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Transcript of Business Environment
Business Environment
105649/Nipuna Weerakoon
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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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