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British Airways is one of the oldest and the most reputed airlines functioning in the world. It was started on 1st September in the year 1974. It is the official airline of the United Kingdom. It is owned by the government of the United Kingdom but it is run by private firms. It is also known as BA. It was formed by the merger of four airlines they are The British Overseas Airlines Corporation (BOAC), The British European airways (BEA), Cambrian Airways and finally the Northeast Airlines this took place on 31st march 1974. Thus BA was formed. It was one of the few prestigious airline to fly the Concorde the supersonic passenger plane. It has a large fleet of 239 aircrafts. It flies to 300 destinations. It employees 42,755 employ . It is a public limited company also listed on the London stock exchange. The main headquarters of BA are Heathrow airport and Gatwick airport both are situated in London. It is also a star alliance member. The total revenue earned by BA in the year 2010 was £7,994 million.
Mission And Vision:-
Fig1.1 Mission, Vision, goals, objective cycle
It is defined as "A mission describes the organization basic function in society , in terms of the product and services for its customer"
The above definition explains how important a mission is for a organization as it helps in building its own image in front of the customer that it wishes to give services to. It maybe a just a sentence but it creates a image in the mind of the reader what the organization is made up of. It also helps to give the brand a competitive edge as the mission statement will help in showing the uniqueness of the brand. The mission statement of British Airways is as follows "One Destination seeks to ensure our customers fly confident that, together, we are acting responsibly to take care of the world we live in". BA mission statement on reading creates a mindset that they always be safe on ground or in air and they want the customer to feel safe and confident when they fly British airways. They have also maintained their mission statement as they have least accident history and they always have new fleets and always updated with latest technology.
Values:- Organizational values define the acceptable standards which govern the behaviour of individuals within the organization. Without such values, individuals will pursue behaviours that are in line with their own individual value systems, which may lead to behaviours that the organization doesn't wish to encourage. Thus values are very important for the organisation for achieving the vision that it aims for(Value of Organizational value)(http://www.teal.org.uk/mat/page6.htm)(accsed on 22ndApril 2011) The values of BA are as follows:-
"Objectives are normally quantified statements of what the organisation actually intends to achieve over a period of time." According to Mintzberg (1997), Business Enviourment; Viva books. He says that objective help the organisation to conduct activities that will help in acquiring the mission of the organisation. He also says while forming a the objective the organisation must use the SMART technique.
The objective should contain these points.
Fig 1.2 SMART Objective
The objective of BA is as follows:-
Fig 1.3 Objective of BA
1.b) Evaluate the extent to which an organization achieves the objectives of three stakeholders.
"The individual or groups who have interest in how a organisation performs because they have some stake in it and thus it affects them in someway." In the modern world they are mainly of two types which include primary and secondary stakeholders (Stokes D., (2002) Small Business Management (4th edition) Thomson Publications: UK.) The primary and secondary stakeholder of BA have a effect on the airline as they are somehow related to the organization. Thus in the table below the author has shown how both of these can affect the airline
.A Steady flow of revenue
.Should be well informed about the risk and plans
.Continuation of Business
-Exercising ones right to vote
-Checking the annual book as well as the statements.
-To defend against wrong issues
.Pay and Status
-Growth of the organisation
-Participating to improve the organisation with recommendations
.Pay and Condition
-The union may go on strike
.Receiving goods and services of a reasonable quality
.Receive optimum level of services
.Great value for money paid
-Choosing other airline over BA
-Bad impression about the airline
-Not using it services
.Being paid promptly for the goods and services delivered
.Receiving regular repayment of the capital provided
-Not delivery the Services on time.
Government and General Public
.The organisation is meeting the relevant legal requirements
.Social welfare of public is protected
.Helping the nation and public to progress
-Licenses, law and permits
-Strict laws against them
-Boycott or appreciate the company.
Fig 1.4 Shareholders their interest and influence
All the organisation in the world to run smoothly and efficiently need to satisfy its stakeholders as they have a stake in the organisation which can affect the organisation in both good and bad ways as shown in the table above. Thus British airways is no exception even they have tried to meet the satisfaction of the stakeholders so as to progress more and achieve their targets. Below are given the instances where British airways have satisfied its stakeholders
Employees they are the most important part of the organisation for the smooth and progressive functioning of the organisation. As BA is a large organisation hence it employs a large no of employees whos need and wants he need to caters. Thus BA has done many changes like improving the workplace where they function reasonable working hours were allotted to them then they have also introduced various crew programme which help them improve the safety of themselves as well as the customer. BA has also started recruiting people from all over the globe so as to maintain a equality among the employees. Their wages are also improved compared to what they were paid earlier some changes were done by BA for some the union had fought to get it done
Society are a major concern for organisation like BA because if society is not benefited from them they wont allow smooth functioning of the airline for the same reason BA has contributed a lot towards society by giving them employment in the firm also setting up various NGOs to help the underprivileged society also contributing some amount towards charity. They have even started cutting down their co2 gases by using much more fuel efficient engines as well as machines used at the airport thus contributing o save the enviourment.
Customers are the important part for the organisation to progress because e if customers aren't there then who will the airline serve and earn money from. As BA is in the service industry they need to take good care of their customers so as to improve their image as well as their market standings. For the same they have improved their economy class cabin by improving the quality of service provided also they have introduced the programme known as CUSTOMER KING which is for the first and business class travellers. They have also increased their security standard so to increase the safety of their passengers.
Q.1c) Explain the responsibilities of an organisation and strategies employed to meet them?
Social Responsibility of an organisation may be defined as the obligations that the organisation has towards the people and the enviourment in which the business functions. In other words the corporate social responsibility is a process where the organisation can improve its functioning in outdoor as well as indoor processes so as to increase the vision, improvement and add competitive advantage to the company.
BA has to maintain the business ethical criterion responsibly they also known the importance of their stakeholders and hence they follow the regulation so as to protect the social, environmental, financial, and economical of the stakeholders. In order to complete these aspects BA follows all the legislation laws and rules laid down for safety, employment and other such stakeholder related aspects. By following these laws and jurisdiction BA shows loyalty towards the corporate social responsibility as a business should show.
Below are given few social responsibility that British airways follows and tries to do the needful for it (Corporate responsibilities (2007) one destination [online] (updated on 2010) Available at: http://www.britishairways.com/travel/csr-corporate-responsibility/public/en_gb?link=main_nav [Accessed 15th may 2011].
Environmental Protection Act:- BA has started to contribute a lot towards helping in saving the enviourment the reason being that there have been more strict rules by the government in recent years so to implement those and also create a healthy enviourment they have taken various steps in help protecting the enviourment The steps taken are as follows:-
Fig 1.5 Enviourment Protection Act
Safety and Security Act:- British airways are known for their stringent security measure that they follow. The safety of the passenger and crew are their highest priority. BA also follows the most advanced and sophisticated machinery in their services so as to assure the passenger that they are in safe hands. They also have a outstanding record in safety and security flied.
Fig 1.5 Safety and Security Measures
Employees Act:- The staff of a company are those people who work for a particular organisation or a industry, but apart from that they are a part of a large society where the organisation functions. The first labour law in Britain was made in 1974 for the people or employees of and organisation. The law consisted of various aspect that would help the employee to feel secured and satisfied in the workplace. Some of the laws were Self Organisation, Collective Bargains, To work what is suitable to employee, and job security. Thus BA follows these rules laid down by the government and also supports it. So as to keep the employees happy and smooth running of the organisation.
2.)Using PESTLE and any management tool you are familiar with evaluate the impact of macroeconomic policy measures and the influence of the global economy on British Airways and its stakeholders?
Implications On BA
Heavy Regulation (AEA,2009)
Increased Security due to past terrorist attacks(DFT,2009)
.Compliance is necessary if BA wants to continue operations
.Enough security measure should be undertaken to maintain the competitive advantage and beliefs in consumers
-Economic Crisis the growth projected at only 2%in 2009(IMF,2008)
-Pounds weakens against Euro
- Fluctuations of oil prices
.Possible decline in the business travel as companies are using alternate methods like telephone conferencing.
.BA will face poor exchange rate as well as due to the fluctuation it will affect their cost base as the rate they might get for the currency might get low
The population in UK is ageing given by national statistics.
Due to recession there is increased unemployment
.This a great opportunity for BA as older generations have more money and time to spend.
New technologies regarding the fleet and improvement and addition to the fleet
The number of people using e-check in has increased a lot
.As there are new aircrafts coming in the market BA should keep its fleet updated with these machines
.BA should keep itself updated so as to remain in the competition
Expansion of its main terminal is difficult because it comes under London's green belt area
Consumer are aware of what are the effects of air travel as they are increasingly becoming more green.
BA has to convert limited space into full utilisation of the capacity that it has
BA has to adopt to all its environmental strategies to keep the consumer with them
Collusion and Fixed Pricing
Open skies Agreement(AEA,2009)
Restriction on having mergers will affect their alliance with American airlines
.BA has a great opportunity of transferring aircrafts between him and America
Fig 2 Pestle on BA (www.scibd.com)
The other macroeconomic policy that can effect BA are as follows:-
-Monetary Policy in the UK is concerned with the decision of rate of interest and the supply of money in the economy. The one who controls the interest rate in the UK are the Bank of England Monetary Policy committee. The current rate decided by the bank of England is around 2.0% . If they decide to increase the rate then it wont be feasible for BA to borrow loans from them as they will have to pay very high interest rate thus they wont benefit from it. But if they lower the rates then BA can borrow from the bank and achieve their objective much quickly.
-Exchange Rate Policy is handled by the government. The exchange rate is controlled by how much amount of gold and foreign exchange currency do they have in reserve in the central bank. The rate is even altered when the interest rates go higher or lower. If the exchange rate is high then BA will benefit as the goods it will buy will be cheaper as the currency they using will be higher and thus they can make profits. But if it goes down then BA will face losses as the things that were cheap will became expensive and they will have to increase the air fares which will see a decline in their sales.
These are some policy that the author think can BA .
- All the organisations in the world are affected by the social economic and enviourment factors globally. As BA is a large organisation operating in more than 300 countries hence it has to fulfil and satisfy all its stakeholder. Britain's economy policy affects a lot of organisation below is given their policies that influence them
Overall Economic Policy
-Cost of Finance
-Protection vs Free trade grants,
Regulation eg:- Investor protection, company law, entry barrier, capacity
-Work Place regulation,
EU and WTO obligations
-Export promotion to allies
Environmental and infrastructure Policy
Fig 2.2 Economic Policies of UK
Social Welfare policy which BA follows are it has introduced work place regulation which enables its employees to work freely in the workplace as they have been given high level of training which helps them to do their work with much ease and perfection as well. The safety standard used by BA is also very high and the crew are also given sufficient amount of rest and training to function effectively. BA also has normal working standard and all the aspect that are included in the employment law. The employees are also given a lot benefits which include perks, pension, maternity allowance, social fund as well as other benefits which help make their private life better as well. These are some of the policy that BA follows towards its employees
3.) Explain whether the problems facing the British airways can be found in a planned economic system and discuss whether the economic system in which the BA operates allocates resources better.
Different nations of the world use different approaches or types of economic system. The core of the economic problem is infinite desires versus limited assets. The study of economics is basically how nations allocate their resources in the best way so as to maximize the productility and services to fulfil the satisfaction of wants. In modern economies there are various ways of dealing with scarcity. The various kinds of economy are as follows:-
Fig3.1The different types of economic systems (BPP, Learning media, (2007) Business essentials: Business environment (3rd edition) viva books Pvt ltd: London)
The economy followed by Britain is a mixed economy because there is a balance between the market forces and the state interventions. The advantages of mixed economies are any one can set up a business and choose what to produce and even set their own cost. Even though they pay taxes they reap benefits through social programmes. The disadvantages of mixed economy are many business find it difficult to find a market for their products also they can't control the taxes they pay, merchants always complain that they are very high.(http://www.blurtit.com/q917361.html) accessed on 14th may 2011)
In mixed economy the decisions of resources provision would somewhat depend upon the forces of supply and demand curve and it might also depends on the aims and the objectives of the firm. BA after privatization faced a lot of changes as after the merger BA had changed some of its rule and accepted a few of the other airlines rule. It even started to fly to more international destination once the demand for that increased. Because of this reason their whole allocation shifted from one firm to anther and from domestic to international.
Because BA is in a mixed economy there is always a chance of growth as the private firms will help them, Also BA has to complete all the requirements that are jotted down by the stakeholders or even the government. But as of now BA is fulfilling all the criteria that are laid down by the government as well as also helping the airline to grow as much as it can. Thus Mixed economy helps BA to allocate its resources better than any other economy would have.
4.) State the market in which the British Airways operate and discuss whether it is easy to merge in that type of market (regulatory environment implication etc)?
- The level and amount of competition faced by the firms varies a great deal. There are many types of market and no market is similar to each other in some single firms dominate in other there might be a lot of competition for the same product or service. The market structures that the firms operate are different from each other.
Figure 4.1 The Different market structures.
Perfect competition:- When there are many people in the market, and other condition are such , that no one can influence the price, all other things being equal.
This occurs when there are lots of sellers and lots of buyers and nobody can have any effect on the total quantity for sale or the total amount that the buyers want. There is a freedom in the entry and exit of the industry.
Monopoly:- When there is only one supplier for a product or service in a market we call that as monopoly market. The business owns a key source for which substitute is very hard to find. The pricing of the product is decided by the firm itself.
Duopoly:- It is a market were two sellers compete with each other for a homogenous good . The output of the firm is believed to be fixed. The example can be If BA lowers its transatlantic fares then how will virgin react to it? It is a case between competition ad monopoly.
Oligopoly:- When there are a few large suppliers, whose business decisions affect each other they are said to be in oligopoly market. The example that author has chosen is from the airline industry as he can link it to BA. Suppose if BA was to lower their airfare for a particular sector on which even virgin flies then to be in the competitive race even virgin will have to lower its prices. Thus in oligopoly market if one makes a decision then it has to effect the other. New firms cant enter this market as it requires huge amount of investment. This lowering of prices of both the companies is known as price wars.
The competition commission is an self-governing public body established by competition Act 1998. It replaced the monopolies and Mergers Commission with a superior power to take authoritarian actions or measures in the closure of the company. "BPP, Learning media, (2007) Business essentials: Business environment (3rd edition) viva books Pvt ltd: London)".
This body mainly makes sure that no organisation should form merger or cartels with each other to convert the market from oligopoly to monopoly market.
5.)Explain whether the British airways have benefited from international business/trade and the European Union. What will be the business implication to the BA, if the UK, joins the European Monetary Union (EMU).
International trade is the exchange of goods and services between countries. An import is the UK purchase of a good or service made overseas. An export is the sale of a UK made good or service overseas.
BA is a international airline which operates in more than 300 destination. It operates in continents Asia, Europe, America etc. As BA being a British company it has chosen Europe as its global market. One of the reason being that it is the member of the European union. BA has benefited from international trade big time for many of the events like given below:-
-There is free trade of aircraft between BA and American airlines hence they can upgrade their fleet without paying the duties
-The land cost in Britain is very high compared to rest of Europe hence they use to set up big factories which they need at places where the land is cheap.
-The labour in many parts of Europe is also very cheap compared to Britain.
-The currency they use is accepted all over Europe and hence they don't even lose any money on exchange rate.
-The raw material which is needed by BA is obtained at much cheaper rate from European countries
These are some of the benefits that BA has by doing intenational trade with the European union members.