Contemporary Issues In Business Commerce Essay Example
Contemporary Issues In Business Commerce Essay Example

Contemporary Issues In Business Commerce Essay Example

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  • Pages: 12 (3047 words)
  • Published: July 10, 2017
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Introduction

This report evaluates British Airways' response to a contemporary business issue. It examines the identified issues and critically analyzes how British Airways addresses them through academic research.

History of British Airways

The British Airways group is composed of British Airways plc and several subsidiary companies, including British Airways Holidays Limited. With services offered to 149 destinations in 72 countries, British Airways is a leading global airline. In the fiscal year 2004/05, the company transported over 35 million passengers and approximately 900,000 metric tons of cargo.

The air hose web of its origin is in the United Kingdom, where the majority (85%) of its 47,500 workforce is located. The group's mission is to provide a meaningful service for individuals who prioritize their flying experience. The company acknowledges the significance of collaborating with its stakeholders to accomplish this goal. This coll

...

aboration has shaped their approach to corporate social responsibility. The company also recognizes that while airlines yield significant social and economic advantages, they also have substantial effects on the environment (such as noise and air quality) and the areas surrounding airports.

British Airways ( 2010 )

Findings


The general environment

This refers to the external environment. These factors impact the management over time but are not usually involved in day-to-day operations. The general environment includes international, technological, sociocultural, economic and legal-political dimensions.

The international dimension

This aspect of the external environment includes events occurring in foreign countries as well as opportunities for U.S companies in other countries.

The global environment introduces new competitors, customers, and suppliers and influences social, technological, and economic

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trends as well. Nowadays, all companies, including BA, must compete globally. The American car industry has been permanently altered by the introduction of high quality, low priced cars from Japan and Korea. US based companies in the cell phone and handheld market confront fierce competition from Samsung in Korea, Nokia in Finland, and High Tech Computer Corporation (HTC) in Taiwan. For numerous US companies like Starbucks and Wal-mart, domestic markets have reached their maximum potential for growth, leaving international markets as the sole opportunity for expansion.

Online businesses are placing increasing emphasis on international e-commerce, as the global dominance of the US in this sector is declining due to the rise of foreign companies. This competition is especially significant for BA because they have to compete with foreign airlines that are offering similar services. Kotter (1979) states that the most notable recent change in the global landscape is the transfer of economic power to China and India.

India and China are two countries that have the potential to bring about a significant change in the global economy. Both nations boast large populations, possess intellectual capabilities, and have abundant energy resources. Experts predict that within the next thirty years, India will surpass Germany to become the world's third largest economy. Similarly, it is expected that China will outpace the United States and emerge as the leading global economy by mid-century.
China has already experienced an impressive growth in per capita income in just one generation. In order to support sustainable long-term economic expansion, Chinese leaders are actively investing in infrastructure development. This commitment is evident from their significant consumption of natural resources such as approximately 47% of global

cement, 30% of coal, and 26% of crude steel in 2005.

Although it is impossible to predict the future, companies in the US and Western countries must pay attention to unfolding developments in India and China. This presents an opportunity for BA to enter and expand in this market. According to Daft (2009), the global environment is complex and constantly changing, distinguishing it from the domestic environment. Therefore, managers who typically only consider their home country's environment must adopt new strategies to remain competitive.

When operating globally, managers must consider legal, political, sociocultural, and economic factors not only within their own countries but also across various other nations. For instance, the growing middle class in China and India significantly impacts standards for high-tech products like cell phones, multimedia appliances, and wireless network services.

The technological dimension refers to the progress made in science and technology that has transformed different industries and society as a whole. These advancements have had a substantial impact on organizations in every sector. In the past, desktop computers were not extensively utilized by many organizations; however, today, computer networks, internet access, handheld devices, videoconferencing capabilities, cell phones, fax machines, and laptops are essential tools for conducting business operations. The most recent generation of handheld devices permits users to access their corporate email, daily schedules, business contacts, and even customer orders from any location with wireless network connectivity.

Cell phones are crucial for improving efficiency in BA by seamlessly switching between cellular networks and corporate wireless local area network connections (Daft, 2009).

The economic dimension:

This dimension relates to the economic well-being of the country or region where the organization operates. It encompasses factors such as consumer purchasing

power, unemployment rate, and interest rates that contribute to the organization's economic environment. Managers now face greater complexity and uncertainty in this dimension due to the increasing prevalence of global operations.

The global impact of interconnected economic systems has increased, affecting various events. For instance, the economic downturn in the early 2000s led to a decrease in consumer confidence within the United States, impacting American companies and the stock market. Similarly, economic problems in Asia and Europe had similar effects on them. Presently, mergers and acquisitions occur regularly.

Citibank and Travelers merged to form Citigroup, IBM acquired Pricewaterhouse Coopers Consulting, and Cingular purchased AT radio. Additionally, BA is considering merging with a foreign airline to help navigate the economic downturn (Cope, 1998).

The legal-political dimension:

This dimension includes government regulations at the local, state, and federal levels, as well as political activists aiming to influence company behavior. The political system in the US promotes capitalism and the government aims not to excessively regulate business. However, there are government laws that establish rules for the operation of businesses. The federal government influences organizations through various administrations and agencies.

The task environment of a corporation involves analyzing various elements to understand the external factors that impact its operations. This includes dealing with government and legal issues in other countries, such as the European Union's environmental and consumer protection regulations that impose significant costs on American companies like Hewlett Packard, Ford motor company, and General Electric for recycling their products sold in the EU. Additionally, pressure groups within the legal political framework work to influence companies towards socially responsible behavior. The changing landscape due to global warming and expectations for government action also

affects BA. (Daft, 2009)

Directors must understand the competitive environment, also known as the industry environment or project environment. The profitability of the company and the level of competition in the industry are directly influenced by developments in the competitive environment.

Industry Analysis

Industry refers to a group of companies that produce a similar product or service. The company interacts with a more specific environment, which is the industry. There are four main components that exert influence on the industry:

  • Suppliers
  • Rivals and potential substitutes
  • Potential entrants
  • Buyers


Rivals, potential substitutes, and potential entrants

The number of companies operating within the industry and the number of companies wanting to enter the industry is regulated by barriers to entry, which determine continued participation in or departure from the industry.

Some of the restraints include the rate of industry growth, fixed costs, and differentiation. Potential rivals can offer the same or different products/services, and substitutes for existing products/services are also a potential threat. Substitute products/services can coexist with current offerings or make them obsolete.

Buyers and Suppliers

The competitive situation of businesses is influenced by transactions with buyers and suppliers. Buyers exert power by forcing down prices, negotiating for higher quality or more services, and playing competitors against each other. Suppliers can exert bargaining power by threatening to raise prices or reduce the quality of goods or services purchased.

In addition to viewing providers as other houses, it is important to recognize labor as a significant power in various industries. The organization addresses the following key points:

  1. Environmental Uncertainty: Effective management of environmental uncertainty is critical for organizations. This uncertainty arises from factors that influence the organization and how much these factors change. Organizations must be able to adapt quickly

to rapid environmental changes.

  • Adapting to the environment: In response to increased uncertainty regarding competition, customers, suppliers, or government regulations, managers can utilize different strategies for adaptation. These strategies include boundary-spanning roles, interorganizational partnerships, and mergers or joint ventures.
  • Boundary-spanning roles: Boundary spanning involves collecting and transmitting information within an organization. It serves two primary functions: monitoring information and presenting the company positively. The main sources of information are business intelligence and general environmental information.
  • Competitive Information refers to information about an organization's competitors. Interorganizational partnerships have become increasingly popular as a strategy for adapting to the environment. The traditional approach for North American companies has been to work independently and compete with each other. However, in today's uncertain and interconnected global environment, companies are forming alliances to increase effectiveness and share limited resources.

    Head to head competition among independent houses is being replaced by webs of confederations that compete on a global scale.

    Amalgamations and joint ventures go beyond strategic partnerships, as companies engage in mergers or joint ventures to reduce environmental uncertainty. The recent increase in merger and acquisition activity, both domestically and internationally, is an effort by organizations to cope with the immense volatility of the environment. A merger occurs when two or more organizations combine into one entity. A joint venture involves two or more organizations collaborating on a strategic alliance or project. This typically happens when a project is too complex, costly, or uncertain for a single company to handle alone.

    BA is currently undergoing a merger with a foreign airline due to economic uncertainty.
    The Internal Environment: Corporate Culture
    Corporate culture refers to the shared values, attitudes, standards, and beliefs that characterize members of an organization

    and define its nature. It is based on an organization's goals, strategies, structure, and work approaches. Ultimately, corporate culture plays a crucial role in determining the success or failure of a business. According to John O'Malley in Birmingham Business Journal: "Corporate culture is the unwritten value-set that management communicates directly or indirectly; it is known by all employees and shapes their work." Corporate culture serves as the underlying mindset and guiding force within an organization that fosters unity and employee loyalty. A thriving corporate culture establishes a foundation for maintaining high levels of employee satisfaction, customer loyalty, and profitability.

    Not all company cultures are effective in achieving a company's goals. A healthy corporate culture encourages employee collaboration for overall business success. However, entrepreneurs may find it challenging to develop and maintain a healthy corporate culture because the authoritative practices that worked for small businesses need to be replaced with participatory management approaches that support growth.
    A Growing Focus on Culture
    Starting from the 1980s, businesses have been evaluating corporate culture alongside traditional measures of corporate health such as assets, revenues, profits, and shareholder return.

    One reason for this shift is the transition from a manufacturing-focused to a service-focused economy, which prioritizes the quality of business relationships over physical product quality. Another factor is the need for American companies to compete with international competitors who possess unique and successful corporate cultures. Additionally, businesses must adapt to technological advancements or merge/acquire separate entities, amplifying the importance of corporate culture across different operational areas.

    One aspect of corporate civilization is corporate citizenship, which refers to a company's relationship with the broader environment. Within this realm, a company's culture determines its overall ethics and

    stance towards public service. Another aspect of corporate civilization pertains to human resource management. A company's culture influences various HR policies and practices, including the manner in which managers interact with employees, the company's response to diversity issues in the workplace, and the availability of flexible work arrangements such as flextime and teleworking. Additionally, the company's culture also impacts safety and training programs, as well as wellness and recreational facilities.

    In a smoothly operation organisation, all such policies and patterns promote a cohesive corporate culture that is internally consistent (Daft, 2009).


    Environment and Culture

    When considering which cultural values are important for the administration, directors take into account both the external environment and the company's strategy and goals. Research suggests that there are four categories or types of culture that are associated with the right fit between culture, strategy, and environment. These categories are based on two dimensions: the level of flexibility or stability required by the external environment, and the degree to which a company's strategic focus is internal or external.

    The text discusses four classes related to differences in organizational cultures: adaptability, accomplishment, engagement, and consistency. The adaptability culture arises in an environment where quick response and high-risk decision-making are necessary. Managers promote values that enable the company to rapidly observe and interpret signals from the environment, and employees have the freedom to make decisions and respond to new demands. The achievement culture is suitable for organizations focused on serving specific customers in the external environment, without a significant need for flexibility and rapid change.

    This civilization focuses on consequences and values fighting, aggressiveness, personal initiative, and the willingness to work hard and for a long time to

    achieve results. On the other hand, there is a different civilization that emphasizes employee engagement and the ability to quickly adapt to changing demands from the environment. In this culture, meeting the needs of employees is highly valued, and the organization is characterized by a caring and family-like atmosphere. Cooperation, consideration for both employees and clients, and avoiding status differences are important values promoted by managers in this culture. Finally, there is another type of culture called consistency culture, which prioritizes internal focus and consistency for a stable environment.

    The text emphasizes the importance of adhering to regulations and being frugal, as these are valued in civilization. Civilization encourages a methodical, rational, and orderly approach to making things. However, in today's rapidly changing world, many companies operate in an unstable environment and therefore prefer cultures that are more adaptable and responsive to changes. Lewin (1989) states that each of these four categories of culture can be successful. Additionally, organizations often have values that fall into multiple categories. British Airways (BA) is an example of an organization that embodies values from all of the aforementioned categories.

    Decision

    According to this study, it has become clear that British Airways has considered several modern-day issues, particularly in the environment and corporate culture. In other words, BA has been successful by adapting to the environment and society. After facing several failures, BA learned from its mistakes and overcame them. Today, BA is recognized as one of the leading corporate culture companies in the world. Additionally, BA is able to handle change and innovation very well. In other words, BA is effectively dealing with the issues that come their way.

    However, BA is facing

    a few issues in implementing alteration, especially when not everyone is happy with the changes and prefers to stick with the old ways. The mentions regarding these issues are as follows:

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