This is a Business Environment Organization Assignment in which we discuss business and cultural environment, business structure and market pricing.
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 persists for its business in UK and at international level also. This report would discuss all this in details.
Market Structure, Pricing and Output Decisions
There are various market structures that are found in different kinds of market which depends on the number of firms and the kind of products in the market along with the number of consumers for that particular product or service. Depending upon the market structure, the pricing of products and services is defined and the demands from the market for the products or services define the output decisions for the organizations operating in the market. Main kinds of market structures that can be easily find are as follows:
- Perfect competitive market
- Monopolistic competition
Perfect Competitive Market
Perfect competitive market is such a market where there is a perfect competition an there exist no such power which can affect the pricing decisions for the goods in the market. Practically such a market does not exist as it has no barriers for entry and exit for the firms. In such a market demand for the product or service is elastic in nature and the supply for the goods or services is unlimited. So, in such a market demand and supply have little or no influence on the pricing and output decisions for goods and services. There is no impact of such a market structure on the business of BA as such a market does not exist in UK.
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Monopoly exists in a market when there is only one supplier for the products or services demanded in a particular market. All decisions related to the pricing and output of the products or services is dependent on the firm’s management. Such a market bring lots of profit to the only existing firm while on the other side consumers don’t get benefits as they are highly dependent on the decisions of the firm.
This form of market structure is formed by the presence of large number of small firms. Such a structure results in the reduced competition and most of the times consumers have to pay higher costs. In such a market bad practices by firms like cartel are created to get more and more benefits (Eckel, 1997).
Impact of market forces shaping Organization
Actions of organization get impacted by lots of market forces prevalent in the market. Such market forces impacts the various decisions taken the firms for their actions and impact the output of the firm which impacts the pricing decision as well. Main market forces were defined by porter. There five market forces are as follows:
- Intensity of competitive rivalry: The strength or the weaknesses of the competitors of the firm are taken care by the organization in order to define their actions. In a competitive market it becomes important to keep track of the activities of the rivals.
- Bargaining power of suppliers: Suppliers to the firm like Boeing, Airbus possess some bargaining power towards BA. The kind of supply by these suppliers defines the dependency of the firm on these suppliers. Bargaining power of supplier is strong in the case of BA.
- Bargaining power of consumers: Bargaining power of consumers of BA is not high due to the presence in the mixed economy. However the competition in the market keeps customers in benefits most of the time.
- Threat of new entrants: The threat of new entrants for BA is very low due to the high entry barriers and high investment.
- Threat of substitute products and services: There is a very less threst to BA in this aspect as well (Pose, 1998).
Business and cultural environment shaping organization behaviour
Business and cultural environment in which a business operates have a direct impact on the organizational behaviour of the organization. The businesses are being conducted with the people from diverse background who have differences in their lifestyle, culture, beliefs, values, language, ethnicity and religion etc. These factors are the cultural factors. Business environment like the government policies, legal laws, technological innovations, social culture of the employees, political scenario of the economies etc have an impact on the way businesses are done by the organizations. There are various tools like PESTLE (political, economic, social, technological, legal and environmental) analysis which analyzes the macro environment of the businesses and SWOT (Strength, Weakness, Opportunity and Threat) analysis which analyzes the internal environment of the organization. Below section would discuss the two aspects of business environment which influence the organization behaviour of BA:
Technological Analysis: Technology is playing lead role these days in the business of almost all kinds of organization. Various kinds of technologies are helpful for the business of BA. These technologies help it in effective and efficient working. Technologies impacting the oil consumption, service delivery to passengers etc play an effective role in the behaviour of organization.
Economical Analysis:Policies defined by the various economies where BA operates it business has direct impact in various financial decisions of the organizations which defines the organization behaviour in the last (Pagano, 2009).
Importance of international trade
International trade means the business by an organization in overseas market along with its own domestic market. Basically international trade expands the business of organization in other foreign countries where the organization finds better opportunities to work for. BA has the services of airlines as its main business. Its flights have various foreign counties as their destination also. It means it is involved in cross border trade for its business. Various opportunities and threats that arise from the international trade can be explained in following manner:
- BA gets an opportunity to increase its customer base due to the exposure to a larger suitable audience. This helps in the increased revenues for the organization.
- Expansion in foreign markets gives the organization an opportunity to know about better and advanced practices of business which help BA in creating a better service framework for the consumers and results in better brand image.
- It results in the less dependency on the business from domestic market.
- The threat arises from the local airlines active in the foreign market as they may have to see a tough competition from those local players.
- International trade needs global branding efforts by the organization in order to attract maximum market share, so the financial spending of organization increases along with the spending on marketing efforts (Warburton, 2010).
Effect of global factors
It is well known that BA is an international organization which has its business operating in various countries. There are various factors that play an important role in the business of BA while operating overseas. These factors have a direct impact on the business of BA in some manner. Some factors help in the better business for BA while some factors result in the obstacles in its business. Some of the important factors that play an important role in the business of BA are custom unions, emerging markets, World Trade Organization (WTO), Northern American Free Trade Agreement (NAFTA), enlargement of EU along with some social, economic, political, legal and ecological factors. Emerging markets help BA in getting more business for BA while customs union have positive and negative both kind of impact on the business of BA. World trade organization creates various rules and regulations for the international trade of BA which have a direct impact on the business of BA as it has to adhere to these rules and guidelines. NAFTA does not have any significant impact on the business of BA however NAFTA was an agreement for the cross border business between three main economies Mexico, Canada and US. Expansion of EU would help the organization in attracting more business from the larger market. It would also help the organization in better financial results due to the uniformity in the currency used for the business. Social, economic, technological, political and legal factors also impact the business of BA due to the interaction of business with the people from diverse background like different language, culture, belief, government rules, policies etc. Finally it can be concluded that various global factors have direct or indirect impact on the business of BA (Madsen, 1996).
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The impact of European policies
BA is headquartered in England, so all the policies that are defined by European Union have a direct and significant impact on the business of BA. Various policies like competition regulation policies, harmonization of technical safety standards, policies regarding custom unions, policies related to the use of Euro etc influence the business of BA. BA was affected by the competition regulation policy in 1999 due to its issue with its main competitor Virgin Atlantic and later on government had to revoke this regulation. The issues were revolved around the joint venture between British Airways and American Airlines related to some transport services in various transatlantic routes. The changed policies resolved the issue by giving guidelines for the operation by airline service providers on their respective routes only. Custom union policies impact the business of BA in a manner that custom is applicable on BA for its services in some countries. Free trade area is the area where BA can operate its business without the application of custom on the various goods. The policies related to the harmonization of technical safety standards have an impact on the business of BA in a manner that it has to redesign all its processes in order to ensure the safety of the passengers by implementing all the safety standards in its processes. Finally it can be easily stated that various European policies affect the business of BA in some manner (Canova, 2003).
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 international trade, European policies, global factors affecting the business of BA, cultural and business environment of UK, market structures and market forces etc are being discussed in greater details in order to make readers understand about these concepts. It can be concluded that the study of all these concepts is must in order to understand and assess the business environment existing for the operation of any business in a country.