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Business Environment 105649/Nipuna Weerakoon

Business Management Assignment: Business Environment

Mr. John Opoku

I.D No: 105649 NIPUNA WEERAKOON

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Business Environment 105649/Nipuna Weerakoon

Table of contents
Executive summary Introduction
Chapter I. 1.1 1.2 1.3 1.4 Vision Mission Objectives Stakeholders 5 5 6 7

Chapter II.. 2.1 2.2 PESTEL SWOT Analysis of British Airways 8-10 10-12

Chapter III. 3.1 3.2 Economy System Problems of economy system 13-14 15

Chapter IV. 4.1 4.2 4.3 Perfect Competitive Monopoly Oligopoly 16 17 17

Chapter V .. 5.1 5.2 International Business UK Trade with the EU Conclusion Bibliography 18 18

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Business Environment 105649/Nipuna Weerakoon

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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Business Environment 105649/Nipuna Weerakoon

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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Business Environment 105649/Nipuna Weerakoon Chapter I 1.1 Vision Definition of vision: 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

Vision of British Airway

1.2 Mission Definition Statement: of mission A sentence describing a company's function, markets and competitive advantages; a short written statement of your business goals and philosophies.

Mission of British Airway

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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Business Environment 105649/Nipuna Weerakoon 1.3 Objectives Definition : 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)

British Airways Objectives:

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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Business Environment 105649/Nipuna Weerakoon 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: Companys Internal and external stake holders ImageSource:http://sites.google.com/a/psu.edu/group8/_/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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Business Environment 105649/Nipuna Weerakoon Chapter II

2.1 PESTEL An organizations 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 companys 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 mans 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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Business Environment 105649/Nipuna Weerakoon 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 companys 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 UKs 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 their airports e.g.) are

reaching

natural

limits.

Differentiation from there remains to be difficult. British Airways own success makes it difficult to recruit and train staff quickly enough.

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Business Environment 105649/Nipuna Weerakoon Opportunities Experts predict great potential for future growth in the next years The current recession is favorable as people and businesses are more costconscious. More full-service airlines may Companies cut on business travel in times of economic downturn and because of new time-consuming 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.

withdraw from the regional market to focus on more profitable long-haul routes leaving the market to the lowcost operators. The short-breaks market, an

security measures travel substitutes like videoconferencing are

important market for British airway grows more rapidly than the UK travel market as a whole1. Reduced aircraft prices.

introduced.

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Business Environment 105649/Nipuna Weerakoon 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

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 countrys economic development Market economies aim to reduce or eliminate entirely subsidies for a particular industry.

Planned Economy

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.

Mixed Economy

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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Business Environment 105649/Nipuna Weerakoon 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 its 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-byrecord-loss.html

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Business Environment 105649/Nipuna Weerakoon 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

Many consumers with the willingness and ability to buy.

Low-Entry/Exit Barriers

It is relatively easy to enter or exit as a business.

Perfect Information

Prices are assumed to be known to all consumers and producers.

Transactions are Costless

Buyers and sellers incur no costs in making an exchange.

Aim to Maximize Profits

Firms aim to sell where marginal costs meet marginal revenue.

Homogeneous Products

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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Business Environment 105649/Nipuna Weerakoon 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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Business Environment 105649/Nipuna Weerakoon 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 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. Harmonised standards EU-wide technical and safety standards ensure that if you meet UK standards you'll also meet the standards of other EU countries. Movement of people UK citizens have the right to travel, live and work in any EU country The euro 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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Business Environment 105649/Nipuna Weerakoon 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-ofeconomic-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/hrswot-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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