Unit 1 : Business Environment

Pearson BTEC Level 4/5 HNC/D Diploma Business – Unit 1 : Business Environment

Unit Description

This ABI College Business Environment Assignment is based on the research study of the British Airways’s business environment and approach for business development.

Task 1

1.1 Identify the purposes of different types of Organization in England.

An organization is a type of a structure which is made of mainly three elements that are relationships, responsibilities and authorities between different individuals with the help of which the organization achieves different objectives. The purpose of any organization is to make profit in a standard way. The organizations in England are also built in order to fulfil this purpose. England is the capital city of United Kingdom and has a vast number of organizations built in the city.There are many types of organizations which are there in England and their goals and objectives and even their interests vary from organization to organization. Some of the organizations in England are built to earn profits, some are created to support mankind and some of the organizations are known as non-profit organizations which have been created to do some good cause to the society. The sole trader is a kind of a business organization in England that is owned by one person. A sole trader is a kind of a business organization that is started by using personal funds, it is the responsibility of the sole trader to decide as to what type of good or service that he would like to produce and what will be his target market in Britain. In Britain around eighty per cent of all the business organizations are sole traders. The reason for this is mainly because the ease with which an individual is able to establish this type of business. Another type of business is Partnership in which two or more individuals establish a business which they own. Such partners have unlimited personal liability. The partners in such a firm have a limited liability to their investment in the partnership. Partnership firms are limited to only 20 or less partners under the law. Partnership companies have written contracts between the partners which state the type of partnership it is, how much capital each partner has contributed, and thus how the profits and losses will be shared. There are a number of partnership firms in England. Limited companies are companies in England which are registered at Companies House- www.companieshouse.gov.uk. Such companies have a legal entity with its own legal rights and obligations, separate and distinct from those of its members. In this type of organization all the property which is registered on company, belongs solely to the company and is thus not treated as belonging to the company’s shareholders and directors. The benefit of a limited company is that it offers limited liability to its members. Another feature of such a company is that as per the legal entity of such a company the members and directors are not personally liable to the debts of the company unless they have acted wrongly in some way. There are two different types of limited companies; they are public limited companies (PLCs) and private limited companies (Limited, LTD).

ABI-college-business-environment-assignment

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British Airways is the most reliable and well known airlines in UK. It is an International Airline that provides its services to almost 570 destinations and spanned across 133 territories. It is headquartered at the Heathrow and Gatwick airports. In the year of 1972 the United Kingdom government established a British Airways Board in order to manage the two nationalized airline corporations, namely the British Overseas Airways Corporation and the British European Airways and two more but smaller regional airlines namely the Cambrian Airways from Cardiff and the Northeast Airlines from Newcastle. All the four companies were then merged to form the British Airways on the 31st March 1974 (Grugulis & Wilkinson, 2002).

1.2 Explain the responsibilities of the organization and the strategies employed to meet them.

BA is an aviation company with its sole purpose to give high class comfort to its passengers. Its objectives are to be punctual with their service, to reduce the number of misdirect or loss of baggage of the customers, and thus to be the best in their business (Balmer, Stuart & Greyser, 2009). The responsibilities of British Airways in terms of social, economic, environmental and ethics are as follows.

Social-British Airway’s is aiming to raise €1.5 million for an NGO ‘Change for Good’ so as to help the needy children around the world.

Ethical- It is a responsibility which includes improving and protecting the standard of living of the citizens of the whole world. British Airways provides its employees various social security benefits like the pension, maternity allowances, etc. and some other benefits like the social fund, working tax benefits, etc.

Business- The main responsibility of the company is to produce and market those products and services that will assure a long term economic benefit to the corporation. They need to create and focus on long term strategies such as that increase the share price of the company, its overall revenue, etc. rather than just focus on the short term business strategy. It can only be possible because of good business environment.

1.3 Describe the extent to which the organization will meet the objectives of different stakeholders.

For the organizations in England their stakeholders matter a lot to them as they are the ones without them they would not have been in their respective industry. Thus for British Airways stakeholders matter a lot. First stakeholders are the customers, the passengers’ satisfaction and customer service matters the most to the organizations and their main strategy has always been to fulfil the satisfaction and comfort of the passengers so that they get their value for money (Park, Park & Zhang, 2003). Second is the shareholders, they are a group of people who are really important to the company as it with their managing financial support that the company is able to work. Without their investments the organizations would not have been able to form. Third is the staff, they are the employees of the company and thus they are the ones who turn the decisions of the company into a reality. Fourth is the Government, when the organization does well in the market they are able to pay the right amount of tax to the government by which the government is able to provide good service to its country. Last stakeholders are the creditors and the debtors who are the financers of the company. It is very important for the organizations to take care of these stakeholders as their decisions can be beneficial as well be a big problem for the company. Customers are a very important stakeholder for British Airways. Even if a customer who is working as a part time, they are also stakeholders in the British airways. The customers who are looking to buy products or services of British Airways, they are looking for a wide range of products and services of the company. They also want to buy goods and services which are of great quality products and services at a competitive price, it can only be done because of good quality management. Customers are a really important aspect of any organization as their purchases of the various goods and services provide money for the British Airways in order to be a successful organization in the market. A customer and organization must having aspects of contract and negligence for better service and business.

Task 2

2.1Explain generally how economic systems attempt to allocate resources effectively.

How is an economic system defined, it is an organized manner in which a state or a country managing resource of the country and allocates the goods and services amongst the national community. An economic system can thus be defined as a plan in which the country distributes its services and goods in the same manner in which the economic plan is made.
An economic system is an organized manner in which the government distributes the resources of the state in the national community. The organizations have been affected by the nation’s economic condition. When people are able to afford a healthy spending and are thus able to buy the expensive products and services of the organizations, the organizations are able to maintain a healthy profit and are thus able to maintain a stable economic and business environment also (Hoeffler & Keller, 2002). On the other hand when the nation’s economic condition is not good the company is not able to fill in their carriers. The organizations find it difficult to sell their products and services at a high price and are not even able to sell all of them as the purchasing power of the consumers drops due to fall in the economy.

2.2 Evaluate the impact of competition policy and other regulatory mechanisms on the activities you expect of your production company in England.

Competition policy is a policy that is created so as to prevent any type of conspiracy among firms and thus to prevent any one of them from holding excessive power in the market. The effect of competition policy on the organizations in England has been such that the organizations end up paying a hefty fine because of their conspiracy against their competitors in order to move ahead in the market (Doganis, 2002). As there has been an emergence of new competition in the market, the new organizationsin the industry has led to an increase in the creation of more jobs. Due to competition ticket prices got reduced which expanded the available market for various other airline carriers. An extremely competitive market led to a growth all over the industry of more than 200%. Competition created connecting flights, minimized opportunity cost, has thus helped in reaching more customers and has helped the customers by offering them competitive pricing. The impact of other regulatory changes on the various organizations has been that the company has been in losses because of the fluctuations in the economy all over the world.
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Task 3

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

The market structures determine the price and output of the British Airways because being in a perfect market situation the company has no choice but to charge what the market price is otherwise the customers will go to some other aviation company and take their service.

The demand for flights on a particular route where alternatives exists, demand is elastic in nature. The demand also depends on the type of customer, the leisure travelers for whom the demand is elastic and for business travellers for whom the demand is inelastic because they need to travel for business management several times to various destinations no matter what the situation may be. On the other hand in the short run the supply of flights is relatively inelastic. This is because when once the flights have been scheduled and the tickets have been sold, the British Airways has little option to cancel the flights. But in the long-run the company can cancel the flights and thus adjust their routes in order to increase their profits (Balmer, Stuart & Greyser, 2009).

3.2 Illustrate the way in which market forces in England and how they may shape the responses of the planned production company in England.

Price elasticity of demand gives the measure of how there is a change in demand with a slight change in price. Price elasticity of supply is the opposite of demand; it measures the change in supply with a slight change in price. Equilibrium point is an optimum position which results to the same amount of demand and supply of a product or service of a market price.
The factors influencing price elasticity of demand for BA are.

Income- The income of consumers is the major factor that affects the demand for the BA. The lower income consumers are the ones who travel less through air and are thus more likely to reduce their demand for air travel than those who are in high income range. Low income consumers may also change their demand even more in time of economic recession. The high income consumers might not change their demand irrespective of the prices.
Sales- The demand for air travel is influenced by the prices of the tickets. If BA increases the prices of the tickets then the sale will go down and vice a versa. If the company takes advantage of the holiday season and reduces its prices then the customers will be attracted to the bargain and will chose it over to other companies.
3.3 Judge how the business and cultural environments in England shape the behaviour of your planned production company.

Some of the governments provide subsidies to the aviation industry; this tends to provide an unfair advantage to such companies. British Airways has adopted new strategies of working; it has made strategies to reduce Co2 emissions by at least 15%. As the rise in costs of fuel is a matter of concern for BA it has even decided to reduce the cost of fuel by 50% as they are creating a new kind of bio diesel fuel which is known to be environment friendly. The expansion of refineries by the oil companies and the government has also lead to a rise in fuel prices. Rise in the air passenger tax by the government in UK has thus led to an increase in price tickets (Themistocleous & Irani, 2001).

Task 4

4.1 Discuss the significance of international trade to UK business organizations.

International trade affects air transport like any other transport services in the world in two distinct ways. Firstly, the airline transportation is traded as a service in its own right. Secondly, it is considered to be a key service for other kinds of trade such as the trade of both goods and services (Dharwadkar, George& Brandes,2000).

Output and performance of the industry- The performance of the British Airways is dependent on the same factors which determine the performance of the economy. These factors are inclusive of elements such as growth in gross domestic product or more commonly known as the GDP. The growth in international trade which is inclusive of the trade of the goods and services, and the growth in various other industries that make use of air travel as a means of transportation of cargo and people. The kind of sustained economics and company growth that is being experienced by all the economies all over the world in the past few decades and the strong performance displayed by the international trade has led to a strong positive trend for international customers thus benefitting British Airways .
International trade in air transport services- British Airways tends to have a direct and as well as an indirect impact on international trade. This is because as it covers all kinds of air transportation services that are carried out by the residents of one country for those living in another country. This involves the carrying of passengers to and fro, the transportation of the goods, the rentals of all kinds of carriers along with the crew members, etc. Passenger services cover all kinds of services that are exchanged between the economies of two foreign countries.
4.2 Analyse the impact of current global factors on UK business organizations.

New rules and regulations that have been introduced by the government have had a great impact on the British Airways. The global economy has thus affected the British airways in a negative way. Recession has had an adverse effect on the demand for air tickets which has thus decreased the sales for British Airways. Also the investment during the time of recession has led BA to a loss of £531 million. The shareholders of the company were also affected adversely by the change in the global economy as the shareholders were not getting enough returns as were expected by them, the Financial Institutions were also negatively affected because the British Airways was not being able to return their money which was lent to the company once. If the British Airways had been a part of the Planned Economy then the scenario would have been absolutely different. British Airways would not have been adversely affected by the increase in the prices of the fuel as the company would have got subsidies from the government which would have helped them to maintain the same level of oil prices. The company would also not have been affected by strikes as it would not have taken place as everything was under the control of the government (Evans, 2001). Certain policies implemented by the government on the industry like the deregulation has thus created a lower barrier to entry for new entrants in the European airline industry. Earlier when deregulation was implemented the government had a huge control over the aviation industry which thus forced such rules by which the new airlines were not able to enter the existing market. British Airways was thus able to offer flights in or out of any airport that was of their choice, routes could not be poached by any existing company and the prices for certain routes where fixed.

4.3 Evaluate the impact of policies of the European Union on UK business organizations, with special reference to your planned production company in England.

European tourism is said to represent the third largest economic sector in the European Union. The tourism sector is said to increase its overall influence and its contribution to the conditions of employment rate in the European Union and as well as to the economic development. EU has helped in investigating and encouraging new types of tourism thus benefitting the British Airways also. EU continues to focus on ensuring that the rights of the customers are always protected. It also continues to work in the areas of mergers in order to encourage healthy competition amongst the various airline companies. EU has made efforts so as to minimize the impact of the environment and thus making it possible for the BA to meet international commitments. It has impacted BA as it has raised awareness among the tourists and the stakeholders of the industry about the environmental performance and thus has been successful in encouraging the regional development keeping in mind the environmental principles. EU has encouraged the aviation industry to become responsible about the use of various natural resources that they use in their products and services. BA has thus been able to reduce its waste to a certain extent because of this regulation by EU (Kotler & Lee, 2008). It has encouraged the companies to monitor the amount of their usage and thus protect the heritage and help in preserve the natural resources. Advantage of EU is that as all the airlines will be treated as equals, the competition between them will not be affected. It is thus beneficial for British Airways as it helps the company in improving itself in many areas.

Conclusion

The British Airways has faced some problems like recession, increase in fuel prices, increase in labour costs, rise in taxes, etc. It discusses about the financial crisis faced by the company. Increase in fuel prices thus led to an increase in tickets which has thus reduced the number of passengers. Thus BA has adopted some strategies to come over these problems; they have decided to open new low cost subsidiaries in order to gain its position in the market. It is also concentrating on first class passengers by offering them new comfort. This report analyses the impact of the global factors, policies implemented by EU, the government’s regulations, the impact of various economic policies, its responsibility towards its stakeholders, etc. All the above factors have thus led them to understand their weak areas and their strong points by which they can save costs, and thus be able to stay in the market remain as the favourites of the customers (Grugulis & Wilkinson, 2002).

References

Balmer, J. M., & Greyser, S. A. (Eds.). (2003). Revealing the corporation: perspectives on identity, image, reputation, corporate branding, and corporate-level marketing: an anthology. Psychology Press.

Balmer, J. M., Stuart, H., & Greyser, S. A. (2009). Aligning identity and strategy: Corporate branding at British Airways in the late 20th century. California Management Review, 51(3), pp.6-23.

Dharwadkar, B., George, G., & Brandes, P. (2000). Privatization in emerging economies: An agency theory perspective. Academy of management review, 25(3), 650-669.

Doganis, R. (2002). Flying off course: The economics of international airlines. Psychology Press.

Evans, N. (2001). Collaborative strategy: an analysis of the changing world of international airline alliances. Tourism management, 22(3), pp.229-243.

Grugulis, I., & Wilkinson, A. (2002). Managing culture at British Airways: hype, hope and reality. Long Range Planning, 35(2), pp.179-194.

Hoeffler, S., & Keller, K. L. (2002). Building brand equity through corporate societal marketing. Journal of Public Policy & Marketing, 21(1), pp.78-89.

Kotler, P., & Lee, N. (2008). Corporate social responsibility: Doing the most good for your company and your cause. John Wiley & Sons.

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