow the ethical and legal considerations in order to meet the responsibilities that are implemented to its operations. 

In order to meet the different responsibilities, British Airways has developed a large pool of strategies that are considered during decision making process of the company in every business process. To ensure that the company is meeting its ethical responsibilities, the company has developed a thorough code of conduct that needs to be followed by all employees and management personnel of the company (Pohl and Tolhurst, 2010). Going further than this, the company also believes in meeting its responsibilities above the general regulations and therefore, the company has been involved in self-regulation practices of airline industry.

Explain how economic systems attempt to allocate resources effectively

Resources in any business environment have some degree of influence on the financial condition of the company. The British Airways is not an exception to this law as the company must get involved in the task of allocating its budget according to the need of resources for company operations. The economic system heavily influence the resource allocation in the companies. Different economic systems handle the task of resource allocation in the following manner:

Free market system: Free market is an open system that is most commonly followed by the European Union member countries. This kind of market system include the flow of resources in a way that allow free and self-direction of the forces of the market. In this system, the customers decide what needs to be developed, the manufacturers decide how the products will get developed, and the way products are distributed among the customers rely on the consumer purchasing power.

Command economies: The command economics is most commonly practiced by the governments for the allocation of scarce resources. In this economic system, the resource allocation is thoroughly planned by the people in command of the process. 

Mixed economies: This is the third type of economic systems which combines the factors of free market system and the Command economy system. These systems include a private sector industry, in which the resource allocation is mostly influenced by the different market sectors. Even in this sector, the sector is also managed by the government regulations for monitoring purposes. The other type in this kind of economic system is the public sector industries which are mostly governed by the government. 

British Airways has different types of resources that are necessary for its operations in the airline industry; these resources include- human resources, airline equipment, monetary resources, and technological resources. In the circumstance of recent economic downfall and recession period, the company had to rethink its financial status in order to maintain validity and practicality of the business operations of the company. In this duration, many companies lost their financial base and declared bankruptcy and almost all companies in US and UK focused on methods of cost-cutting to reduce impact of recession. British Airways had several options of implementing cost-cutting methods; however, the company did not go against its ethical policies and opted for making cost cutting decisions that did not impact its employees or customers (Britton, 2013). For example- in this situation, the company could have asked pilots with lesser experience to fly the company aircrafts to save on salaries, but British Airways did not find this method ethical as it would potentially risk the lives of customers and degrade the consumer trust the company has developed

In such a situation of recession, British Airways relied on other small methods of cost-cutting which included reducing the number of flights to destinations generating low revenues and providing more budget friendly flight packages to attract more consumers and improve the flight booking stats and occupancy status.

Assess the impact of fiscal and monetary policies on business organizations and their activities

From a long time period, the government has had the role of promoting competitiveness and fair business practices in the business environment by managing and introducing new fiscal and monetary policies. Such policies have high impact on the activities of business organizations and their decision making process. Following is the assessment of business decision making process on British Airways:

Fiscal policy: the fiscal policies employed by local government include various legal regulations that imply on the expenditures of an organization and the taxation laws. Such policies have impact on the business organizations in two different ways- laws that have an impact on the economy overall, and the organization or industry specific laws that affect the operations of British Airways (Carlberg, 2006). It is essential for the British Airways to follow the fiscal regulations implied by the local government and these can have a direct impact on the business organization and the way it maintains its financial resources.

Monetary Policy: In most countries, the Federal Reserve has the responsibility of maintaining the monetary policies in order to keep the inflation rates steady and controlled. The monetary policies influence the cost of money, by altering and deciding new interest rates. Such policies are introduced to maintain the flow of money and its supply in the market. As an organization, British Airways relies heavily on its financial status for management of its services and allocation of its resources; a phase that is directly linked to the monetary policies.

Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization

British Airways has its primary airline hub located at Heathrow Airport in London, and the company headquarter is located in Harmondsworth, England. As clear by the name, the majority of its business practices rely on the trends and policies of the UK government. UK has quite detailed regulations about fair trade policies in the business environment and believes in the fair competitive nature of the business environment.   

The UK government issues business policies ensure that every company is able to stay in the business on competitive grounds. The UK competitive polices in business environment are about the regulations that ensure that the business organizations in any industry compete with each other in a fair environment (Clarke and Morgan, 2006). Such a practice encourages British Airways to compete with other airline companies in the market on basis of higher efficiency, a wide variety of choice,  higher quality of services, better pricing of the services, and more customer oriented nature of business. With respect to the British Airways, the UK competition policies have following impact on operations of the company:

• Competitive pricing: In order to compete with the new and existing companies in airline industry, British Airways need to keep its pricing attractive as a way of making its services appealing to consumers.
• Higher quality: as the UK competition laws discourages any kind of unfair advantage to big organizations, British Airways need to rely on its quality of services in order to gain consumer trust and loyalty. This encourages the company to improve the quality of its services.
• Innovation: The UK competition policies encourage British Airways to continuously remain involved in tasks of innovation of new services for its customers. 

Task 2

Explain how market structures determine the pricing and output decisions of businesses

Developing any product or service has its own life cycle; however, the launching of a product has its own set of procedures and steps that needs to be taken before introducing a service to the market. Pricing of the product is an important decision that needs to be taken seriously by any organization to ensure that the product remains as successful as aimed by the organization (Etro, 2009). Various factors that need to be considered while deciding the output and pricing decision management for a service include- knowing how large is the targeted customer base, who are in the targeted customer base, purchasing power of the targeted consumer, the cost of developing the mentioned service of product, and the amount of profit the company needs to make from the sale of particular product of service.

In order to develop its output and pricing decisions, it is essential that British Airways handle both of these decisions in a parallel and inter-connected process. This needs to be done as both pricing of a service and the output required relies on each other. The higher the price of a product, the lower amount of supply is required, and vice versa. Such decisions are also influenced heavily by the market structure.    

In a market scenario having perfect completion, organizations are left with no choice but to follow the existing market pricing. In any other kind of market structure, organizations gain some control over the pricing and output decisions. In oligopolies market structure, the pricing decisions of British Airways depend on the pricing decisions of rival companies. However, in the monopoly market structure, British Airways does not need to pay attention to the pricing of rival companies. However, in any market structure, it is important for the British Airways to develop output that ensures that the marginal revenues of the product equals the marginal cost. The pricing should be done in such a way that it clears all of the output entities.

Illustrate the way in which market forces shape organizational responses

The various market forces have a deep impact on the response of an organization in numerous ways. The different market forces that have an impact on British Airways include the following factors: supply, demand, and consumer oriented marketing.

Supply refers to the amount of goods that the company has available in the market for consumers. Demand of the product refers to the total number of product or services that are wanted by the consumers. In the market structure of any kind, the relation between the supply and demand is always linked in this way (Morgan, 2005). British Airways always try following the state of equilibrium with its supply of available flights to different destinations, i.e. developing only that amount of flights that are demanded by the market. Pricing of the British Airways flight also plays a vital role in changing the demand of the service.

Marketing is also a vital factor in the establishment of equilibrium of demand and supply. Positive marketing can influence higher demand for the British Airways flights which would then require higher supply from the organization.

Judge how business and cultural environments shape the behaviour of a selected organization

A business organization is always influenced by the environment that it is in, whether it is the business environment of the organization or the cultural environment. These different environments and various factors involved in these environment can be analysed by using macro and micro environment analysis of British Airways.

Micro Environment: In case of the British Airways, the macro environment of the company include the various factors that are part of the internal structure of the organization. As the cultural part of the environment is also reflected among the employees, this also influence the work ethics of the British organization and impact the decision making process as such processes take input from the people belonging to different cultures (Parhizgar, 2002). 

Macro Environment: Macro environment refers to the external factors impact British Airways operations. Such factors include the business environment and the government policies influencing the industry. In most cases, British Airways does not have control on such factors; however, it needs to rethink its strategies and make decisions according to the changes occurred in the business environment. The macro environment of the British Airways can be assessed by performing a PESTEL analysis:

• Political factors: The aviation industry in UK region generally consist of major organisations having good political influence. In addition to this, the business also gets affected by the factors like political instability in a region.
• Economic factors: The aviation industry for British Airways gets impacted by the different economic factors like currency exchange rates and changing purchasing power of the consumers.
• Social factors: The cultural factors for an organisation are covered in the social factors of the organisation. For Births airways, the social factors include designing services and marketing campaigns that are in accordance to the likeness of the society.
• Technological factors: aviation industry requires implementation of highly reliable and latest technologies to improve safety, consumer satisfaction and convenience.
• Environmental factors: In UK region, the government has implemented many environment protection laws and regulations that needs to be followed by the British Airways.
• Legal factors: As a business organisation, British Airways needs to perform its business operations in accordance to the UK business laws such as tax laws, customer protection, fare trade laws, and competition policies.

Discuss the significance of international trade to UK business organizations

Having its services available in the global market, it is important for the UK based British Airways to develop and implement business strategies that are not simply bound by the region of UK. For its operations in different regions, it is important for British Airways to adapt to the local culture, and devise different sets of ethical codes that are in accordance with the local community ethical considerations.

International trade is very important for the British Airways organization as even with its primary business structure being located in the UK region, about half of its operations take place in other countries as all of the international flights either originate or land to a foreign country (Komori and Wellens, 2009). To make sure that the company services are adequately assessed and managed for international markets, British Airways needs to follow the process of localized market structure analysis for its primary destinations and then develop a business plan and marketing strategy depending on the findings of such analysis.

Analyse the impact of global factors on UK business organizations

In the present business environment which is facilitating the globalization of business organizations and their services, the global factors have impact on all regional organizations in different parts of the world. British Airways, being a UK based company that is having its commercial operations, is highly impacted by the different global factors. For example- the company needs to continuously deal with the factor of exchange rates on global scale which impacts the financial state of the organization(Dosi and Galambos, 2013). Other factors that impact the business practices of British Airways include the global level financial crisis, political instability in a particular region, global polices about the airline industry, etc. British Airways consistently develops and revises its strategy to deal with the global factors in effective and efficient manner. 

Evaluate the impact of policies of the European Union on UK business organizations

As a UK based organization, British Airways falls in the regulations zone of the European Union as England is part of the EU as a primary state. Due to this joint commission policies, it is essential for the British Airways to continue to follow the various trade guidelines issued by the European Union (Strohmeier, 2013). In addition to the business ethics, workplace safety regulations, and pricing laws, EU is also involved in developing fair trade regulations for the various organizations that operate in the EU region.  It is important for the British Airways to adhere to the various trade guidelines employed by European Union for its operations in the region. Following are the different aspects of UK business organisations that gets impacted by the policies of EU:

• Market structure: The European Union follow the market structure of free market trade, and this market structure impacts the various UK business organisations as UK is a member of EU. As part of the free market structure, UK business organisations such as British Airways need to implement its business processes based on market forces such as consumer choices and their spending power.
• Competition policies: European Union supports the fair competition policies in order to protect the rights of consumers by preventing creation of a monopoly in the industry as well as to assist the new and emerging organisations. For the UK business organisations, this ensures that the large organisation do not have additional unfair advantages over smaller organisations.
• Regional policies: For the countries that are members of the European Union, many regional policies are decided by the EU that needs to be followed by the UK business organisations.

Conclusion

In the presented report, the business environment of British Airways is analysed for various factors that influence the organization. The paper also analysed the organizational structure of the organization as well as the resource allocation process influencing factors. Impact of various local and global business factors on the organizational decision-making process of British Airways is assessed in this report. The report also evaluated and shed some lights on the organization’s Corporate Social Responsibility (CSR) factors.

References

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