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Business Management

Assignment: Business Environment

Mr. John Opoku

I.D No: 105649

NIPUNA WEERAKOON

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Table of contents Executive summary

Introduction

Chapter I……………………………………………………………………………………….

1.1 Vision 5

1.2 Mission 5

1.3 Objectives 6

1.4 Stakeholders 7

Chapter II……………………………………………………………………………………..

2.1 PESTEL 8-10

2.2 SWOT Analysis of British Airways 10-12

Chapter III…………………………………………………………………………………….

3.1 Economy System 13-14

3.2 Problems of economy system 15

Chapter IV…………………………………………………………………………………….

4.1 Perfect Competitive 16

4.2 Monopoly 17

4.3 Oligopoly 17

Chapter V ……………………………………………………………………………………..

5.1 International Business 18

5.2 UK Trade with the EU 18

Conclusion

Bibliography

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Executive Summary

In this report, Author will concentrate on a business named British Airways, . Look at which

type of company it falls under, about its stakeholders, objectives, aims of the company,

amongst other factor.

Then concentrate on the bigger picture, looking at the international markets and its effects on

the U.K economy, various types of business environments, trends of global .economies and

policies governing those markets.

Finally author concentrate on the European Union, and the relationship between U.K and the

EU, policies, types of markets, the unique policies that govern them.

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Introduction:

Business environment is a set of political, economic, social and technological (PEST) forces

that are largely outside the control and influence of a business and that can potentially have

both a positive and a negative impact on the business. The Institute of Chartered Financial

Analysts of India (ICFAI) center for management research state that the global business

environment can be defined as the environment in different sovereign countries.

The British Airways Board was established in 1971 to control the two nationalized airline

corporations, BOAC and BEA, and two much smaller regional airlines, Cambrian Airways

from Cardiff and Northeast Airlines from Newcastle upon Tyne.

Figure 1: British Airways and British Airways franchise Destinations,

Image Source: http://en.wikipedia.org/wiki/File:BA-Des.svg

The British airway company supports the United Kingdom economy by providing vital

arteries for trade and investment, meeting the demand for business travel and leisure travel

for holidays and family reunion. At the present the Company flies to more than 550

destinations worldwide.

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Chapter I

1.1 Vision

Definition of vision:

Vision of British Airway

Vision is a long term view, sometimes describing how the

organization would like the world in which it operates to be.

A Vision statement outlines what the organization wants to

be, or how it wants the world in which it operates to be. It

concentrates on the future. It is a source of inspiration. It

provides clear decision-making criteria

„To be the Undisputed leader in world travel for the next

millennium‟

1.2 Mission

Definition of mission

Statement:

Mission of British Airway

A sentence describing a company's function, markets and

competitive advantages; a short written statement of your

business goals and philosophies.

“To be the best and most successful company in the airline

industry”.

(British Airway)

British Airways' slogan is "The World's Favourite

Airline," and the company's mission is to achieve that by

providing a full service experience, both in-flight and on the

ground.

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1.3 Objectives

Definition :

British Airways Objectives:

The desired or needed result to be achieved by a specific

time. An objective is broader than a goal, and one

objective can be broken down into a number of specific

goals, (Laura Lake)

Zero waste to landfill in the UK by 2010

Improve our carbon efficiency by 25% by 2025 -

reducing the grammas of carbon dioxide per

passenger kilometre from 111 to 83 grammes

Reduce the average noise per flight by 15% by 2015

50% reduction in our net CO2 emissions by 2050

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1.4 Stakeholders:

According to Andrew L. Friedman (2006), Person, group, or organization that has direct or

indirect stake in an organization because it can affect or be affected by the organization's

actions, objectives, and policies. Key stakeholders in a business organization include

creditors, customers, directors, employees, government, owners, suppliers, unions, and the

community from which the business serves to. The main Stakeholders of this company are

the employees, customers, government and the owner.

Figure 2: Company’s Internal and external stake holders

ImageSource:http://sites.google.com/a/psu.edu/group-

8/_/rsrc/1235590867668/Home/camera-project/stakeholders/Stakeholder_%28en%29.png

Most important stakeholders in British airways are BA workers; because they want to do well

companies pay their mortgages. BA Shareholders, because they own the company and want

their investment to increase in value. They want to get paid dividends. BA Suppliers because

they make money from supplying BA with good and services BA buy in everything from

food to fuel to entertainment for customers. BA Customers, Many business customers fly the

same route on a regular basis. This everybody wants BA to do well so BA can earn profit

with good stockholders.

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Chapter II

2.1 PESTEL

An organization‟s success is influenced by factors operating in its internal and external

environment. PESTEL Can Describe Macro-environment in an organization.

POLITICAL Taxation policy, Governmental policies,

Government stability, Political party change

ECONOMICAL Business Cycles, Interest rates, Inflation,

Unemployment, Disposable income,

Devaluation, Recession, Globalization.

SOCIAL Population demographics Income

distribution, Social mobility, Lifestyle

changes, Consumerism, Public/ Press

Opinion, Levels of education, Attitudes to

work & leisure.

TECHNOLOGICAL Impact of new technology, Research &

Development, Network speeds, Innovative

methods, Internet advances, ICT

development.

ENVIRONMENTAL Threat of natural causes global warming,

Waste disposal, Carbon footprint, Ethical

trading, Sustainable energy, Environmentally

friendly product.

LEGAL Employment law, Competition law, Health &

Safely law, Regional legislation, Trade

Union.

Figure 3: PEST Analysis, Field work

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Economic environment:

Economic factors concern marketing firms, as they are likely to influence demand cost price

and profits. These factors are largely outside the control of the firm, but their effects on

individual enterprises can be profound.

When looking at British airway is 550 destinations worldwide because of that each

destination fuel changes may effect to British airway travellers so travelers may choose less

'exciting' holidays.

Technological environment:

Technology is a variable that affects not only the marketing firm, but all elements in the

company‟s proximate macro-environment including customers. The British airway

technology environment is higher than comparing other Airways.

For a Example, they have big technology plan for Heathrow and Gatwick Airports.

Political and legal environment:

Political and legal environment depend with each country government policy. Fiscal policy is

the use of government spending and revenue collection by means of taxes to influence the

economy. Fiscal policy is also used by governments to adjust its levels of spending in order

to monitor and influence a nation's economy. The fiscal policy was introduced to the UK

economy in the 1950, 60s and 70s, this was brought in to fine tune the economy, it was felt

that the government could ensure full employment.

Monetary policy is the process by which the government, central bank, or monetary authority

of a country controls the supply of money, availability of money and cost of money or rate of

interest, in order to attain a set of objectives oriented towards the growth and stability of the

economy.

The Social-cultural environment:

Culture as described by Herks, M. cited by Rai University (n.d) “culture may be viewed as

the sum total of man‟s knowledge, beliefs, arts, morals, loves, customs and any other

capabilities and habits acquired by man as a member of society”. It is the totality way of life

for a man.

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Socio-cultural factors are the social and cultural influences that affect every business. So for

British Airway also got more influence with social-cultural factor. These factors may vary

from country to country. These factors include dominant religions, attitudes to foreign

products and services, language impact upon the diffusion of products onto markets. When

looking at Airline industry doing their business with country to country.

2.2 SWOT Analysis for British Airway

There are many ways of measuring this company‟s performance. The analytical tools that can

be used is the SWOT for British Airway.

Figure 3 : SWOT Analysis

http://hrmadvice.com/hrmadvice/useful-hr-tools/hr-swot-examples.html

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Strengths

Image, differentiation on price and

brand.

Is financially successful.

Is being seen as an innovative and

flexible organization.

Has a strong e-business.

Is part of the consortium that has been

awarded to run UK‟s air traffic

control system (NATS).

Weaknesses

Has no customer retention policy

Has little or no scope outside of

Europe.

Lack of service, flexibility and

business focus (such as frequent flyer

programs e.g.) make the low-cost

model unappealing for most business

travelers.

The two drivers of growth, the focus

on price and the focus on convenience

(frequent flights, few connections,

more nearby airports e.g.) are

reaching their natural limits.

Differentiation from there remains to

be difficult.

British Airway‟s own success makes it

difficult to recruit and train staff quickly

enough.

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Opportunities

Experts predict great potential for

future growth in the next years

The current recession is favorable as

people and businesses are more cost-

conscious.

More full-service airlines may

withdraw from the regional market to

focus on more profitable long-haul

routes leaving the market to the low-

cost operators.

The short-breaks market, an

important market for British airway

grows more rapidly than the UK

travel market as a whole1.

Reduced aircraft prices.

Threats

Difficulties to expand as viable new

routes from London are scarce.

Competition is likely to intensify,

given the saturated market and the

shortage of other options.

Companies cut on business travel in

times of economic downturn and

because of new time-consuming

security measures travel substitutes

like videoconferencing are

introduced.

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Chapter III

3.1 Economic system:

According to George Nikolaus Halm (1962)An economic system is the system of production,

distribution and consumption of goods and services of an economy. Alternatively, it is the set

of principles and techniques by which problems of economics are addressed. Examples of

contemporary economic systems include Command (Socialist systems), Free enterprise

(capitalist systems) and mixed economies. Some countries still follow the Command

economy system. And they are benefitted vastly due to this. An example for is India and

Pakistan. They always try to foster their own ideas and goods without relying on outside

sources. Most countries in the modern world follow the free enterprise and mixed economies.

This has helped them bring in new technologies from the outside world and give out some of

their own. The UK, USA is good examples for this type of economy. Also British airway

using Mixed economy system.

Figure 4: Type of economic system,

http://sardar-hassan.blogspot.com/

British Airways also follow with mixed economics system.

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Market Economy

Planned Economy

Mixed Economy

National and state government play minor

role in market economy. . In this type of

economic system, the assumptions of the

market play a major role in deciding the right

path for a country‟s economic development

Market economies aim to reduce or eliminate

entirely subsidies for a particular industry.

A planned economy is also sometimes called

a command economy. The most important

aspect of this type of economy is that all

major decisions related to the production,

distribution, commodity and service prices,

are all made by the government.

A mixed economy combines elements of

both the planned and the market economies

in one cohesive system. This system using in

many countries where neither the

government nor the business entities control

the economic activities of that country - both

sectors play an important role in the

economic decision-making of the country.

Figure 5: Describe of economic system, field work

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3.2 Problems of economy system

According to P.A. Stone (1998) the basic economic problem stems from the fact that as

humans, we have unlimited wants and needs but the ugly truth is that the world and every

individual in it have limited resources in relation to the wants and needs we have. When

applying this theory to British Airway the main problem they will face is limited amount of

fuel in the world. Also beginning of this new millennium world face big terrorist attack in

2005 in London Underground Bomb, because of this kind of reason many BA travelers fear

to use air travels this problem effect to UK economy. Also BA going with a Mixed economy

system that mean if something happen UK government economy it‟s directly influence to

BA.

Figure 6: British airway Profits 2001-2009, Dunkley, J (2009)

http://www.telegraph.co.uk/finance/newsbysector/transport/5367367/British-Airways-hit-by-

record-loss.html

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Chapter IV

4.1 Perfect Competitive:

Perfect competition describes the perfect being markets in which there are many firms, all

producing homogeneous goods. A perfectly competitive market may have several

distinguishing characteristics. The major advantage British Airway has it the service they

provide, this cannot be compared with the other competitors.

Many buyers/Many Sellers

Low-Entry/Exit Barriers

Perfect Information

Transactions are Costless

Aim to Maximize Profits

Homogeneous Products

Many consumers with the willingness and

ability to buy.

It is relatively easy to enter or exit as a

business.

Prices are assumed to be known to all

consumers and producers.

Buyers and sellers incur no costs in making

an exchange.

Firms aim to sell where marginal costs meet

marginal revenue.

The characteristics of any given market good

or service do not vary across suppliers.

Figure 7: Characteristic of perfectly competitive market, Field work

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4.2 Monopoly:

In economics, a monopoly exists when a specific individual or an enterprise has sufficient

control over a particular product or service. British airway has a significant say in the market.

No other competitor can be compared with British airway because of the unique choice of

service they provide.

Monopoly A monopoly is a market structure in

which there is only one

producer/seller for a product. In

other words, the single business is

the industry.

4.3 Oligopoly:

An oligopoly is a market form in which a market or industry is dominated by a small number

of sellers. This is present as well there are only a hand full of airline service providers to

London. And British airways dominate this market because they specialize in this sector.

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5.1 International Business:

According to Frederic Bastiat, (1999) By virtue of exchange, one man's prosperity is

beneficial to all others. International trade is the exchange of goods and services between

countries. A nation trades because it lacks the raw materials, climate, specialist labour, capital

or technology needed to manufacture a particular good. International trade is very important

to U.K because without international trade it will be very hard for them to survive.

5.2 UK Trade with the EU:

Trading with other European Union (EU) countries offers a number of key benefits to

businesses in the UK. The EU is a huge market in which to sell your goods and service. It

also gives you access to a huge source of suppliers.

At the core of the EU is the single market - the programme of freeing up the trade of goods

and services and the movement of people between EU countries. The aim is that doing

business with other EU countries should become increasingly like doing business within your

own country. The following are some of the measures which EU countries have introduced to

make it easier to trade with each other:

Reduced bureaucracy and paperwork

Harmonised standards

Movement of people

The euro

for instance, trade with the EU can be

recorded on your VAT form in the same way

as any of your sales and purchases in the UK.

EU-wide technical and safety standards

ensure that if you meet UK standards you'll

also meet the standards of other EU

countries.

UK citizens have the right to travel, live and

work in any EU country

It has reduced the currency considerations

faced by businesses trading in Euros between

Euro zone countries.

Figure 8: EU Country measures, Field work

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Conclusion:

From this report we have learnt many things like responsibilities of organizations,

stakeholders of organizations, various market situations, ways of measuring performance, EU

rules and regulations, various types of organizations that are in place so that business is done

fairly. Etc.

Al this information will be most useful to us when we go into our professional lives, where

knowledge out will be tested and it will be required to run an organization. So because we

aver learnt about all of these things, we can use it in a way that both organization and myself

will benefit from it.

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Bibliography

British Airway., (2010) Investor Relations [Online]

http://www.bashares.com/phoenix.zhtml?c=69499&p=IROL-index [Accessed 25 July 2010]

Worthington, I., (2006) The Business Environnent (5th Edition) Pearson Education, Oxford

Wright reports.,(2008) British airway company profile[online]

http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C826A3440 [Accessed 25

July 2010]

Friedman, A. L and Miles, S (2006) Stakeholders: theory and practice , (illustrated edition),

Oxford university press, Oxford.

Economy watch.,(n.d) Type of economy [online]

http://www.economywatch.com/world_economy/world-economic-indicators/type-of-

economic-system.html [Accessed 28 July 2010]

Peterson, J; Shackleton, M, (2006). The Institutions of the European Union (2nd edition),

Oxford University Press, Oxford.

HRM Advice., (2008)SWOT[online] http://hrmadvice.com/hrmadvice/useful-hr-tools/hr-

swot-examples.html [Accessed 1 May 2010]

Sloman, J (2006) Economics, (6th

edition), Pearson Education, Essex.

.

Whale, B.P (1967) International trade, Routledge, New York

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