1D (LO3.2).Using a range of examples, explain how the forces of demand and supply can affect the pricing decisions and sales
Supply is simply the amount available, and demand is amount that is wanted. Supply and demand are the two words that economists use most often, and supply and demand is the forces that make market economies work. So, the modern microeconomics is all about supply, demand, and market equilibrium. The terms supply and demand refer the behaviour of people how they interact with one another in markets. Buyers determine demand and sellers determine supply. Pricing decisions and sales is when the top management has to make reasonable decisions pricing and sales. This means how much to charge for a product or service in depends on a multitude of factors such as competitors, cost advertising and sales promotion. When the price of some product went up because demand increased or the supply was short. The price of the product decreased because there were only few demands or no demand for the product. For example, British Airways drops the price during certain periods when there are few travellers (demands), and it increases the price of ticket during summer or in the beginning of December. Therefore, demand and supply are the most important element in a market. Buyers’ preferences comprise the demand side of the market, and sellers’ preferences comprise the supply side of the market. Prices and quantities are then determined by the point where supply and demand come together. So, it is important for BA to consider that prices and quantities are the outputs of the supply and demand model, not the inputs. Also it is important to consider that the supply and demand model only applies to competitive markets where there are many buyers and sellers all looking to buy and sell similar products. (J. Beggs, 2015)
1E (LO 3. 3). With the aid of the management tool called PEST/PESTEL assess how the business environment shapes the behaviour of British airways
The cultural environment, defined as institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviours, is one of the many forces that affect marketing management’s capability to construct and maintain successful relationships with target customers. PESTEL which is stand for Political, Economic, Social, Technological, environmental, and Legal can be used to assess how the business environment shapes the behaviour of British Airways. Economical factors: British Airways is affected by the recession as the number of travellers is in trend of decreasing; BA responded to the actual economic situation increased by introducing low cost flying to fill empty seats, also the cost of fuel is a risk for BA because when the cost of oil increased this will affect the price of ticket and if the price raises less people use planes, in addition terrorist threat during the past few years makes people to think. Social factors: unemployment in UK and overseas could have affected BA because the lack of finance reduce the number of travellers, on the other hand, increase in airline crashes might people are reluctant to travel by airline, also religion and language could affect BA, for example no meal that has pork can be served in flight to Muslim countries; environment factors: BA current strategy is to minimise the environmental impacts of their operation, this includes consideration of climate change, air quality, noise level, waste and recycling, therefore tighter environmental regulation may increase operational costs each year; technology factors: BA has invested a significant amount of money in improving its technology, BA must ensure that they remain up to date with these technological advances whilst avoiding becoming overly reliant, as this may isolate certain customer such as the elderly who do not feel comfortable using such technology; and legal factors: the major legal factor affecting British Airways is the power of unions, BA has severely suffered many industrial actions especially in the past years and is aware of the implications that the trade union can cause, legal regulations on employee rights and customer rights have to be followed, also BA has to follow new regulations from the Europe and US to provide details on passenger such as the locations they are going to stay on the first night of their visit, and BA has responded to it by collecting required information on the “ manage my booking” sections of its website. (M. Waas, 2014)
1F (LO 4.1) Discuss the importance of international trade to BA and VAA
The exchange of goods, services and capital across the borders of different countries is known as international trade. British Airways is one of the world’s largest international airlines, and one of the most extensive international scheduled airline route networks, flies to more than 300 destinations worldwide. Also, one of the world’s longest established airlines, is well known as an industry – leader. Therefore, the international trade is very important to them. British Airways are not only filling their planes, but they are helping British business export their goods and services; they are giving the British economy a boost. A good example of the importance of the international trade is that British Airways cannot only rely on customers in its own country, but also to attract new customers across the world. Even more importantly, British Airways, through international trade can develop more relationships, and discover more about different cultures, languages, markets, and products. The international trade is important to British Airways because it can encourage British Airways to operate and progress in an intensively competitive global economy.
1G (L O 4.2). Fluctuations in oil prices and exchange rates will immediately affect British Airways and VAA. Also the increase of VAT at 20% in January 2011 will affect British Airways and its shareholders as already mentioned in question 1E. In addition, if the pound Chan, 2012)
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1H (LO4.3). The European Union (EU) was founded in 1958 by the treaty of Rome and its aim was to create a common market in order to encourage the member states to trade freely and promote free trade; to remove the tariff barriers between member states and to institute the common tariffs on goods outside the union. The advantages of this are to increase trade and investment, free movement of goods and capital, and help to improve productivity and to reduce costs; also to increase GDP (Gross domestic product) in a country. According to the European commission GDP of countries of EU could increase by an average of 4%. The gains of countries like EU which have a well developed financial market. However, there are some disadvantages such as surrender of national political and economic sovereignty, and the same rate of interest must apply to all the Euro zone countries. British Airways is of the biggest company among the European States, so all these factors have impacted it. Also for many years now the European Union has been enthusiastic to tackling climate change both internally and internationally and has place it high on the EU agenda, as reflected in European climate change policy. Climate change is one of the major challenges facing mankind in the coming years, because rising temperatures, melting glaciers and increasingly regular droughts and flooding are all evidence that climate change is really happening. Therefore, the EU is taking action to control greenhouse gas emissions in all its areas of activity in order to achieve the following objectives: consuming less-polluting energy more effectively, establishing cleaner and more balanced transport options, decision making companies more environmentally responsible without compromising their competitiveness, ensuring that the environment is friendly used. Already British Airways is more interesting as it has changed its strategy of working and has been successful because it adopted new policies. One of the policies that states to reduce Co2 emissions by 15% by all airlines and British Airways has decided to reduce by 50% as they are working on creating a new kind of fuel which is known as bio diesel which is pollution free and environment friendly.
(The BBC, 2015)
Economic Systems is the way a country’s resources are owned and the way that country takes decisions as to what produce, how much to produce and how to distribute what has been produced determine the type of economic system that particular country practises. There are three types of economic systems: Market Economy (also called Free Enterprise Economies or Capitalist Economy), centrally –Planned or Controlled Economy, and Mixed Economy. Free Market, all resources and means of production are owned by private individuals and private organisations e.g. USA and Japan. They can make their choice about what to produce, how to produce, and for whom to produce. The idea will come from the consumers according to their needs. The government has role to pass law to protect businessmen and consumers, to provide the security (police), to stop firms from dominating the market and to put a limit on power of trade unions, restore and maintain states properties. As for any deals, there will be advantages and disadvantages.
Advantages: Methodically, Free market economies are extremely competitive. There is good reason that free market economies assign their resources more systematically. Also, decisions about what to produce are decided by the people who will actually consume the goods. Firms will wish prices to be as low as possible so that consumers will be happy to buy from them; this drive towards competency should mean that resources are not wasted. Firms will wisely choose and produce what consumers are really prepared to buy because the consumer is self-governing. Firms will always be searching to produce something modern to get ahead of their competitors. Therefore, countries whose economic system has been almost to the free market model have grown much quicker than those with a command economy since the World War Two. Disadvantages: Public goods cannot be provided privately, in contrast, these products have to be provided publicly. Even in a very free market, government has to take role on certain demerit goods because they are bad for human’s health. For example, drugs alcohol, and cigarettes. So if someone start life with very little, or no even has a good education, then there will be a very little protection from destitution. (D. Griffin, 2015)
Planned Economic Systems (Socialism) is the type of economic systems in which the government owns all means of production and takes control on everything. Therefore, individuals are not allowed to own any property. The States such as Cuba, China, and the former Soviet Union are under Planning Economic Systems. Planned economies can provide stability, but also can limit the growth and advancement of the country if they do not assign resources to the innovative enterprises. Choice is made by the government, so it is to the government to decide what to produce, how to produce and for whom to produce. Prices are variable without state instructions. Advantages: Equality plays huge role, hence the resources and fortune can be equally distributed according to the values of society. Production is for needs rather than profit. It is possible to make long-term plans; and the duplication and waste of resources can control as allocation is centrally planned. On the other hand, government will provide job to everybody in order to avoid unemployment because the government is responsible for everything.
Disadvantages of Planned Economic Systems: Lack of motivation and the lack of having your own vision for future. Poor standard of living and the lack of profit mean no opportunity for improvement because people could not really be enthusiastic in doing things. Some groups of people they do not exactly what government has planned ahead?
Mixed Economic Systems which is consisted of Public sector and Private Sector, there are no real free market economies or pure command economies. A mixed economy is an economy system that integrates element of more than one economic system. That is meaning an economic system that has both privately-owned and state-owned enterprises (Capitalism and Socialism or mixed market). This system demonstrates the disadvantages of both the free market and planned economic systems. The balance between them is less equal because government can fix the degree of mixing. For instance, government can decide how much business activities there will be in the private sector and public sector. This system is adapted by all Western European countries. Advantages of Mixed Economy authorises individuals to make their business in order to make profits but in the same time they can contribute towards the welfare of society. Also it creates efficiency in both the private sector and public sector. Producers and consumer are free to choose what to produce and what to consume. However, harmful goods are not allowed, failing to avoid that, government will take action against the person. The mixed economy may have less income inequality because government plays its role. Disadvantages of Mixed Economy: Private organisations could face lot problems because of various government loopholes such as favouritism and bureaucratic. The balance tends to lean more toward government because people have less freedom. Furthermore, some unfitted regulations may paralyse features of production; this could lead economic balance to shift. All three economic systems are quite good, but the problems are just about fairness, equality, and to consider humanity as beneficial for all. As it is quite difficult to make everybody comfortable, so maybe it is better to choose not to be too hot or not to be too cold. Overall, it would be extremely good if any of these three types of the economic systems could perfectly succeed on its own because they are all based on right things to be. However, mixed economic system is best allocates resources. (D. Griffin, 2015) Order Now