Month: June 2017
Personnel Management Essay Example Pdf
Task 1 - P1, M2.
One view of the distinction between personnel management and HRM is offered by Bloisi (2007: 12) who sees personnel management as workforce centred and operationally focused. Tasked with recruitment, selection and administrative procedures in accordance with management's' requirements, they are functional specialists rather than strategic managers, often with little power or status, acting as a bridge between employer and employee, required to understand and articulate the needs of both. Redman and Wilkinson (2006: 3) see the rise HRM as taking place over the last 20 years, firstly in the US and later in the mid-1980's in the UK. The 1990's saw the appearance of HRM journals and university courses, with the then Institute of Personnel Management, the main professional body for personnel practitioners, re-launching its journal People Management with the subtitle the magazine for Human Resource Professionals. After 2000, the professional body became Chartered Institute of Personnel and Development (CIPD), emphasising the transition. Redman and Wilkinson (2006: 4) argue that the rise of HRM reflects changing concerns of management and changing power balance in the workplace with declining trade union membership and management concerns turning towards efficiency and productivity. There is also the influence of organisational change attempting to adjust to global competition with downsizing, de-layering and decentralisation. Organisations are more flexible, less hierarchical and have been subject to continuous change programmes such as business process re-engineering, performance management, culture change and the concept of the learning organisation, all areas where HRM has become involved. Armstrong (2006: 19) summarised major differences by noting HRM places more emphasis on strategic fit and integration with business strategy, based on a management and business oriented philosophy. HRM attaches more importance to organisational culture and the achievement of commitment, and places greater emphasis on the role of line managers as the implementers of HR policies. HRM is a holistic approach concerned with total organisational interest, while recognising those of individuals, but as subordinate to the total. HR professionals are expected to be business partners as opposed to administrators and treat employees as assets and not as cost overheads.
P2, M1
Armstrong (2008: 9) states that the overall role of HRM is to ensure organisational success through its employees, noting that Caldwell (2004) identified the role in the form of goals to be achieved. These included the management of people as assets fundamental to the competitive advantage of the organisation, aligning HRM policies with business policies and corporate strategy, creation of flatter and more flexible organisational structures capable of rapidly adapting to change, encouraging teamwork and cooperation, empowering employees to manage their own self-development and learning, and improving employee involvement. Also development of reward strategies designed to support performance, building employee commitment, and increasing line management responsibility for HR policies. Foot and Hook (2008: 30) offer a comprehensive list of tasks and activities of the HR practitioner. These include recruitment and selection, learning and development, human resource planning, provision of employment contracts, policies on fair treatment, equal opportunities, managing diversity, managing performance improvement, employee counselling, payment and reward policies, health and safety, employee discipline, grievance, dismissal, redundancy, negotiation, ethic and corporate responsibility and change management among others.
P3
While HRM can initiate policies and practices Armstrong (2006: 97) acknowledges the line manager has implementation responsibility. If line managers feel indifferent or disagree with HR policies, and are compelled to implement them, they do so reluctantly and ineffectively. Purcell et al (2003) pointed out that high levels of organisational performance are not achieved simply by the existence a range of HR policies and practices and any difference made lies in how these are implemented. A factor affecting the line manager role lies in their ability to carry out HR tasks. Special skills are needed to perform people-oriented activities such as defining roles, interviewing, conducting performance reviews, providing feedback and coaching and identifying learning and development needs. Some managers have them and some do not possess these skills, or the organisation fails to provide training. Redman and Wilkinson (2006: 211) argue that line management responsibility for HR issues is not new, as they were always held responsible and accountable for managing people at work. There has been devolution of some HR work to the line partly due to pressure of organisational costs, and to provide a more comprehensive type of HRM arguably best achieved by devolving HR tasks to those managers responsible for implementation. A frequent criticism of line management is their lack of soft, or people skills, and Torrington et al (2008: 205) state that many voluntary resignations are explained by dissatisfaction on the part of employees with supervisors. People are frequently promoted into supervisory positions without adequate experience of training.
Task 2 P4
McKenna and Beech (2002:117) describe the need for HR planning as being defined by the number of staff required to meet the organisation's future needs as well as the composition of the workforce in terms of the necessary skills. Mullins (2005:797) describes HR planning as a strategy for the acquisition, utilisation, improvement and retention of an organisation's human resources, preferably an integral part of broader corporate planning. Information needs include the extent and scope of the plan, forecasting period, target dates, and types of occupations and skills required, among other factors. The first stage is an analysis of existing resources. Second, estimation of likely changes in resources by the agreed target date, including losses, current staff development, and external factors such as labour availability, market or legislative change, all of which determine the supply forecast. There follows a forecast of staffing requirements necessary to achieve corporate objectives by target date. Finally a series of measures are taken to ensure the required staffing resources are available as and when needed. The overall process should consider changes such as population trends, for example the ageing workforce, fewer young people entering directly from school, more flexible work and organisational structures, level of competition from other organisations, employment legislation, development in information technology and automation.
P5, M3
Price (2007: 369) explains that the Credit Suisse process involves pre-selection, online testing, and both telephone and face-to-face interviews. Jackson et al (2008: 552) explain that Southwest Airlines uses structured interviews with multiple interviewers who have had extensive training. Marchington and Wilkinson (2005: 176) list the availability of a wide variety of selection methods including references, application forms, work sampling, assessment centres and graphology believing that no single technique, regardless design quality, is capable of producing perfect decisions capable of certainty as to which individuals will be good performers in a given role. Multiple methods are preferable, and while references may be sought before or after interviews, they remain critical. Online tests, telephone interviews, assessment centres and personality questionnaires, literacy and numeracy tests and those for specific skills are also used according to a CIPD annual survey (CIPD 2004). Most have very low accuracy levels in terms of producing effective decisions, with work sampling offering the best likelihood of success, followed by intelligence tests and structured interviewing. References score poorly as does graphology and a combination of techniques increases accuracy. Jackson et al (2008: 552) suggest that an alternative or complimentary method is the personality test, used to judge likely fit with organisational culture.
P6, D2
The interview remains the most common selection technique with Bloisi (2007: 147) noting that 68 percent of organisations still use interviews with an increase in the more structured types, and towards training of selection teams, with the (CIPD 2005) survey reporting 56 percent using structured, panel interviewing, and 41 percent employing behavioural questioning in structured interviews. McKenna and Beech (2002: 152) see several problems associated with the interview. These include subjective, unsound judgements made by untrained interviewers, early judgement based of first impressions, or the interviewer may have prior unfavourable biases about interviewees, or be positively disposed to them because they like or are attracted to them, the halo effect. Where a panel is used there may be a lack of consensus. Problems include lack of preparation, shortage of allocated time, unsuitable venues and lack of appropriate documentation, such as the applicant's CV being circulated to all involved, and lack of structure and note-keeping. However, Armstrong (2006: 404) feels the interview provides the opportunity to ask probing questions about the candidate's experience and evaluate the extent to which their competencies match the job specification, enabling interviewers to offer a realistic preview of the job and gives the candidate opportunities to ask questions about the role, training, career prospects terms and conditions of employment. The face-to-face interview allows an assessment of how the candidate would fit into the organisation and offers the candidate a similar opportunity. Overall, unless no personal contact is required, as in some remote networking roles, the interview remains a critical but flawed part of selection.
P7
Best recruitment and selection practice is promoted by the (CIPD 2011) website. Selection practices involve two main processes of short listing and assessing. CV's or application forms are used from short listing onwards and awareness of the avoidance of unfair discrimination highlighted. Online techniques may be used to manage application forms and screen candidates. Candidates should be given prior notice of what to expect, regardless of method employed, including the type of assessment and timescale, in addition to a check for disability requirements. Questions should be carefully planned and identical for all, with answers scored and a focus on required attributes and behaviour, with efforts made to put the candidate at ease. Psychological tests should only be considered where appropriate. Assessment centres may be used with various exercises and tasks but should be perceived as fair to the candidate. Reference checks should be undertaken, sometimes by telephone. The general advice is to use a structured approach ensuring perception of fairness to both successful and unsuccessful candidates, with flexibility and job tailoring. All involved should have appropriate training, be adequately briefed about the job, its requirements, and aware of the danger of unfair discrimination. Price (2007: 369) notes that selection at Credit Suisse focuses on pre-selection, online personality testing and telephone interviews, followed by face-to-face meetings. Structured questions are compared to pre-determined answers and interviewers are trained. Jackson et al (2008: 552) note that Southwest Airlines uses combinations of techniques including face-to-face interviews, aptitude and attitude testing by panel, and peer and line manager one-to-one meetings. The process is well-designed, structured, tailored to the job and involves all obviously suitable applicants. Neither organisation meets all best practice guidelines but Southwest does demonstrate high levels of staff retention.
Task 3 P8
Price (2007: 471) states that job evaluation is concerned with the tasks involved in fulfilling the job, duties that have to be completed and responsibilities attached. The process involves a comparison of jobs in a formal, systematic way to identify their relative value to an organisation and has its roots in the scientific management movement of Taylor (1947). It is seen as increasingly inappropriate for the way work is organised today since the content of many jobs varies daily. Traditional job evaluation is focused on unchanging job descriptions and requirements, and if performance and pay are linked to the completion of specific tasks the need for change, endemic in today's organisation, is ignored as is a flexible approach to customers. Modern organisations favour competency profiles instead. Factors determining pay include the employer's compensation strategy, worth of the job, affordability, external factors such as labour market conditions, living costs regional wage rates, cost of living, presence of collective bargaining, and legal requirements (Bohlander and Snell 2009: 419).
P9, D2
Beardwell and Claydon (2010: 520) identify several types of reward systems including individual performance-related pay where employee performance is assessed against pre-set targets or objectives and payments may be consolidated into base and bonus or variable pay. Benefits are doubtful and limitations include the fact that motivation by money alone is not necessarily effective or universally applicable, and problems are associated with measuring performance fairly and objectively. Contribution-related pay is based on both outcomes of work carried out and levels of skill and competence employed. Its advantage is seen as a move towards rewarding employees for their conduct of the work, attitudes and behaviours displayed, which are seen as leading to competitive advantage. Competence-related pay is a method of paying employees for their ability to perform as opposed to paying for performance (Armstrong 2002). Its advantages include the encouragement of competence development which fits the modern less-layered organisations and facilitates lateral career moves. Disadvantages are that assessment of competences may be difficult and links to pay arbitrary. Skill-based or knowledge-based pay is aimed at encouraging employees to gain additional skills or qualifications appropriate to business needs. The advantage is that employees strive to gain relevant skills, but a disadvantage can be cost and the need for a skills requirement analysis to ensure only those skills required are encouraged. Team-based pay is measured on an assessment of team performance rather that at an individual level and designed to reinforce collaborative working and team results. Teamwork is seen as contributing to organisational success, however, among the difficulties are distinguishing individual contribution, and highly performing individuals in low-achieving teams may feel penalised and dissatisfied.
P10, D3
Torrington et al (2008: 263) state that for most people pay is important, if not a sufficient motivator in itself. Maslow (1943) recognises the need to have sufficient money for basic existence as one of the most fundamental in a hierarchy of needs which motivate people. Herzberg (1968) argues that while pay in itself may not motivate, it holds the capacity to de-motivate if insufficient. Marchington et al (2002: 480) explain McGregor's (1960) distinction between theory X and theory Y managers, with theory X managers believing that workers are inherently lazy and uninterested in their work, and must therefore be highly controlled and offered incentives to get them to work harder. In contrast theory Y managers believe workers can be motivated by goals of self-esteem and desire to do a good job, and that money is less important to them than these types of rewards. Vroom's (1964) expectancy theory is linked in terms of the effort put in by employees in the expectancy of reward, and is dependent on whether they view the likelihood that their action or effort will lead to the necessary outcome of reward.
P11
For those employees not subject to an automatic annual increment when conditions allow, a common practice in monitoring and rewarding is annual review with their immediate supervisor, a limited and often superficial process. Bloisi (2007: 259) describes performance appraisal as a means of measuring and evaluating performance, which requires aiming at enabling decision-making on employee performance and determining any training or development needs. Frequently seen as an annual event, to be effective it should be continuous and involving two-way dialogue, and is frequently used as a guide to reward. Armstrong (2000: 11) argues that performance appraisal as a means of monitoring has been discredited because it was frequently operated as a top-down bureaucratic system owned by HR rather than line managers. It was often backward-looking; concentrating on past performance, rather than future development needs, and with inadequate links to business needs. Employees have resented the superficial nature of the procedure and managers have lacked the necessary skills to conduct appraisals. Jackson and Mathis (2007: 335) suggest appraisals can be formal or informal, with the informal being conducted whenever necessary and the day-to-day relationship between manager and employer offers such opportunities. However, in today's sometimes networked organisation, this may be impossible. Team appraisal can be useful as having peers involved can overcome the problem of the manager's inability to be present to observe. Comparative methods may be used to compare performance levels of their employees against one another. Management by objectives allows the manager to set, agree and monitor employee progress against targets, either job or behavioural in nature. In all cases, an important criterion is that managers receive adequate training in employee monitoring and feedback skills. 360-degree feedback may be used as basis for monitoring and reward and according to Swart et al (2005: 213) is a process where different groups within the work situation, such as peers, subordinates and supervisors and possible internal and external customers appraise an individual and offer feedback.
Task 4 P12
The Trades Union Congress (TUC 2008) provides a guide to employment rights in the UK. The employment contract signed at time of offer will normally give the notice amount required on departure which must be at least one week after a month's employment, rising progressively up to 12 weeks after 12 years or more, with most employees being entitled to receive pay. This can be waived by receipt of payment in lieu of notice. If the reason is for misconduct, it has to be substantial and can be without notice, and immediate departure may be required. After a year's employment written reasons for dismissal must be provided, or if dismissed while pregnant or on maternity leave. Failure to comply with the employment regulations opens up the possibility of the employee taking their case to an Industrial Tribunal. Apart from complying with employment legislation in voluntary resignation situations best practice is also to conduct an exit interview to establish where possible the main reasons for resignation and to discover if the organisation could have done anything to prevent the resignation, facilitating learning for the future (Taylor CIPD 2002: 71). Exit interviews provide a more useful picture of departure grounds when the employee has secured another position. Most employers retain records for several years following departure, and many ensure all access is removed, especially in the case of IT staff. Foot and Hook (2008: 112) add the provision of a preparation for retirement program to assist the transition of departing for employees, and provision of programmes to keep ex-employees in touch. B&Q comply with all the legal requirements of exit in terms of providing paid notice, or payment in lieu, in addition to paid holiday entitlement. If the departure is involuntary reasons for dismissal are provided in writing and all access to property and systems are shut down on the date of departure, regardless of reason. Property is normally returned on departure date or earlier. No exit interviews are conducted, and no follow-up is practiced for departed employees, which compares badly with best practice. Rolls-Royce complies with all legal requirements and notice in addition to holiday entitlement. All departure reasons are documented and an exit interview conducted notes of which are retained for analysis as to reasons. All access to property and systems are removed on date of departure and any company property is required to be returned. Overall the company complies reasonably with best practice.
P13
Redman and Wilkinson (2006: 367) argue that regardless of methods used, fairness and justice remain key issues in redundancies. Recent trends have seen a move away from seniority and a reduction of last-in-first-out towards selection based on skills and performance. Certified absence counts against an employee in the selection process as much as unauthorised absence according to the IRS survey (2004). Torrington et al (2008: 223) adds attendance record to the list and reports that a more recent approach involves drawing up a new post-redundancy organisational structure and inviting all employees to apply for the jobs that will remain. Early retirement and voluntary redundancy are also favoured.
References
Armstrong, M. (2000) Performance Management: Key Strategies and Practical Guidelines, 2nd Edition, London, Kogan Page Ltd., p 11. Armstrong, M. (2002) Employee Reward, 3rd Edition, London, CIPD. Armstrong, M. (2006), A Handbook of Human Resource Management Practice, 10th Edition, London, Kogan Page Limited, p19, 97, 404. Beardwell, I. Claydon, T. (2010), Human Resource Management: A Contemporary Approach, 6th Edition, Harlow, FT Prentice Hall, p 520. Bloisi, W. (2007) An Introduction to Human Resource Management, Maidenhead, McGraw-Hill Education, p 12, 147, 259. Bohlander, G. Snell, S. (2009) Managing Human Resources, 15th Edition, USA South-Western Cengage Learning, p 419. Caldwell, R. (2004) Rhetoric, Facts and Self-Fulfilling Prophecies: Exploring Practitioners' Perceptions of Progress in Implementing HRM, Industrial Relations Journal, 35(3), pp 196-215. CIPD (2011) Selection Methods Available from: https://www.cipd.co.uk/hr-resources/factsheets/selection-methods.aspx CIPD (2004) Recruitment, Retention and Turnover: A Survey of the UK and Ireland, London, CIPD. CIPD (2005) Recruitment, Retention and Turnover: A Survey of the UK and Ireland, London, CIPD. Foot, M. Hook, C. (2008) Introducing Human Resource Management, 5th Edition, Harlow, FT Prentice Hall, p 30, 112. Herzberg, F.W. Mausner, B. Snyderman, B. (1957) The Motivation to Work, New York, Wiley. IRS (2004) The Changing Shape of Work: How Organisations Restructure, Employment Review, No. 794. Jackson, S.E. Schuler, R.S. Werner, S. (2008) Managing Human Resources, 10th Edition, USA, Thomson South-Western p 552. Jackson, J.H. Mathis, R.L. (2007) Human Resource Management, 12th Edition, USA, Thomson South-Western, p 335. Marchington, M. Wilkinson, A. Sargeant, M. CIPD, (2002) People Management and Development: Human Resource Management at Work, 2nd Edition, London, CIPD, p 480. Marchington, M. Wilkinson, A. (2005) Human Resource Management at Work: People Management and Development, 3rd Edition, London, CIPD, p 176. Maslow, A. (1954) Motivation and Personality, New York, Harper & Row. McGregor, D. (1960) The Human Side of Enterprise, New York, McGraw-Hill. McKenna, E. Beech, N. (2002) Human Resource Management: A Concise Analysis, Harlow, FT Prentice Hall, p 117, 152. Mullins, L.J. (2005) Management and Organisational Behaviour, 7th Edition, Harlow, FT Prentice Hall, p 797. Price, A. (2007) Human Resource Management in a Business Context, 3rd Edition, London, Thomson Learning, p 369, 471. Purcell, J. Kinnie, K. Hutchinson, Rayton, B, Swart, J. (2003) People and Performance: How People Management Impacts of Organisational Performance, London, CIPD. Redman, T. Wilkinson, A. (2006) Contemporary Human Resource Management: Text and Cases, 2nd Edition, p 3, 4, 211, 367. Swart, J. Mann, C. Brown, S. Price, A. (2005) Human Resource Development: Strategy and Tactics, London, Elsevier Butterworth-Heinemann, p 213. Taylor, E. (1947) Scientific Management, USA, Harper & Row. Taylor, S. CIPD, (2002) The Employee Retention Handbook, London, CIPD. Torrington, D. Hall, L. Taylor, S. (2008), Human Resource Management, 7th Edition, London, FT Prentice Hall, p 205, 263, 223. TUC (2008) Your Rights at Work, 3rd Edition, London, Kogan Page Ltd., p 157. Vroom, V. (1964) Work and Motivation, New York, Wiley.
Cite this page
Personnel Management Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
The UK Chocolate Market Example for Free
1) "It is said that life without chocolate is like a beach without water" (Christou, 2009). The UK Chocolate market is the largest within the European Union (30 percent of the EU market) with British citizens consuming more chocolate than any other EU nation (Barnett, 2006). Within the UK adults are the primary consumers eating A£3.5 billion a year compared to children who consume A£390 million a year, with the over 55's the highest consumers of all adults (Scott-Thomas, 2009) Twenty-one per cent of the total chocolate and confectionery sold in Britain is consumed by people above the age of 55, who spend on average A£700 yearly (Datamonitor, 2005). Within the UK the main manufacturers are as follows: Chocolate manufacturers by sales and share (Mintel, 2009)
| 2009 | 2007 | 2005 | % change | ||||||||||||
| A£m | % | A£m | % | A£m | % | 2005-07 | |||||||||
|
1 |
Cadbury Trebor Basset | 1189 | 35.3 | 1101 | 34.9 | 1146 | 34 | 3.8 | |||||||
|
2 |
Masterfoods (Mars) | 1010 | 30 | 953 | 30.2 | 914 | 27 | 10.5 | |||||||
|
3 |
NestlA© | 494 | 14.7 | 470 | 14.9 | 672 | 20 | -26.6 | |||||||
|
4 |
Ferrero | 134 | 4 | 126 | 4 | 118 | 4 | 13.2 | |||||||
|
5 |
Kraft Foods | 61 | 1.8 | 63 | 2 | 141 | 4 | -56.7 | |||||||
| Own-label | 217 | 6.5 | 189 | 6 | 124 | 4 | 75.3 | ||||||||
| Others | 260 | 7.7 | 252 | 8 | 245 | 7 | 6.2 | ||||||||
| Total | 3365 | 100 | 3154 | 100 | 3360 | 100 | 0.1 | ||||||||
The current market can be broken down into the following segments: Boxed; chocolate assortment composing of a selection of high-added-value individual units (Booth, 1990) Countlines; chocolate-covered bars with an individual centre which can be eaten with one hand, so called named because these items are sold by number rather than weight. Moulded Bars ; regular bars of chocolate with or without inclusions i.e. nuts or filled centres i.e. soft caramels Seasonal Chocolate : chocolate confectionary produced for Easter through 'eggs' and Christmas in 'gift boxes' and 'miniatures' Straightlines ; small items which are identical and eaten as casual snacks on the move i.e. Cadbury's chocolate buttons Other Chocolate Confectionary/ Assortments; other The below table suggests that the most revenue generating segment using recent data is 'countlines' @ 2244.44 millions.
UK Chocolate Market Value (Euro m), 2004- 2008
Segment |
2004 |
2005 |
2006 |
2007 |
2008 |
| Boxed | 1332.6 | 1350.2 | 1367.6 | 1385 | 1400 |
| Countlines | 2152.3 | 2176.4 | 2200.6 | 2224.6 | 2244.4 |
| Moulded Bars | 982.3 | 996.3 | 1010.3 | 1024.2 | 1036.3 |
| Other Choc Confectionary | 18.1 | 18.1 | 18 | 17.9 | 17.7 |
| Seasonal chocolate | 885.2 | 899.5 | 913.8 | 928.1 | 940.8 |
| Straightlines | 732.9 | 743 | 753.1 | 763.4 | 772.1 |
| Total |
6103.4 |
6183.5 |
6263.4 |
6343.2 |
6411.3 |
(Source: Business Insights; Chocolate Confectionery Industry Insights, 2008) Additionally within these segments the following brands are present: Chocolate confectionery brands by sales and share (Mintel, 2009)
| 2009 | 2007 | 2005 | % change | ||||||||||||
| A£m | % | A£m | % | A£m | % | 2005-07 | |||||||||
| Cadbury Dairy Milk | 345 | 10.3 | 318 | 10.1 | 275 | 8.2 | 25.4 | ||||||||
| Galaxy | 146 | 4.3 | 138 | 4.4 | 129 | 3.8 | 13.3 | ||||||||
| Mars | 99 | 2.9 | 97 | 3.1 | 104 | 3.1 | -4.7 | ||||||||
| Kit Kat | 80 | 2.4 | 70 | 2.2 | 83 | 2.5 | -3.3 | ||||||||
| Flake | 77 | 2.3 | 70 | 2.2 | 49 | 1.5 | 57.2 | ||||||||
| Aero | 67 | 2 | 64 | 2 | 56 | 1.7 | 18.4 | ||||||||
| Snickers | 52 | 1.6 | 51 | 1.6 | 57 | 1.7 | -8.1 | ||||||||
| Milky Bar | 52 | 1.6 | 50 | 1.6 | 60 | 1.8 | -13.2 | ||||||||
| Others | 2040 | 60.6 | 1921 | 61.1 | 2222 | 66.1 | -8.2 | ||||||||
| Own-label | 224 | 6.7 | 193 | 6.1 | 162 | 4.8 | 38.2 | ||||||||
| Total | 3365 | 100 | 3154 | 100 | 3360 | 100 | 0.1 | ||||||||
Market Trends: Seasonality: The chocolate industry is highly seasonal where peak seasons of Easter and Christmas observe a sharp increase in sales. Therefore if externalities affect these periods it can be assumed that performance will be severely curtailed. The recent recession over the Christmas period impaired consumer spending therefore to mitigate the loss of sales it is essential to maximise them over the Easter period 2010. Failure of new products Numerous new product launches have failed over the past few years where many companies have adapted the strategy of re-launching old favourites to leverage on their brand equity and consumer recognition. Barriers to Entry The chocolate industry is synonymous with a number of large firms (Mars, Nestle and Cadbury) dominating the market, enjoying a well established history and therefore high brand loyalty. Consequently barriers to entry are high for existing incumbents and new entrants. Increasing Cost of Raw Products As cost of raw products rise such as cocoa, chocolate manufacturers are shifting their attention away from marketing strategies and instead focusing on the input processes of chocolate making as opposed to the output. Potential Partnerships Given a saturated market and a continuous increase of raw material prices, to remain competitive and keep costs down, creation of partnerships are potential business propositions for manufacturers. Growth of luxury segment of market Luxury dark chocolate brands have entered the market in (Booth, 2000) due to the advocates of healthy eating and the anti-oxidant benefits of dark chocolate. Targeting the 'grey pound' with a larger disposable income the luxury segment is increasing in market share presently. 2. The highly competitive UK chocolate confectionary market has suffered a hit during the 2008/9 recession where volume sales have decreased by 2.6 percent (Nielsen, 2009) throughout all leading brands. However this fall in sales contradicts the trend which has emerged throughout the recession of an observed increase in comfort eating such as chocolate within the 'affordable' segment of the market. Currently the chocolate industry is saturated with increasing pressure from unfavourable economic conditions squeezing profit margins and manufacturers consequently looking for new growth areas. Segmentation targeting and positioning Segment of Chocolate Industry –'Countlines' Analysis of the industry suggests that the most revenue generating segment belongs to the 'countlines' segment at 2244.44 million yearly, making this a potential area for diversification for JFL. Consumption of these modern snacks such as Snickers represent a growing sector of the confectionary market as they subscribe well into 'on-the-go' lifestyles which compliment modern society. Easily fitted into handbags, suit pockets and sportswear countlines are convenient snacks in a variety of choices which make them ideal for busy people everywhere. As per the above table and market research competitors brands within this segment are: 'Mars' 49 g @ 40p 'Twix' 58 g @ 45p 'Mars Snickers' 58 g @ 45p 'Cadbury Dairy Milk' 49 g @ 58p 'Green and Blacks Organic' 50g @ A£1.25 Positioning – 'Pocket Money Segment to luxurious treats' There is a decline in the ''pocket money' segment of the confectionery market due to increasing health concerns over children's increasing sugar intake. Market research evidences that it's the 11-14 year old segment of children who spend the most on weekly pocket money with expenditures of A£10 – 15 (Youth TGI, 2009). Linking this to the entry strategy for JFL within the chocolate industry and the consumer's propensity towards familiar brands and pricing structures; it is recommended that entry into the 'countlines' segment should be positioned within the 'pocket- money' segment. This should be at the lower end for 'tweens' and the higher end for the 'over 55's'. Another suggestion is that JFL 'partner' with another manufacturer such as Nestle to leverage on brand credibility and reduce start-up costs into the market, especially with increasing raw material prices. The risk of cannibalisation will be mitigated due to product launch into different segments. Consumer Segmentation – 'Over 55's' Given that the over 55's are the biggest consumers of chocolate with a larger disposable income it is recommended therefore that JFL position themselves at the premium end of the 'pocket money' 'countlines' segment. Building on the notion that the 'health food' chocolate market is growing due to its anti-oxidant benefits it is recommended that JFL target the 'grey pound' with a product which offers health benefits (increased anti- oxidants, reduced saturated fats) which is perceived to be of superior quality. Consumer Segmentation - 'Tweens 11-14' Building upon the increasing disposable income of this segment and the reputable brand image that JFL has built within sugar confectionary it is recommended that JFL target this segment for entry into the market. Offering a product which is half the size of an average chocolate bar: at 25g within the 'countlines' segment this will enable JFL to remain competitive on cost whilst leveraging the Nestle brand. 3. Product description; 'Over 55's' - An average sized premium chocolate bar (50g) specifically formulated to contain increased levels of anti-oxidant properties in the form of flavonoids, found in cocoa processed with minimal extraction and reduced milk content. Lines can be either solid chocolate classified as 'premium milk with added cocoa' or individual centres of nut or coconut covered with 'premium milk with added cocoa'. 'Tweens 11-14' – A mini-bar of 25g formulated with milk chocolate where lines can be either solid milk chocolate or individual centres of toffee, caramel and nuts. Brand image; 'Over 55's' – The branding of 'premium healthy chocolate' to this segment should demonstrate one which will communicate the health benefits of eating chocolate rich in anti-oxidants. The differentiating factor with this brand is the fact that it is milk chocolate with added cocoa, for 'a premium creamy milk chocolaty taste with all the anti-oxidants of dark chocolate'. The reason for this is the baby boomer generation (over 55s) has been evidenced as possessing an extremely 'sweet tooth', which create preferences towards sweeter milk chocolate rather than bitter dark chocolate. Therefore a bar which can be sold as milk with added benefits of dark will appeal to the psychology of this segment. 'Tweens 11-14' – The branding of the mini-bars, it is recommended will leverage Nestles brand and associated products such as breakfast cereal (Shredded Wheat, Cheerio's, Golden Nuggets, Clusters) beverages (coffee, hot chocolate and Nesquik) and ice-cream. These are items which this segment of the market consume regularly, even on a daily basis, therefore creating this relationship between the new product of 'mini-bar' and household names will re-enforce brand identity. Pricing objectives strategy; 'Over 55's' – The price of this product should reflect its position within the 'higher end' of the 'pocket money' segment of 'countlines'. The average weekly expenditure on chocolate confectionary for the 'grey pound' is A£13.50 per week (A£700 per person annually) with buying behaviour of chocolate in the luxury end of the market a few times a week i.e. 'Green and Blacks Organic' 50g @ A£1.25. It is recommended that the price per bar of this product (50g) should be positioned just below the premium price but substantially above the lowest price of counterline competitors bars at 40p. Therefore the price for this product should be pitched at 80p per 50g bar. 'Tweens 11-14' – The average weekly expenditure within the pocket money segment is at the lowest range A£10 min - A£15 maximum (A£520 – 780 per person annually) with buying behaviour at the lowest end of the market with daily purchases of chocolate. It is recommended that the price per mini- bar of this product (50g) should be positioned just below the lowest price of counterline competitors bars at 40p. Therefore the price for this product should be pitched at 30p per 25g bar. Retailing and distribution objectives and strategies; 'Over 55's' – Distribution channels for chocolate are wide, with chocolate availability the highest it have ever been, from small retailers to mass-market outlets. To maximise product launch it is recommended leveraging on current trends such as increasing internet usage to distribute the product. The advantages of this distribution channel are that it is cost effective, can penetrate a wide market quickly and once set-up is easy to maintain. For this segment who are becoming more technology 'savvy' and have availability to the net this distribution channel will be successful. 'Tweens 11-14' – Distribution for this segment follows the above, and builds on existing channels of all sizes of retailers to mass-market outlets. Given the proposed partnership with Nestle and their grocery products such as breakfast cereal and beverages, it is recommended that using coffee shops, supermarkets and ice-cream outlets will increase sales of the 'mini-bar'. Additionally the internet for this segment is a must given the trend towards online purchases. Integrated marketing communications' objectives strategies; 'Over 55's' - For this segment the IMC strategy will encompass promotional strategies which will use venues such as golf clubs, day centres, community leisure centres, gymnasiums and supermarkets to launch the product. The promotional aspect should encompass 'EMarketing' linked to offers, which when advertised at the above mentioned outlets customers will receive a specified discount if they print out a voucher online which is redeemable. 'Tweens 11-14'- It is recommended using an IMC strategy which can be integrated into Nestles existing marketing plan so as to 1) drive down promotional costs 2) leverage existing expertise within Nestle and 3) build on existing marketing strategies. Extra consideration will be taken to ensure that cannibalisation does not occur through alignment of segmentation against current Nestle chocolate. 'EMarketing' will be used as above for promotion using the same redeemable voucher offer. Evaluation and control; To see whether your product launch has been successful it is recommended that JFL implement a metric which enables accurate measurement of sales within both lines. As the predominant form of distribution and promotion is online, converted sales can be measured through CTR (click through rates). Additionally measurement can be through response rates and online users to the JFL website. For control it is recommended allocating one employee per line who has expertise within EMarketing.
Bibliography
Booth, R (1990) 'Snack food- An AVI book'; Springer 'Britons are Europe's biggest chocolate-lovers; Louise Barnett – 13/04/2006': available at https://www.independent.co.uk/news/uk/this-britain/britons-are-europes-biggest-chocolatelovers-473928.html 'Brits' love of chocolate feeds sales growth; Caroline Scott Thomas – 09/10/2009': available at www.confectionarynews.com 'Business Insights; Chocolate Confectionery Industry Insights' (2008): available at https://www.globalbusinessinsights.com/report.asp?id=rbcg0125 'Chocolate Candy Sales Start to Melt; Nielsen- 30/01/09': available at https://blog.nielsen.com/nielsenwire/consumer/chocolate-candy-sales-start-to-melt/ 'Datamonitor – The home of business information' (accessed 04/03/10) – available at https://www.datamonitor.com/ 'Mintel Reports – Insight, Analysis and Business Intelligence Reports' (accessed 04/03/10) available at https://reports.mintel.com/ 'The Grocer - The Top Products 2009: Confectionary (chocolate) Peter Christou': available at https://www.thegrocer.co.uk/articles.aspx?page=articles&ID=206242 'Youth TGI (Target Group Index)' (accessed 04/03/10) – available at https://kantarmedia-tgigb.com
Cite this page
The UK Chocolate Market Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Potential Merger Essay Example Pdf
Introduction
In today's fast-paced business environment, mergers have become a common strategic initiative for organisations (Volberda et al., 2011). Mergers are projected to be based on shareholders' proposition or creating value for them, however, it is argued that the decision is initiated by the management (Wolfgang, 2008). The motive may be different for firms in different situations. For some organisations it may be to survive in the industry by combining with a more established player in the industry (McCarthy and Weitzel, 2013), while for others it may be a strategy to compete better by achieving higher growth (Johnson et al., 2014). A recent merger proposition between bookmaking giants Ladbrokes and Coral became the limelight of the public attention (Kleinman, 2015), whereby the various reasons for the merger were highlighted, followed by two-sided opinions about them. On one hand, media updates depict the potential of greater market power (Farrell, 2015), higher financial benefits (Hall, 2015), faster online growth (GalaCoral, 2015), increased international presence (Schram, 2015) and strong position in the regulatory environment (Maidment, 2015); while on the other, analysts criticize the decision by pinpointing the probability of store closures and job losses (Wood, 2015), loss in share price and dividend yield (Head, 2015), unfit skills set for online growth (Nimmo, 2015) and uncertainty about decision confirmation (Martin, 2015b). With such mixed viewpoints, Ladbrokes Coral must take appropriate steps to ensure the success of the combined entity both in the short run and long run.Reasons for the Merger
Greater Market Power
The most important reason behind the merger intention between Ladbrokes and Coral seems to be their aspiration to gain the market leadership position, i.e. they want to create a new entity which would be the largest bookmaker in the UK (Farrell, 2015). The new entity would have a total of 4000 shops (Rojas, 2015) surpassing the current market leader William Hill, which has only 2400 (Aglionby, 2015). Volberda et al. (2011) identify this as the principal reason underpinning most merger cases, whereby the merging organisations strive to achieve greater market power by ensuring that they will have an opportunity to sell more goods or services than their competitors. Bridge and Craven (2015), however, provide a critical review of this strategy saying that it will be a move with an aim to achieve dominance merely in terms of higher number of shops, and further mention that with the two companies merged together, they will have lots of duplicated shops within the same vicinity, which might not be very useful. Another critique about this strategy was that a single company would not be allowed by the CMA regulations to have that many shops, hence the excess shops will be allocated to smaller competitors like PaddyPower and Betfred; that again makes the purpose of this merger in vain (Kleinman, 2015). As a counter-argument to this, the management of Ladbrokes and Coral stated that even if they lose 1000 stores, they would still have 700 more stores than William Hill, hence it would be beneficial for them (Bridge and Craven, 2015). Wood (2015) argues that as the regulatory authorities enforce to close down excess shops, it would also result in many job cuts and that Ladbrokes Coral management should have considered these consequences while discussing the merger proposal.Higher Financial Benefits
According to Hall (2015), the combined entity would be valued at A£2.3bn, earning about net revenues worth A£2.1bn and delivering cost synergies worth A£65m per year. However, critics argue that a mere announcement of the merger has resulted in a 9% decline in Ladbrokes' share price, which is alarming (FinancialTimes, 2015). Hence the situation at the time of actual merger may be worse. An analyst Greg Johnson considers this to be a smart strategic initiative as the combined entity's revenues and profitability will be higher, which would result in greater marketing budget, thus helping the bookmaking giant be equivalent to the current leader William Hill (Martin, 2015a). Head (2015), on the other hand, views this as a disadvantage mainly for Ladbrokes, because at the time of announcing the merger, it underwent a reduction in the 2015 annual dividend by 66%. With only 2.3% yield of the shares, Ladbrokes' investor confidence may further drop as well. The CEO of Ladbrokes offers a counter-argument saying that although this strategy has shown some dividend and revenue losses currently, it would be useful for the business development in the next 900 years (ProQuest, 2015). The combined retail business of Ladbrokes Coral is viewed as a cash engine of the company, which is why they consider this merger as a win-win situation for both organisations (Maidment, 2015). An opportunity for business growth has been identified related to the joint procurement and reduction of central overhead costs which would enhance the company's efficiency, making it financially strong to bear the tax increases (GalaCoral, 2015).Faster Online Growth
With the major growth opportunities in the industry being online gaming and digital sportsbetting, the combined entity has a higher potential to enhance its online growth (GalaCoral, 2015) by attracting sports fans and younger gamblers through its tablet and mobile applications (Maidment, 2015). It will also set the drivers to enhance customer experience and increase loyalty though effective multi-channel offers (GalaCoral, 2015). Since both the companies use similar technology platforms and have partnered with outside parties such a Playtech and Scientific Games, it will be easier for integration of the systems and would not cause any disruption to their existing customers (GalaCoral, 2015). Investment banker Jefferies, however considers Coral to be an imperfect fit to merge with Ladbrokes, as another analyst determined that the success of Coral's online business is only dependent upon its casino games; hence it lacks the competence to help Ladbrokes enhance its online growth (Nimmo, 2015).Increased International Presence
Another reason for the merger is the opportunity to have greater international presence (Schram, 2015). After closing this deal, the combined entity would be able to operate in Italy, Australia, Spain and Belgium, and would have the potential to expand further with lesser limitations (GalaCoral, 2015). As a result of this, international revenues would account for more than 10% stake in the company's total revenues (Kleinman, 2015). The management of Ladbrokes and Coral also believes that they are very complementary businesses, which would enable them to compete better in the UK and internationally (Schram, 2015). Although there might be potential benefits of going international, Martin (2015b) argues that the uncertainty of whether the merger will take place or not, may cast serious doubts on the strategy of Ladbrokes and it may then hinder its plans to grow in other countries later on.Strength to Operate in the Regulatory Environment
Maidment (2015) believes one of the reasons behind betting firms' mergers is their strategy to be strong enough as an entity to be able to bear higher British tax bills and regulations in the industry. Some analysts view this as a strategy which is not well-planned, because Ladbrokes planned to take over Coral in 1998 with the same intention of better online growth, but the imposed regulations by the government to cease the takeover proposal and notices from the trade and industry secretary about the consequences of hurting the competition, made it discard the proposal (Martin, 2015b). Hence similar hindrances may occur this time around as well if the minute details have not been given enough consideration.Recommendations for Success
Digital Strategy
Jim Mullens, CEO of Ladbrokes admitted in front of the public about the disappointment from poor digital strategy by Ladbrokes, which made them suffer (ProQuest, 2015). In the digital market, Gala Coral accounts for a strong share of about 8% in the UK, while Ladbrokes lags behind with only 6% (Maidment, 2015). Hence in case of the new entity, the innovative ideas and successful technology from Coral may also be used in order to devise a successful strategy for digital marketing. The Coral Group possesses the leading multi-channel technology (Playtech, 2014), which if combined with that of Ladbrokes, would increase their expertise to such an extent that they will be able to upsurge their multi-channel revenue and customers.Separate Investment Entities
Since the declining share price and dividend yield may have an adverse impact on customer confidence, the combined company should still keep the shares of existing shareholders to the entities they prefer, meanwhile transitioning the best case practices in both the entities before the merger takes place. This would help in avoiding any future issues in standardization of processes as has been the case in some merger failure cases (Papathanassis, 2012). Another advantage of this strategic move would be foundation of a recreational scale and improvement in the customers' experience (Schram, 2015), whereby they would feel more valued. It would also upkeep the shareholders' confidence as they would have discretionary power to hold the shares desired by them based on the experiences of customers.Ensuring High Employee Morale
According to media sources, the merger is planned to come into effect legally as a takeover of Coral by Ladbrokes (Farrell, 2015), however, there might be problems arising as a result of this issue at the time of implementation of plans, because research suggests that takeover cases normally prove to worsen the situation for employees in the acquired organisation (Risberg, King and Meglio, 2015). Although there is satisfactory representation from both organisations in the executives' list (GalaCoral, 2015), the real cultural problems may occur down the hierarchy. Ladbrokes Coral would, therefore, need to take care that the impression of the 'acquired firm' is not considered in its literal sense, taking example from the successful merger case of Yawata Steel and Fuji Steel to form Nippon Steel, where the employee morale was kept up throughout (Waverman, Comanor and Goto, 2005: 66). The management must, therefore, develop policies according to which the employees of neither organisation are discriminated against to create a healthy work environment.Appointment of Trustworthy and Reliable Executive Members
There is a probability that the CEO of HBOS, Andy Hornby would occupy a senior position in the executive board of Ladbrokes Coral (Duncan, 2015). Hornby was accused of pushing the bank into massive failure when it was finally rescued after being taken over by Lloyds bank in 2008 (Inman, 2015). Ladbrokes Coral seems to be waiting for the legal inquiry being published about the HBOS case and that Hornby would be taken on the board if not found guilty. One of the executives in the company suggested that he could be given another chance as he is a good retailer and was probably not well-suited for the banking career (Farrell, 2015). However, critics argue that the bank failed as a result of the reckless lending practices during Hornby's leadership (Aldrick, 2012). Although not being appointed for the main executives' list (Duncan, 2015), it is still not fit for Ladbrokes Coral to have Hornby on their panel as it is going to be a huge risk for the company and might hinder its way to achieve its goals successfully. Even if Hornby was not directly responsible to create the culture of high pressure sales, he was still responsible to not cease it when it came to his notice. Therefore, having experienced personnel with clear and honest work history would be best suited for the executive positions to be filled in for the newly merged company.Conclusion
The competitive betting industry poses some amazing opportunities for Ladbrokes Coral, however, the combined entity may be faced with certain threats as well. Therefore, the management must evaluate the benefits of the merger proposition against the criticisms by the analysts to take the necessary actions to ensure the smooth running of the organisation. It may capitalise on Coral's remarkable technology to develop its digital marketing strategy and secure stakeholders' confidence by keeping the share ownership of the two entities separate. Additionally, it can formulate discrimination-free policies to ensure high morale of the employees in both entities, both before and after the merger, and appoint trustworthy and reliable members for its executive board to lead to a successful future.References
Aglionby, J. (2015). Ladbrokes and Coral Confirm Merger. The Financial Times. 24th July. [Online] https://www.ft.com/cms/s/0/6a054918-31cb-11e5-8873-775ba7c2ea3d.html#axzz3olHGUo00 Aldrick, P. (2012). Book Cites Andy Hornby for HBOS Failure. The Telegraph. 9th September. [Online] Available at: https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9531748/Book-cites-Andy-Hornby-for-HBOS-failure.html Bridge, S., and Craven, N. (2015). Merger of Top Bookmakers Ladbrokes and Coral would lead to Huge Local Duplication of Shops all Owned by Same Firm. This is Money. 28th June. [Online] Available at: https://www.thisismoney.co.uk/money/news/article-3141674/Merger-bookmakers-Ladbrokes-Coral-lead-huge-local-duplication-shops-owned-firm.html Duncan, H. (2015). Disgraced Former HBOS Bank Boss Andy Hornby to Land Top Job at Newly-Merged Gambling Giant Ladbrokes Coral. The Daily Mail. 24th July. [Online] Available at: https://www.thisismoney.co.uk/money/markets/article-3172417/Disgraced-former-bank-boss-Andy-Hornby-handed-job-newly-merged-gambling-giant-Ladbrokes-Coral.html Farrell, S. (2015). Ladbrokes and Coral in Talks to Create UK's Biggest Bookmaker. The Guardian. 23rd June. [Online] Available at: https://www.theguardian.com/business/2015/jun/23/ladbrokes-and-coral-in-talks-to-create-biggest-bookmaker FinancialTimes (2015). Ladbrokes profits slump 44% after Shop Closures. [Online] Available at: https://www.ft.com/fastft/373691/ladbrokes-half-year-profits GalaCoral (2015). Joint Announcement Regarding Proposed Recommended Merger. [Online] Available at: https://www.galacoral.co.uk/~/media/Files/G/Gala-Coral/reports-and-presentations/quarterly-report/pr-24072015.pdf Hall, J. (2015). Ladbrokes Share Price Falls after Confirming A£2.3bn Merger with Gala Coral. CityA.M. 24th July. [Online] Available at: https://www.cityam.com/220890/ladbrokes-confirms-23bn-merger-gala-coral Head, R. (2015). Why Playtech PLC is the Jackpot Winner from the Ladbrokes PLC-Gala Coral Merger. The Motley Fool. 24th July. [Online] Available at: https://www.fool.co.uk/investing/2015/07/24/why-playtech-plc-is-the-jackpot-winner-from-the-ladbrokes-plc-gala-coral-merger Inman, P. (2015). Former HBOS Boss Andy Hornby to take Charge of Public Company. The Guardian. 23rd July. [Online] Available at: https://www.theguardian.com/business/2015/jul/23/former-hbos-boss-andy-hornby-to-take-charge-of-public-company Johnson, G., Whittington, R., Scholes, K., Angwin, D., and Regner, P. (2014). Exploring Strategy: Text and Cases. Harlow: Pearson Education Limited. Kleinman, M. (2015). Ladbrokes and Coral Agree A£2.3bn Merger. Sky News. 24th July. [Online] Available at: https://news.sky.com/story/1524609/ladbrokes-and-coral-agree-2-3bn-merger Maidment, N. (2015). Ladbrokes and Gala Coral Team up for Online Betting Push. Reuters. 24th July. [Online] Available at: https://uk.reuters.com/article/2015/07/24/us-gala-coral-m-a-ladbrokes-idUKKCN0PY0JL20150724 Martin, B. (2015a). DA©jA vu for Ladbrokes Investors as Bookie Gambles on Mega-Merger. The Telegraph. 27th June. [Online] Available at: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11703159/Deja-vu-for-Ladbrokes-investors-as-bookie-gambles-on-mega-merger.html Martin, B. (2015b). Ladbrokes Merger Months in the Making. The Telegraph. 23rd June. [Online] Available at: https://www.telegraph.co.uk/news/predictions/leisure/11694843/Ladbrokes-merger-months-in-the-making.html McCarthy, K.J., and Weitzel, U. (2013). Merger Motives - Merger Motives and the Realization of Gains. In: McCarthy, K.J., and Dolfsma, W. (ed.). Understanding Mergers and Acquisitions in the 21st Century, pp. 109-147. London: Palgrave Macmillan. Nimmo, J. (2015). Market Report: Ladbrokes Stumbles as City Doubts Success of its Coral Deal. EveningStandard. 13th August. [Online] Available at: https://www.standard.co.uk/business/market-report-ladbrokes-stumbles-as-city-doubts-success-of-its-coral-deal-a2488616.html Papathanassis, A. (2012). Post-Merger Integration and the Management of Information and Communication Systems: An Analytical Framework and its Application in Tourism. Germany: Springer Science & Business Media. Playtech (2014). Playtech's Multi-Channel Solution Revolutionises the Betting Shop Experience. [Online] Available at: https://www.playtech.com/news/latest_news_and_prs/playtech_s_multi-channel_solution_revolutionises_the_betting_shop_experience ProQuest (2015). Ladbrokes Business Review, Proposed Recommended Merger with Coral Group and Proposed Placing Call - Final. Fair Disclosure Wire. [Online] Available at: https://goo.gl/Px3LXl Risberg, A., King, D.R., and Meglio, O. (2015). The Routledge Companion to Mergers and Acquisitions. New York: Routledge. Rojas, J.F. (2015). Betting Giants Ladbrokes and Coral Merge to Create UK's Biggest Bookmaker - But will it Close Stores and Axe Jobs? Mirror Online. 24th July. [Online] Available at: https://www.mirror.co.uk/news/business/betting-giants-ladbrokes-coral-merge-6128993 Schram, B. (2015). Ladbrokes and Gala Coral Agree on A£2.3bn Merger to Create Bookmaking Giant. International Business Times. 24th July. [Online] Available at: https://www.ibtimes.co.uk/ladbrokes-gala-coral-agree-2-3bn-merger-create-bookmaking-giant-1512379 Volberda, H.W., Morgan, R.E., Reinmoeller, P., Hitt, M.A., Ireland, R.D., and Hoskisson, R.E. (2011). Strategic Management: Competitiveness and Globalization. Hampshire: Cengage Learning EMEA. Waverman, L., Comanor, W.S., and Goto, A. (2005). Competition Policy in the Global Economy: Modalities for Cooperation. London: Routledge. Wolfgang, K. (2008). Synergies, Shareholder Value and Exchange Ratios in "Value-Creating" Mergers: Why Shareholders Should Doubt Management's Pre-Merger Promises. Managerial Finance, Vol. 34, No. 4, pp. 252-261. Wood, G. (2015). Coral and Ladbrokes Merger Result of Adapt-or-Die Phase of Digital Age. The Guardian. 23rd June. [Online] Available at: https://www.theguardian.com/sport/blog/2015/jun/23/coral-ladbrokes-merger-result-of-digital-ageCite this page
Potential Merger Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Football Attendances Essay Online for Free
Introduction
The British football sector is characterised by considerable diversity in relation to the nature, type, size and success of football clubs (Wilson and Piekarz, 2015). However, what these clubs all share is a diminishing ability to attract large audiences. For example, by June 2015, just two months before the start of the 2015/2016 season, the English Premier League club, Newcastle United had only managed to sell 70 per cent of its season tickets; articles that just one decade earlier had been the subject of considerable demand (Edwards, 2015). Clubs at the lower echelons of the English footballing hierarchy, like Millwall and Brighton are faring even worse (Gupta, 2013), while many of those in the Scottish League are suffering a similar fate (Watt, 2014). This paper examines and discusses the drivers of the fall in football attendances and ticket sales in the United Kingdom in recent years. The paper finds that the decline cannot be attributed to any one factor; rather, a number of aspects have combined to produce a decline in interest, or ability of football fans to attend games. Against this background, a number of strategies to boost ticket revenues are proffered. The paper is organised as follows. The next section identifies and critiques four possible reasons for the decline in attendances and sales (the late 2000s recession, the limits of capacity, hooliganism and the increase in the number of televised football matches). Next three novel tactics to boost sales are identified. A short conclusion summarises the key findings of the paper.Causes of decline
The late 2000s recession
In 2008, the British economy officially entered into a recession. Unemployment rose - particularly among the working classes (the social class in which football fans and audiences have traditionally been located), downward pressure was placed on wages, and, as a consequence of growing inflation, disposable incomes were squeezed (Wilson and Piekarz, 2015). It seems reasonable, therefore, to suggest that the decline in the uptake of football tickets by potential attendees is at least partially attributable to their inability to afford the expense. Indeed, research shows that during periods of economic downturn, households cutback expenditure on items that are perceived to be non-essentials or luxuries; for many households, attendance at a football game will fall into one of these categories (Dobson and Goddard, 2011). Thus, a negative correlation between (paid) football attendances and inflation rates should be expected. However, there is some research that indicates that football consumption is in fact, price inelastic, even in the higher price brackets (Forrest, Simmons and Feehan, 2002). What this means is that avid football fans will continue to purchase tickets and attend matches if the relative price increases (as occurs during a recession) even if their economic circumstances should, according to a rational analysis, inhibit this. The price inelasticity of football attendance has been explained according to the theory of fandom (Goldblatt, 2014). This refers to the fact that football should not merely be understood as a game, but as a subculture comprised of a community of consumers whose identities and interests are reinforced through the consumption of the activity of which they are a fan (Harris and Alexander, 1998). Many individuals are long-term fans of football teams (or, of the game in general); their history of interaction with the sport can often be traced through familial lines. In such instances, expression of fandom continues regardless of obstacles such as affordability and economic context. The fact that football is characterised by fandom suggests that the recession alone cannot explain the sharp decline in attendances and revenues witnessed in recent years. However, some commentators have argued that the effects of the recession should be understood in conjunction with the massive, real rise in prices of football tickets that have been evident over the past two decades. Since the 1980s, the cost of attending a football game has increased substantially (Buraimo, 2014). In the English Premier League - the highest professional league in the country - the average price of a ticket has risen by some 1100% (in real terms) since 1995 (Buraimo, 2014). One of the reasons for the huge increase in prices is the need for clubs to invest substantial sums in new talent in order to remain financially viable (Dobson and Goddard, 2011). Devoted fans understand this and may be happy to contribute funds through higher ticket prices during normal economic times. However, faced with declining incomes, even the most dedicated followers may be forced to make cutbacks on attendance.Capacity limits have been reached
Another explanation for the decline in attendances and sales is that the limits of growth have now been reached. During the 1990s and early 2000s, many large clubs built new stadia or extended or remodelled their existing infrastructure (Dobson and Goodard, 2011). Examples include Bolton's Reebok Stadium, which was built in 1997, Sunderland's Stadium of Light (completed in 1997) and the DW Stadium (Wigan) which was built in 1999. Indeed, Deloitte (2014) catalogues some 30 new stadium built between 1992 and 2012. The improvement in facilities and increase in capacity meant that aggregate attendance levels, and hence, revenues, sharply rose in the late 1990s and early to mid-2000s (Dobson and Goddard, 2011). Thus, the fall in numbers attending games and the revenues that this yields that has been witnessed in recent years merely represents a return to what economists term equilibrium, or the natural state of things (Dobson and Goddard, 2011).Hooliganism
Since the 1980s, many football matches have been marred by instances of hooliganism (Hopkins and Treadwell, 2014). Hooliganism refers to a bundle of deviant and criminal behaviours (including violence, destruction, vandalism, intimidation, brawling and fighting) that is not typical of, but unique to the sport of football. Although hooliganism in football has a long history (according to Hopkins and Treadwell, 2014, the earliest recorded incident of football hooliganism occurred as far back as 1880), it proliferated during the 1970s and 1980s in English football. Many teams were supported by organised groups of hooligans such as Middlesbrough's Frontline, the Naughty Forty (hooligans associated with Stoke City) and the County Road Cutters (Everton) (Hopkins and Treadwell, 2014). Growing incidents of hooliganism arguably made physical attendance at football matches far less desirable compared with the ability to watch the sport at home or televised in some space away from the stadium (Jewell, Simmons and Szymanski, 2014). The impact of hooliganism on attendances and revenues may also be more indirect. It may also have been partly responsible for the hike in prices that occurred during the 1990s, as clubs sought ways to attempt to dissuade hooligans from attending games. However, the impact of hooliganism on football attendances and revenues could perhaps be overstated. As Green and Simmons (2015) and Perryman (2013) have both noted, there has been a decline in incidents of hooliganism in recent years in both England and Scotland. This is attributable to a crackdown placed on hooligan activities by British law enforcers as well as increased powers of clubs to prevent sales of tickets to individuals known to be associated with football related crime.Increased access to televised football
Finally, it is argued that physical attendances at football matches have dropped because there is simply no need for fans to attend any longer. As a consequence of new economic models characterised by the sale of the rights to televise football games to a number of production companies, it is possible for fans to watch most games either at home (if they have the relevant subscriptions) or in some other space (such as a public house) (Solberg and Mehus, 2014). Furthermore, channels through which football can be watched and accessed are growing in diversity as a result of advances in communications technologies. The proliferation of mobile devices such as smartphones and tablets means that individuals can tune in to their favourite clubs' games even when they are on the go (Cleland, 2015; Solberg and Mehus, 2014). Although football fans express the joy and excitement of attending a 'real-life' game (Goldblatt, 2014), there are many advantages to watching a game outside of the football stadium. First, audiences have access to home comforts and facilities, such as toilets and drinks, and do not have to endure poor weather which may in fact improve their enjoyment of the game. Second, watching a game at home or in a public space is considerably less expensive than attending a physical game, even if a television (or other platform) subscription must be paid for (Dobson and Goddard, 2011). The cost of ancillary products such as food and drink is lessened, and souvenirs, if desired, can be easily sourced online (Solberg and Mehus, 2014). Thirdly, there may be better camaraderie for fans of the game because large groups of individuals are able to watch the game together; whereas only devoted fans are likely to travel to away games, and the cost of both home and away games, as well as restrictions on sales may prevent some individuals from attending. Fourthly, if hooliganism is perceived to be a problem, fans may believe it to be safer to watch the game away from the stadia (Perryman, 2013). Despite the advantages of watching football games away from the stadia, as well as the increased ability to do so, some commentators argue that the impact of television and other media on the negative economic fortunes of the game have been overstated. Firstly, it is pointed out that clubs derive considerable revenues from their deals with television companies (Cleland, 2015). Secondly, many avid fans view televised games as inferior to watching games in real life. Thirdly, the games of many football clubs, especially those in the lower leagues, are not televised at all (Wilson and Piekarz, 2015). This means that the drop in attendance at these games cannot be attributed to the proliferation of broadcasted matches.Strategies to boost revenues from ticket sales
Many of the factors that may be driving reduced sales are, to some extent, out of the control of the football clubs. Therefore, novel or innovative strategies may be necessary to increase sales. Drawing on the tactics used by American sports teams faced with declining sales (reported in Howard and Crompton, 2004), the following strategies are recommended to UK football clubs to boost revenues from ticket sales.- Use differential pricing. Differential pricing is a pricing strategy in which the price of tickets is adjusted according to the quality of the teams involved in the game, the weather or the time of the season (Dobson and Goddard, 2011). If low audience numbers are expected due to, for example, poor weather or the economic climate clubs are advised to drop prices in order to boost sales.
- Flexible season tickets. This involves offering fans the ability to tailor season ticket packages to their needs and has been found to be highly successful in boosting sales (Howard and Crompton, 2004).
- Facilitate resale markets. Clubs are advised to develop ticket facilities that enable secondary sale of already purchased tickets. This will allow individuals facing financial difficulties to recoup losses by selling tickets to other fans.
Concluding remarks
Football is big business. The survival and thriving of British football clubs depends largely on their ability to attract audiences, to grow those audiences (particularly season ticket holders, who are more loyal) and to convince those audiences to spend cash on ancillary goods (e.g. food drinks and souvenirs) when they are in attendance. However, the ability of clubs in the UK to grow audiences and to convert them into revenues is under threat. This paper has highlighted some of the drivers of the drop in football attendances and revenues from ticket sales in the United Kingdom in recent years. The paper finds that reduced revenues cannot be attributed to any one factor. Rather, the fall in sales is likely due to increased prices in tickets, reduced affordability caused by the economic downturn, the increase in hooliganism and the increased ability to watch football matches in spaces away from the physical stadia. Against this background, clubs are advised to adopt three tactics to support their economic and financial growth.References
Buraimo, B. (2014). Spectator demand and attendances in English league football. In Goddard, J. and Sloane, P. (Eds.). Handbook on the Economics of Professional Football. Cheltenham: Edward Elgar Cleland, J. (2015). A Sociology of Football in a Global Context. London: Routledge. Deloitte (2014). Annual review of football finance. London: Deloitte Dobson, S., & Goddard, J. (2011). The economics of football. Cambridge: and Goddard, Cambridge: Cambridge University Press. Edwards, L. (2015). A third of Newcastle season tickets unsold. https://www.telegraph.co.uk/sport/football/teams/newcastle-united/11706929/A-third-of-Newcastle-season-tickets-unsold.html Forrest, D., Simmons, R., & Feehan, P. (2002). A Spatial Cross-Sectional Analysis of Elasticity of Demand for Soccer. Scottish Journal of Political Economy, 49(3), 336-356. Goldblatt, D. (2014). The Game of Our Lives: The English Premier League and the Making of Modern Britain. London: Nation Books. Green, C., & Simmons, R. (2015). The English disease: has football hooliganism been eliminated or just displaced? In Rodriguez, P., Kesenne, S. and koning, R. (Eds). The Economics of Competitive Sports. Cheltenham: Edward Elgar Gupta, R. (2013). Clubs like Brighton & Millwall take steps to halt declining attendances https://www.bbc.co.uk/sport/0/football/21142999 Harris, C., & Alexander, A. (1998). Theorizing fandom: Fans, subculture, and identity. Jersey: Hampton Press Hopkins, M. and Treadwell, J. (2014). Football Hooliganism, Fan Behaviour and Crime: Contemporary Issues. London: Palgrave Macmillan Howard, D. R., & Crompton, J. L. (2004). Tactics used by sports organizations in the United States to increase ticket sales. Managing Leisure, 9(2), 87-95. Jewell, R. T., Simmons, R., & Szymanski, S. (2014). Bad for Business? The Effects of Hooliganism on English Professional Football Clubs. Journal of Sports Economics, 15(5), 429-450. Perryman, M. (2013). Hooligan wars: Causes and effects of football violence. London: Random House. Solberg, H. A., & Mehus, I. (2014). The Challenge of Attracting Football Fans to Stadia?. International Journal of Sport Finance, 9(1), 3-19. Watt, T. (2014). How has your club's average attendance changed in past 20 years? https://sport.stv.tv/football/clubs/celtic/302136-how-has-your-clubs-average-attendance-changed-in-past-20-years/ Wilson, R., & Piekarz, M. (2015). Sport Management: The Basics. London: Routledge.Cite this page
Football Attendances Essay Online For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Strategy of Growth Example for Free
- Summary
- 1. Introduction
- 2. The Interface and Non-Exclusive Nature of the Growth Options
- 3. Advantages and Disadvantages of the Growth Options
- Organic Development
- M&A
- Alliance and Joint Ventures
- 4. Synergetic Growth and Drawing Synergies
- 5. Contrasting Key Performance Indicators and amplified needs
- Perspective
- Key Performance Indicator
- 6. Conclusions
- REFERENCES
Summary
The paper presents a contrast between conservative and aggressive growth options. It discusses mergers and acquisitions, organic growth and alliances using examples from a range of industries which include online businesses, brewery firms, soft drink giants and also a major pharmaceutical industry merger. In examining the interface between the different growth options the paper posits that they are not mutually exclusive and one may lead to the other, whereas a portfolio of growth options is strategically astute to have. The advantages, disadvantages and issues surrounding the growth options suggest that it is a risk-benefit premise that underpins the value perceptions from a chosen growth route. Competitive situations and resourcing s aspects also govern the choice a chosen route.1. Introduction
This paper discusses the different routes to growth that an enterprise might take. Given the growing popularity and mixed success of aggressive growth option of mergers and acquisitions, the paper compares and contrasts them with more conservative options like organic growth and alliances. It first presents the interface between the different routes and then focuses on their relative advantages and disadvantages. The contrast is also brought out in discussing needs, and in highlighting the issue of achieving synergies for delivering greater value under the different growth routes. The paper focuses on organic growth and mergers and acquisitions in the main, with some development of the context of alliancing in comparing the two. It closes with some strategic highlights from the discussion.2. The Interface and Non-Exclusive Nature of the Growth Options
Strategic growth options for a firm usually take three forms. These are growth through alliances with other firms in different areas ranging from R&D to distribution and other forms of joint ventures; growth through mergers or acquisitions (M&A) – that implies creating a new entity through a merger or an expanded firms through an alliance and; organic development that is essentially about growing as an organism through overtime development using investment from surpluses the firm creates from its operations to acquire more assets, personnel and diversify or expand into business areas (Sudarsanam, 2003, p. 70). While these are different options they are not necessarily mutually exclusive. An organisation can follow one option or the other simultaneously. For example a global firm can alliance with another in a new market for purposes of accessing its distribution network while continue to grow organically in another market it has a very entrenched position in. In still another market where competition is intense and competitors are vying for key suppliers it may engage in vertical integration with acquisitions along the supply chain. The example of Pepsi is a validation of such simultaneous occurrence. It acquired key bottling firms in Mexico at three times the price they were worth in early 1980s; this affected the growth of its competitor Coca-Cola very adversely. Similarly Pepsi tied up with Thumps-Up the Indian soft drink brand to penetrate the market before making an offer of acquisition that Thumps-UP could not refuse (Weston et al., 2003). This synergetic and partnered penetration also worked well with making a foreign brand get acceptance in India, which had traditionally been very resistance to foreign brands. In the meantime of course Pepsi continued to grow organically in other markets and later in the markets it thus entered through more externally oriented growth options i.e. alliances and mergers and acquisitions. This example opens up one more dimension of the interface between the different strategic options. This is about one leading to the other. The most familiar one is the alliance option leading to a merger or acquisition- where the former is essentially a taster that builds confidence in the merger. After merger or acquisition the strategising for organic development becomes very crucial, because two different legacies come into play – moving forward as one firm is bereft with challenges (Datta, 1991; Mintzberg et al., 2003, p. 129). The following figure captures this interface. Organic development is a stable option while an alliance is an option with an external locus that can (but not necessarily will) lead to an M&A, while M&A itself is a function of further and focussed organic development. Alliances can also result in further progress along the partnership trajectory or withdrawal, contingent on how the issue of mutual benefits and over time trust shapes up. An M&A in contrast – if it fails can also lead to disposal or a de-merger as is sometimes called, which is very difficult and costly to do (DePamphilis, 2008, p. 531). It can also require organic development that is not – normal but calls for restructuring as well to co-opt the new organisation that comes into being requiring a merger of two legacies. Figure 1: Interface and Non-Exclusive nature of the Growth Options3. Advantages and Disadvantages of the Growth Options
This section extends the contrasts the organic development and the mergers and acquisitions option, building on the prior section that outlines there nature and mutual interface. In doing so it also invariably engages a comparison with the 'alliances' perspective which is the third and arguably the midway perspective intertwined with the other two as explained in the preceding section. The disadvantages and advantages of the growth options are discussed and then summarised. Because of its internal locus of control organic development is easier to control. It is an incremental growth option which builds on core competencies and feeds on rents the firm draws from its operations to fuel expansion. To this extent while it is slower relative to other options it also entails lower risk. Even if debt financing is subscribed to – it is leveraged on current operational throughput and not on future estimates as in mergers and acquisitions, where such estimates are highly contingent on the success of a complex post-merger acquisition process (Ghoshal and Gratton, 2002, p. 34). The organics growth option often involves more upfront revenue costs even if debt financing is subscribed to. Furthermore its value in terms of surprising competition because of its slow trajectory is low. Competition is likely to predict the outcomes and resultant value a firm will draw from its investments in organic growth. Alliances and Joint Ventures are a step up from the mergers and acquisition process they transcend limited competencies by alliancing and drawing the resources of the partner. In many cases such alliances lead to much superior value than would be possible given the constrained and limited scope of one enterprise's resources and capabilities. This unlike organic development moves can usually surprise competitors but can also crumble easily because it is a partnership based on a perception of mutual benefit. Only when it goes beyond benefits to trust can it be rather stable. It does not give real control to anyone enterprise and usually each tries to get more value out than the other. Relative dominance of collaborators may shape an alliance that is not only stressful but is likely to sometimes result in sub-optimal value for both parties. However, when it transcends the benefit harnessing premise to trust between partners it can sometimes sow the seeds for a rather amicable merger and acquisition (DePamphilis, 2008, p. 539). Mergers and acquisitions do not usually arrive by joint ventures but independent of it. They are closely guarded secrets even if deliberated for considerable period of time. When they occur and/or are announced they can cause a ripple in the industry and also surprise competition. Mergers and acquisitions fundamentally extend competencies by integrating new ones provided these new ones do not conflict with the old ones/ the other set of competencies, but act as complements. The economies scale and scope in production and in reach to markets also stands extended if there is not much duplication or conflict in drawing synergies (Harrison, 1991, p. 178; Sirower, 1997, p. 17). In essence the search for parties with true complementary resources is critical for drawing synergies for benefits from an M&A. Not only the merger and acquisition costly but it hits profits in the short run due to market uncertainty in the short run and also focus on integration than operational excellence that is required in the immediate aftermath. This aftermath can extend to several years as in the case of GlaxoSmithKline (GSK) than came together as a consequence of the merger between GlaxoWellcome and SmithKlineBeecham in 2000. The post-merger integration activities continued for almost the next few years. For instance, the post-merger integration of project practices was rolled out after initial smoothening and alignment of resources only in 2003 and then took another few years of refinement based on feedback to get firmly in place. Though this was a successful merger the process itself was costly in terms of resource commitment (Weston et al., 2003, p. 151). Similarly the dilemma faced by AmBev the merged entity from the coming together of Anthartica and Brahma took even longer to stabilise because of fundamental nature of the business of these two Brazilian brewery firms. One was conservative and the other rather ambitious in terms of marketing and product selection. This impacted some incongruence in how the combined top leadership made strategic decisions post-merger. Another important thing to note is that in the rushed market manoeuvres of the 1990s it was always an explicit dilemma – whether to focus on integration or go for more mergers and acquisitions. Though AmBev opted for the latter and was successful- it was a risky manoeuvre to invest in M&A's without realising true synergies from past M&A's (Mintzberg et al., 2003, p. 130). This also brings forth another aspect of managerial hubris that can be fuelled by successful M&A's initially and making the top leadership run on this trajectory of high risk for very long periods. The case of Saatchi and Saatchi that found this to be its nemesis is aft cited as an example of M&A moves that went on for too long, were led by managerial hubris and eventually led to organisational decline, because synergies were not appropriated (Minztberg et al., 2003, Haleblian et al., 2009). The risk mergers and acquisitions entail puts an argumentative quotient to their speed. They are not really fast if one were to look at the time it takes to draw synergy, and if done careful require more time than usually appreciated to scope a relationship like in an alliancing arrangement. As Faulkner and Bowman (quoted in: Gaughan, 1994) say: "Of the various opportunities to growth which may exist, the option of acquisition [and merger!] is by far the riskiest, unless pursued after an extended period of close collaboration with the target company [between the target companies] as a partner" In summary the relative advantages and disadvantages can be summarised as follows: Table 1: Summary of Advantages and Disadvantages of growth Options| ROUTES TO GROWTH | Organic Development | M&A | Alliance and Joint Ventures |
| Advantages | Easier to control | Arguably perceived to be Fast (but in reality could be painstakingly slow if Post merger integration issues are not tackled well) | Opens exciting opportunities |
| Builds around core competencies | Extends Competencies and opportunities | Transcends limited competence | |
| Lower Risk | Surprises Competitors in many cases | Surprises Competitors in some cases | |
| Disadvantages | Slower | Costly | May crumble easily-backing out easier |
| May involve upfront revenue costs | More Difficult and riskier given the history of M&A –performance indicators ambiguous | Collaborators may dominate | |
| Unlikely to surprise competitors | Hits Profits | Doesn't give control-arguably lower quality earnings |
4. Synergetic Growth and Drawing Synergies
In organic growth option synergetic growth is a given because the locus of control is internal. Any improvements in profitability and performance say in R&D and market growth indicate the synergies that have been accumulated and delivered for growth. The incremental value is usually slow but clearly aligned to organizational resources and capabilities. The idea becomes more nuanced when one speaks of two entities coming together to shape a new one as in an M&A. The sense for doing this will only when the combined value is greater than the sum of the parts i.e. greater than the sum of their value generation when they were apart. This is where the contrast of value, synergies and also expectations between organic growth and mergers and acquisitions becomes much amplified from a perspective of 'rationale' (Larsson and Finkelstein, 1999, p. 21; Sirower, 1997, p. 41). Synergy theory expects that there is really "something out there" which enables the merged /combined entity to create shareholders value. In other words synergy is ability of merged/combined entity to generate higher shareholders wealth than the stand alone entities. Economically it can be said to translates into ability to further limit competitors' ability to contest their or the targets' current input markets, processes, or output markets, and/or ability to open markets and/or encroach on their competitors' markets where these competitors cannot respond. Clearly the shift in synergies or expectations about it is only incremental in the case of organic development in the case of mergers and acquisitions this is rather radical (Sirower, 1997, p. 34, 45) The two main types of synergies are operating and financial synergy- as discussed in literature that tried to examine the efficacy of merger and acquisition cases. Operating synergy refers to the efficiency gains or operating economies that are derived in horizontal and vertical mergers. Financial synergy in the main refers to the possibility that the cost of capital can be lowered by combining one or more companies. One of the main sources of operating synergy is the cost reductions that occur as a result of corporate combination. These cost reductions may come as a result of economies of scale (decrease in per unit cost due to the increase in size or scale of the company). The other is economies of scope which is the ability of the firm to utilize one set of inputs to provide a broader range of products and services. Financial synergy refers to the impact of a corporate merger or acquisition on the costs of capital to the parties in the M&A transaction. However whether financial synergy actually exists is a matter of dispute within corporate finance. The combination of firms can reduce the risk if the firm's cash flows are not perfectly correlated. If the transaction lowers the volatility of cash flows then the suppliers may consider the firm less risky (Filatochev and Toms, 2003, p. 900). Drivers of synergy are thus a whole gamut of factors in mergers and acquisitions in contrast to routine and linear combination of production and operations feeding into strategy in organics development. This relative complexity in mergers and acquisitions is as outlined in the figure below. These combine and augment each other for delivering synergy which is the indicator of an M&A transaction. Factors such as strategic relatedness, culture and modus operandi of the transaction influence the extent of and time taken to achieve synergy levels that are stated in the transaction objectives. It is not that these factors do not appear in organic development scenario – only that they are streamlined and dormant as concerns because of the stable platform of incremental and slow pace of investment with mostly lower expectations of returns compared with M&A's (Haleblian and Finkelstein, 1999) Figure 2: Amplification of a complex set of factors in M&A relative to organic growth (Adapted from: Weston et al, 2003, p. 43) For example, in the case of the eBay –Skype transaction in the middle of the last decade operational synergy in this vertical integration is argued in context of economies of scope given the ideas of 'creating more users', ''increasing presence abroad', 'the role of real time communication in e-commerce' e.t.a. Economies of scale have been implied in the idea of 'creating and enabling faster communication between buyers and sellers'. EBay also acquired resources to compete with rivals ranging from Google, Microsoft et al from a perspective based on Porter's five forces model (discussed in - Mintzberg et al,, 2003, p. 131). There is some argument about how the markets would see this integration given that Skype was seen as potentially more volatile. Though there is insufficient financial information to comment further on financial synergy, the mode of acquisition pay-out being linked to performance and with sales improvement- the argument may contribute to stability and financial value perception of the M&A deal. The rolling acquisitions eBay made also resulted in making the suppliers of capital a bit apprehensive like : is it too many too quickly, will it be a case of indigestion. Clearly the M&A mode brings external control and external interface into play that goes beyond just the external entity being merged with or acquired. Also, the eBay and Skype deal looked at a gestation period contingent on performance. This was de-facto not a complete deal in conventional M&A terms but arguably a progression from a quasi-alliancing kind of a mode to a complete acquisition. Organic development at eBay was argued to be costly relative to just acquiring Skype (given video-voice based real time communication technologies). However, this perception of cost as argued in acquisition justification talks is sub-optimal; the costs have to include the risks of integration, investment of resources in facilitating and internalizing the acquisition – among others. The Ebay and Skype integration did not last long, with eBay selling off Skype in 2009 (TC News, 2009). From a true cost perspective that sometimes includes unforeseen elements including firm reputation, it is rare to find an M&A that is less costly than organic development. Of course when a success and with returns factored in M&A is a option that promises returns that are much higher- I a typical high risk high return setting that characterizes growth options. Also while an alliancing though could be a competitive strategic option in the case of Ebay-Skype, Skpye was an acquisition target for competitors like Goggle and Microsoft, making it sensible for eBay to go for an acquisition. However, in hind sight eBay could do with a mix of growth options across the transactions it has made with the 18 companies (all acquisitions) to closely ponder where and if, it could go for alliancing or organic development in some cases instead of acquisitions to optimize usage of company resources (TC News, 2009; Harrison, 1991).5. Contrasting Key Performance Indicators and amplified needs
Another complex process that entails Mergers and Acquisitions is a view on the key performance indicators that becomes inherently complex. As the list of generic key performance indicators suggests- almost all become amplified. For example retention of existing customers while in organic growth is subject to standard marketing strategies in M&A it also becomes a function of realigning brand equity related perceptions. The list in the table below also have some elements that are explicit in terms of mergers and acquisitions like on achieving synergy and integration and also systems alignment and personnel leaving (turnover). This creates new pressures for management- alternate processes and even internal change projects have to be set up. This is also a validation for the earlier assertion that it can in effect be time consuming and because of such diverted attention, among other things M&A can hit profits in the short run. Table 2: A perspective on performance concerns Perspective | Key Performance Indicator |
| Customers | - Retention of Existing Customers - Efficiency in Delivering Services |
| Financial | - Synergy Components Captured to Date - Timely Financial Reporting - Timely Cash Flow Management |
| Operational | - Completion of Systems Analysis - Reassignments to all Operating Units - Resources Allocated for Workloads |
| Human Resource | - Percentage of Personnel Defections - Change Management Training - Communication Feedbacks |
| Organizational | - Cultural Gaps between companies - Number of Critical Processes Defined - Lower level involvement in integration |
6. Conclusions
This paper has shown a clear case for contrast between mergers and acquisitions and organic growth, and has also contextualized the midway route of alliancing. In highlighting issues, concerns and relative merits and demerits the paper is particularly oriented towards highlighting the relative risk of M&A and clarifying the mistaken perception that they are quick. They can be rather slow as well given the need for achieving synergies through post-merger acquisitions. Among other things another highlight has been the implications for organizations to adopt a mixed portfolio of growth strategies contingent on the situation and resourcing strengths.REFERENCES
Datta, D. K. (1991). Organizational fit and acquisition performance: Effects of post-acquisition integration. Strategic Management Journal, 12(4): 281-29 DePamphilis, D (2008). Mergers, Acquisitions, and Other Restructuring Activities. New York: Elsevier, Academic Press. pp. 520-543 Filatotchev, I. and Toms, S. (2003) 'Corporate Governance, Strategy and Survival in a Declining Industry: A Study of UK Cotton Textile Companies', Journal of Management Studies, 40, 4: 895-920 Gaughan, P. (1994). Readings in Mergers and Acquisitions. Blackwell, pp. 127-444 Ghoshal, S. and Gratton, L. 2002. Integrating the enterprise. MIT Sloan Management Review, 44(1): 31-38. Haleblian, J. & Finkelstein, S. (1999). The influence of organizational acquisition experience on acquisition performance: A behavioral learning perspective. Administrative Science Quarterly, 44(1): 29-56. Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., and Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35: 469-502 Harrison, J. S.(1991). Synergies and post-acquisition performance: Differences versus similarities in resource allocations. Journal of Management, 17(1): 173-190. Larsson, R. and Finkelstein, S. (1999). Integrating strategic, organizational, and human resource perspectives on mergers and acquisitions: A case survey of synergy realization. Organization Science, 10(1): 1-26. Mintzberg, H. Lampel, J. Quinn, J.B. and Ghoshal S (2003) The Strategy Process: Concepts, Contexts Cases, Prentice Hall, pp. 123-134, 231-327. Sirower, M. L. (1997). The Synergy Trap. New York: The Free Press, p. 13-71. Sudarsanam, S (2003). Creating Value Through Merger and Acquisitions: The Challenges, an Integrated and International Perspective, 1st Edition, Prentice Hall. pp. 33-78 TC News (2009) EBAY sells Skype, Available online from https://techcrunch.com/2009/09/01/confirmed-ebay-sells-skype/ [Accessed 21 November 2011] TechDirt (2006) Still Waiting To See The Magical Synergies Of The eBay-Skype Mergerhttps://www.techdirt.com/articles/20061113/005402.shtml [Accessed 22 November 2011] Weston, J.Fred, Mark L. Mitchell, J.Harold Mulherin (2003) Takeovers, Restructuring, and Corporate Governance, 4th Edition, Prentice Hall. pp. 13-56, 112-167Cite this page
Strategy of Growth Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Organisational Strategy Example for Free
1. Introduction
This report has been prepared on the request of the CEO of Crossover Technologies Limited (Crossover), a UK headquartered supplier of a range of services to health care professionals. The company has four major service groups, namely, (a) medical transcription, (b) scheduling, (c) billing and coding, and (d) customised software solutions. With delivery centres in the United States, the UK, India and Africa, Crossover has been growing steadily since its founding in 2000. The US government's recent decision on widening the health care net in the country in order to include millions of additional people, presently uncovered by health insurance, in its ambit has been accompanied with the framing of policies and regulations for health care professionals; calling upon them to introduce and maintain Electronic Medical Records (EMR) for all their patients (Adams, 2009, p1). This decision has created an enormous new market for suppliers of such services and has radically altered existing perceptions and paradigms in the sector (McCullagh, 2009, p1). Observers expect an enormous shaking up of the sector to occur because of changes in workforce requirements, adoption of HR strategies and policies, new entrants, and introduction of game changing software (McCullagh, 2009, p1). Whilst Crossover and other industry participants have been anticipating such a development in the US, its actual occurrence has proved to be unsettling and most companies are reviewing their strategic options in this radically changed environment. Crossover has on its own been developing proprietary web based software, which, it feels, will help in improvement of its competitive advantage and in the growth of its market share. Overall projected scenarios of the industry are however unclear, because of the possibility of entry into the sector by big players with deep pockets, ramping up of operations by existing sector participants, and development of alternate products by different companies. This report deals with evaluation of the causes for the development of a paradigm shift and the identification of the different external factors that are expected to impact the organisation. The report analyses the existing strategy of the company and evaluates the possible outcomes of the existing strategic programme of Crossover. The concluding section deals with the actual impact of environmental changes and paradigm shifts on the various organisational strategies of market participants.2. Organisational Overview
Crossover was founded in 2000 by two UK based entrepreneurs as a private limited company with equity from personal sources, as well as from family and friends (Crossoverint.com, 2008, p1). The company aimed to provide services to small and medium medical practices, comprising of one to twenty doctors, in the US and in the UK, for the maintenance of clear and easily accessible records of the medical histories of their patients (Crossoverint.com, 2008, p1). Such records were at that time prepared by the secretarial staff of such practices, either from personal dictations from doctors or from notations on the physical records of individual patients (Crossoverint.com, 2008, p1). Crossover entered the medical transcription business by establishing two small medical transcription centres in South Africa and India (Crossoverint.com, 2008, p1). Health care professionals in the US and the UK would dictate the medical history of patients into recording machines, the contents of which would be transmitted across continents over leased lines (Crossoverint.com, 2008, p1). The voice recordings would be converted into data processed word formats by accent trained workers, edited carefully, and sent back to the clients before the commencement of the next working day (Crossoverint.com, 2008, p1). Whilst the initial years were difficult for the company because of numerous production associated problems, Crossover was able to grow steadily in the US market, especially in the affluent Boston Philadelphia corridor (Crossoverint.com, 2008, p1). The company has, over the years, added staff to its Indian and South African delivery centres and introduced services in areas of scheduling, billing and coding, and customised software solutions for the health care sector (Crossoverint.com, 2008, p1). Crossover has gained a reputation for quality that has helped it in retaining clients despite the entry of new competitors and rampant occurrence of price cutting between companies to wrest away business (Crossoverint.com, 2008, p1). The company has grown at an annualised growth rate of approximately 13% during the last five years. Its current turnover is approximately 40 million USD (Crossoverint.com, 2008, p1). Crossover employs 450 persons, 375 of whom are based in the delivery centres at Cape Town and Bangalore (Crossoverint.com, 2008, p1). The majority of the marketing staff is located in the US (Crossoverint.com, 2008, p1). The corporate headquarters of the business continues to be in the UK, primarily because of its midway location between the delivery centres and the main market of the company (Crossoverint.com, 2008, p1). Medical practitioners in the UK are however beginning to look at EMR seriously and Crossover hopes to achieve some growth in UK revenues in the coming years (Crossoverint.com, 2008, p1). Crossover has invested the major portion of its profits during the last 3 years into the development of a web based technology that can be bought and installed by individual practices (Crossoverint.com, 2008, p1). The new system has numerous features that simplify and add flexibility to the existing EMR process (Crossoverint.com, 2008, p1). Doctors can manage their complete medical records efficiently with the system, and use voice recording options, if they wish to dispense with transcontinental transcription processes (Crossoverint.com, 2008, p1). Installation of such systems is expected to result in substantial savings of recurrent costs for health care practices (Crossoverint.com, 2008, p1). Crossover derives practically 80% of its revenues from the medical transcription division. The other service divisions came about primarily because of demand from existing clients and the company has made little effort to grow them, both in terms of internal competencies and in terms of sales.3. Environmental Changes and Development of Paradigm Shift
The US government passed a path breaking health care reform bill in March 2010 (Lotich, 2010, p1). The bill aims to make health care more affordable to Americans through (a) the introduction of substantial tax cuts that will benefit middle class families investing in health care, and (b) by reducing premium costs for the families who are unable to afford coverage today (Lotich, 2010, p1). The legislation is expected to help approximately 32 million Americans, (who are at present uncovered), to invest in health care coverage (Lotich, 2010, p1). Approximately 95% of the population of the country is now expected to be covered under health care (Lotich, 2010, p1). The bill will also bring about far greater accountability in the health care sector through the introduction of appropriate rules and regulations for insurance companies and medical practitioners (Lotich, 2010, p1). The health care bill places significant emphasis on implementation of electronic medical records and systems, considering them to be instrumental to the ultimate success of health care reform policies (McCullagh, 2009, p1). A recent report from Accenture predicts that approximately 60% of US doctors in small and medium practices, which do not presently use EMRs, intend to purchase and install EMR systems in the coming two years (McCullagh, 2009, p1). Considering that only 6% of such practices use EMRs at present, the expansion in demand is expected to be exponential in nature (McCullagh, 2009, p1). Such increase in adoption of EMR is expected to come about because of two specific causes, financial incentives for implementation of EMR systems and federal financial penalties for their non-adoption (McCullagh, 2009, p1). The intention of hundreds of thousands of doctors in the US to buy and implement EMR systems is expected to radically change a number of premises about the EMR industry and associated businesses like medical transcription. The medical transcription industry will be impacted in several ways by the passing of the health care bill. The market for services to health care practitioners is expected to explode in the coming years and generate work of magnitudes that can be compared to the Y2K period. The requirement for implementation of EMRs in the US will lead to the creation of an enormous new market in EMR services. This will in turn spur the formation of thousands of companies across the world that aim to provide such services and lead to the creation of millions of jobs. Market expansion will lead to a surge of new entrants from across the world, especially from countries like India, Brazil and South Africa, and lead to the fresh demand for thousands of jobs in developing countries. With it being difficult to meet such sharp demand in services in such a short period, the increased needs of the US health care sector will inevitably lead to (a) the entry of companies with lesser competencies, (B) quality issues, (c) HR and training challenges, and (d) the inevitable demise of many start-ups. The exponential increase in demand will also lead to intense work in development of software and applications by resource rich organisations and to the possible generation of breakthroughs and game changing software. The coming years are thus expected to be uncertain in areas of market size, product development, service formulation, entry of new entrants, development of substitute technology, creation of jobs, cross continental transfer of wealth and services, and intensification of competition. A paradigm shift of such dimensions will very obviously have numerous strategic implications for industry participants, including companies like Crossover.4. Strategic Implications of Paradigm Shift in Business Environment
The anticipated alteration in the US health care services environment will obviously have wide strategic ramifications for market participants (Henry, 2008, p 14-36). The extent of competitiveness in a market is fundamentally gauged, with the use of Porter's five forces analysis, from the power of buyers, the power of sellers, the possibility of new entrants, the threats from substitutes, and the intensity of competition between market participants (Henry, 2008, p 14-36). The power of buyers in the sector is expected to reduce because of the enormous anticipated increase in the number of medical practices intending to purchase and implement EMR services. The power of suppliers, namely EMR and medical transcription companies, is not very high at present because of low levels of interest for EMRs among medical practices. Whilst the power of suppliers should in the normal course of events increase with such projected increase in demand, their power could be reduced by the entry of numerous new entrants in the market place. The threat from substitutes is also expected to be extremely high, with high resource organisations like Google readying their EMR products for the market. Competition amongst existing suppliers is keen at present and is expected to intensify further, as all participants shore up their infrastructure and pitch for increased market share. The overall market is thus expected to be in a state of flux even as competitive activity is expected to increase. The market for medical transcription in the US has until now been influenced mostly by costs considerations, with suppliers ready to provide transcription services at fees ranging from 8 to 12 cents per line (Crossoverint.com, 2008, p1). Whilst the price of medical transcription services is expected to increase in future because of greater demand, as well as financial incentives to medical practices for EMR implementation, the benefit of such increase in prices and market demand may well be offset by greater required investment in infrastructure and recruitment and training costs (Crossoverint.com, 2008, p1). Porter's theory of generic strategies calls upon companies to choose between strategies that aim either at cost leadership or at differentiation of products and services (Gilligan, 2005, p 7-28). Whilst cost leadership in this area of business will possibly require substantial investments in infrastructure, size of workforce, and training, companies could also find lucrative niche markets through differentiation of services, introduction of new products, and improvement of quality (Gilligan, 2005, p 7-28). Companies will therefore be required to choose specific strategies for the future, whose relevance and market suitability could well decide the success, failure and the ultimate fortunes of such organisations (Gilligan, 2005, p 7-28). Companies like Crossover have different services in their service portfolio, some of which provide them with growth and sustenance, even as others either pull them down or provide hope for the future. The Boston Consulting Group (BCG) Matrix separates such portfolio components into easily understandable categories like Cash Cows, Stars, Dogs and Question Marks. Cash Cows denote product groups that generate cash and are in the mature period of the product lifecycle, even as Stars represent product groups that are expected to do well and drive organisational growth in future (Business Resource…, 2010, p1). Dogs represent products that are adversely affecting business operations, whilst Question Marks represent groups that are yet to show indication of advantage or disadvantage (Business Resource…, 2010, p1). Crossover, for instance has only one Cash Cow, the transcription business, and its other services can be categorised, either as dogs, or more charitably as question marks. The company does however have a proprietary software product that could become a Star in the changed environment and drive the company's growth considerably in the coming years. Crossover thus faces very important strategic challenges and will need to take important strategic decisions in the near future in light of the shifting of the basic paradigms of its business sector. Crossover will have to give serious thought to the changing environment of its business sector, forecast likely scenarios and competitive environments, take note of the shifting paradigms and decide upon a medium and long term corporate strategy (Baker, 1992, p 3-19) defined paradigm to be sets of rules that define boundaries and instruct organisations on how to behave within such boundaries (Alhujailli, 2008, p1). With the basic premises, assumptions and the boundaries of its business sector going through radical alteration, Crossover will need to decide between staying with its established business of medical transcription and trying to take advantage of its existing infrastructure, customer base and skill sets to grow its business, or change the established rules of the game and establish new paradigms for the business (Alhujailli, 2008, p1). The company has over the past few years developed proprietary software that can help doctors to manage their EMR records on their own with great efficiency and dispense with cross continental medical transcription processes. The product provides doctors with the option of recording case details and updating medical histories from any location of their choice, choosing between voice recognition and transcription facilities, and handling medical records on their own or through Crossover. The development of the software through the joint working of its software personnel at South Africa and India has also led to its development at a fraction of the cost that would have been incurred in the UK or the USA and the company can therefore sell it at an extremely attractive price to thousands of doctors. Crossover will need to decide on making a serious effort to sell its proprietary software product and by so doing shift or possibly pioneer a new paradigm in the EMR sector, wherein medical practices become increasingly self-reliant in handling their medical records, or stay with its established medical transcription business and take advantage of the anticipated market expansion to grow its business. The first option appears to be the more optimal strategic decision for the company because of associated first mover benefits and the opportunity to increase growth substantially in its chosen business sector. Continuing with its current service mix might well lead to obsolescence, growing irrelevance, and loss of competitive advantage to other fleet footed, innovative and dynamic market participants. Whilst the company will necessarily have to fund its product introduction through the funds generated from its medical transcription business, it will have to alter its business model of providing economical transcription services to clients from distant locations by incorporating the selling of a pioneering and potentially game changing product to a much wider audience in its market strategy. The decision will also require the company to change from its current strategy of cost leadership to one of product differentiation and target a significantly increased market. Such significant strategic changes will require Crossword to bring about important changes in its organisational culture and make marketing of products an important business objective. Organisational cultures are developed over time and whilst represented by a range of symbols and totems are usually manifested in organisational attitudes towards market aggressiveness, innovativeness, internal communication, hierarchical structures, and taking of risks. Crossword is likely to have an entrenched service oriented culture, which whilst customer friendly, may possibly lack the market aggression and initiative of successful selling organisations. The senior management will thus have to bring about changes in organisational culture. Changing organisational culture is a difficult task because of changed resistant attitudes of employees. Experts like Kotter and Lewin recommend the implementation of carefully planned stage wise implementation of change management initiatives for achievement of optimal results. Crossover will be well served by the use of their theories in the formulation of its change management programme.5. Conclusions
This review of the recent developments in the market for services to small and medium health care professionals reveals how the passing of health care legislation in the US has radically changed the existing paradigms of this sector, introduced huge opportunities for market participants to grow and develop their businesses, and created significant challenges that will need to be overcome by such participants for organisational success in a dramatically altered environment. The analysis also reveals the significant effect of environmental changes on the competitiveness of specific business sectors, with special regard to, in this case, increase in intensity of competition and the possibility of threats from substitutes and new entrants. Such changes can, as in the case of Crossover, require companies to forecast likely market scenarios in the short and medium term, and thereafter make critical strategic decisions on alteration of strategic objectives, selection of markets, allocation and use of resources, and assumption of the role of paradigm shifters. Crossover's future success will depend upon the strategic choices it makes today and on the ways in which it deploys its many market and organisational resources and strengths in response to the changed business environment.References
Adams, M., 2009, "What's Really in Obama's Health Care Reform Bill", Naturalnews.com, Available at: www.naturalnews.com/026733_health_health_care_healthcare.html (accessed August 17, 2010). Alhujailli, A., 2008, "Paradigm Shift Deployment Using Lewin's Force Field Analysis", Available at: ezinearticles.com/? Paradigm-Shift-Deployment-Using-Lewins-Force-Field-Analysis (accessed August 17, 2010). Barker, J. A., 1992, Future edge: discovering the new paradigms of success, New York : W. Morrow. Barney, J., 1991, "Firm Resources and Sustainable Competitive Advantage", Journal of Management, 17, 1. Burgleman, R., Christensen, C., & Wheelwright, S., 2003, Strategic Management of Technology and Innovation, 4th edition, NY: McGraw-Hill/Irwin. Business Resource Software Inc, 2010, "Boston Consulting Group Matrix", Available at: www.brs-inc.com/models/model14.asp (accessed August 17, 2010). Chheda, C. N., 2005, 2005, "Electronic Medical Records and Continuity of Care Records - The Utility Theory", Application of Information Technology and Economics, Available at: https://www.emrworld.net/emr-research/articles/emr-ccr.pdf (accessed August 17, 2010). Crossoverint.com, 2008, "Crossover Medical Technology Inc, Enabling Quality Patient Care", Available at: www.crossoverint.com/ - United States(accessed August 17, 2010). EMR Experts Inc, 2009, "Electronic Medical Record & Practice Management Software", Medical Web Experts, Available at: www.emrexperts.com/(accessed August 17, 2010). Francehan, M., 2010, "Who's Cashing In on Health-Care Reform", fastcompany.com, Available at: www.fastcompany.com/.../health-care-reform-bill-information-technology(accessed August 17, 2010). Gilligan, R. W., 2005, Strategic Marketing management, 3rd edition, Oxford: Elsevier Butterworth-Heinemann. Henry, A., 2008, Understanding Strategic Management, Oxford University Press, Oxford. Hitt, A. M., Ireland, D. R., & Hoskisson, E. R., 2008, Strategic Management: Competitiveness and Globalization, Concepts and Cases, 8th edition, United States: South-Western College Pub. Lotich, B., 2010, "What Obama's new health care bill means for us", Christian Personal Finance, Available at: www.csmonitor.com/.../What-Obama-s-new-health-care-bill-means-for-us (accessed August 17, 2010). McCullagh, D., 2009, U.S. stimulus bill pushes e-health records for all, Available at: news.cnet.com/8301-13578_3-10161233-38.html (accessed August 17, 2010). McNamara, C., 2008, "Driving Forces and a New Organizational Paradigm", Free Management Library, Authenticity Consulting, LLC. Porter, M. E., 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, 33-61. Schilling, M., 2009, Strategic Management of Technological Innovation, 3rd edition, NY: McGraw-Hill/Irwin. Smith, D., 2010, "FACTBOX-Summary of Obama's Healthcare proposal", reuters.com, Available at: www.reuters.com/article/idUSN021697012010030 (accessed August 17, 2010). White, C., 2004, Strategic Management, 5th edition, Basingstoke: Palgrave Macmillan.Cite this page
Organisational Strategy Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Market Share Essay Example for Free at Magic Help
The objective of this essay is to examine the current marketing strategy and marketing activities of one of the 'big 4' supermarkets in the United Kingdom with particular reference to the adverse effect produced by low cost competitors entering the market. For this purpose, Tesco has been selected. Tesco represents one of Britain's largest and most profitable supermarket, which overtook ASDA in 1995 and continued to increase its market share through the years (Corporate Watch, 2004; Ruddick, 2015). In addition, Tesco was the first supermarket to (1) introduce 'value' lines and cost effective price range of its own-label products and (2) present the first company loyalty card on the market (Corporate Watch, 2004). Therefore, it becomes plausible to suggest that the company is an excellent choice for a marketing strategy analysis in the current declining grocery retail environment of British brands. The structure of this essay is as follows: (1) a brief overview of Tesco's generic marketing strategy, (2) an in-depth evaluation of the supermarket's existent marketing actions and tactics with the aid of the its marketing mix, (3) the impact of low cost competitors, (4) recommendations and suggestions for improvement, and (5) a summary of the main findings.
The supermarket's broad market strategy can be categorised as market penetration and cost leadership. Firstly, market penetration has been defined by Ansoff (1957) to explain one of four business growth strategies. The strategy refers to involves attracting new customers, often achieved by gaining competitors' customer base(s), in order to increase sales. Furthermore, Farris et al. (2010) identify two important metrics of market penetration - penetration rate and penetration share. On the one hand, the penetration rate refers to the proportion of the relevant study population that has purchased the examined product category. On the other hand, the comparison between the brand's customer shares with the market's overall customer population relates to penetration share. In relation to this, a key aspect in Tesco's market strategy is attracting competitors' customers (e.g. ASDA, Sainsbury, Morrison's), which is evidenced by its increased market penetration rate and share from 7.2% in 1971 to its peak in 2007 when Tesco accounted for 31.1% of the total UK grocery market share (Economics Help, 2014).
In addition, according to data from March the current market share of Tesco is 28.7%, which positions the company as a market share leader in the British groceries industry, however, this figure has decreased from the previous financial years (Kantar, 2015). Secondly, before the introduction of discount supermarkets, the company focused on cost leadership, which represents one of the three generic strategies devised by Porter (1980). Cost leadership relates to increasing one's market share through attracting price sensitive customers and implementing an effective price strategy that enables the company to offer the lowest cost product offerings. Tesco successfully managed to maintain cost leadership through three actions before supermarkets like Aldi and Lidl entered the British grocery retail market. These actions were as follow: (1) high utilisation of assets, meaning that large outputs are produced and the fixed costs are spread over high quantities allowing the company to manufacture single units at lower costs; (2) minimal direct and indirect costs in the production and distribution stages; and (3) strict control over the supply chain to ensure low costs (Gamble et al., 2010).
Thus, the cost leadership strategy was an appropriate approach for Tesco, because it represents a large company that is able to take advantage of the economies of scale in the market. Nevertheless, presently the company is unsuccessful in maintaining its cost leadership due to the strong presence of 'budget' supermarkets. The following part of the essay will specifically focus on the Marketing mix of Tesco - product, place, price, promotion, which provides a better understanding of the company's present marketing strategy. Firstly, Tesco offers its target segments a wide range of high quality products at affordable prices. The balance between affordability and quality as well as Tesco's Clubcard helped the company attain a relatively high level of competitive advantage (Winterman, 2013). Some of its various product categories consist of food, consumer electronics, financial services and clothing. This is in consistency with the findings from a study on customer perceived value, where four separate dimensions emerged explaining customer attitudes and behaviours - emotional, social, quality and value for money (Sweeney and Soutar, 2001). Similarly, FernA¡ndez and Iniesta-Bonillo (2007) found that customers evaluate relevant benefits and costs involved in a purchase based on economic and cognitive reasoning. Secondly, the 'place' element of the marketing mix refers to the distribution of products in locations where customers purchase products and services.
In relation to this, Tesco emphasises product and service distribution in two main 'locations' - online and offline. On the one hand, the online sales channel is directly linked to Tesco's website - Tesco Direct, which suits the specific needs of the online shoppers presenting them with various delivery options (Tesco Direct, 2015). On the other hand, the offline channel of distribution involves four different store formats - Tesco Express, Tesco Metro, Tesco Compact and Tesco Superstore (Tesco Official website, 2015). Furthermore, Tesco's initial pricing strategy can be characterised as price leadership, which represented an oligopolistic business behaviour, where there are a few companies that dominate the market and determine the price range (Kotler and Armstrong, 2010). The reason behind this price strategy adoption was the intense competition and other economic and behavioural factors in the British households i.e. cost conscious buyers. Nonetheless, the company is no longer a price leader, but its pricing approach is still based on the marketing message 'Every Little Helps'.
In addition, Tesco is able to implement this strategy and remain to influence the retail market to a certain extent, because it evaluates and utilises the lowest cost materials for supply to achieve higher efficiency rates in the production processes. Fourthly, Tesco's promotion comprises of a wide range of media advertisements, regular announcements of promotions and discounts, point-of-sale marketing tactics, and sponsorships. These marketing activities are aligned with the company's generic strategy of cost leadership and support Tesco's price advantage through profit maximisation in the long run as well as enhance the value of the brand. Hence, Tesco's marketing communications are integrated to enable the company to better coordinate its mission, vision, objectives and interactivity with customers. With the aid of information technology advances (Zabkar et al., 2015). Integrated Marketing Communications were also found to generate a synergy effect through the integration of marketing activities, which also tremendously influences customers through different channels of communications reinforcing the same message
Tesco has successfully managed to build loyalty in its customer segments through its most effective customer loyalty mechanism - the Tesco Clubcard (Tesco Clubcard, 2015). In relation to this, Hallowell (1996) found a direct correlation between customer satisfaction, loyalty and company profitability. Likewise, Lee-Kelley et al. (2003) suggest that customer retention tools not only aim to increase the company's profitability, but also establish long term relationships between sellers and buyers, which are fundamental to customer loyalty and also result in decreased levels of price sensitivity. Tesco's marketing strategy, which comprises of cost leadership and market penetration, has been increasingly impacted by the presence of the foreign grocery store chains Aldi and Lidl as well as food commodity prices and the outcome of this has been continuous price cuts by Tesco to meet the customer demand for low cost product offerings (Butler and Wood, 2014).
Furthermore, the authors suggest that further intensification of the market dynamics is caused by the growth of high street convenience stores and the rise of discounters (e.g. Poundland and B&M), which is directly correlated to the altered consumer behaviour habits during the recession. In addition, business analysis of the current grocery retail market conditions suggest that Aldi and Lidl's combined market share will increase to 12%-15% by 2020 (Allison, 2015). Nevertheless, according to a press release by KPMG (2014), it will be difficult for discount brands to fully challenge and erode the market of the big four, because grocery retail chains like Tesco command the store network market penetration and their market shares have existed for nearly 10 years. In relation to Tesco's marketing mix and the intense price competition and dynamics in the market, two main recommendations can be made for Tesco to regain its lost market ground - increased customer retention and an optimisation of its supply chain management to successfully recover its price leadership status. Due to the current intense competitiveness in the retail and food industry and the emergence of competitively low cost foreign supermarket chains, Tesco should firstly focus on increased levels of customer retention through the incorporation of effective customer relationship management systems.
Numerous studies have demonstrated the importance of customer satisfaction in relationship marketing and customer retention. Specifically, Hennig-Thurau and Klee (1998) conceptualise relationship quality which refers to the extent of appropriateness of a relationship to fulfil the needs and requirements of a customer with regards to the relationship. One way to do this is further integrate the Tesco Clubcard to present loyal customers with various financial product offerings besides current accounts, mortgages and home insurance (Tesco Clubcard Perks, 2015). This will form relationships based on two factors - quality and value-for-money, which will translate into loyalty and protect the company from switching customers. In order to adequately target and foster loyalty in the right customer base(s), Tesco should understand which customer satisfaction elements have the greatest impact, and the amount of investments required to improve particular customer satisfaction elements (Rust and Zahorik, 1993). The second recommendation for marketing strategy enhancement is directly related to Tesco's supply chain management, which will enable the company to regain its lost market share through becoming a cost leader.
Fearne (2009) suggests that in the current business context, companies must pursue a value chain as opposed to a supply chain, which represents a chain of activities performed, in order to deliver valuable products and services to customers. There are two elements that are emphasised in value chains: (1) focus on demand pull, which places customers first and everything else subordinate to their needs and (2) concentration on the formation of collaborative relationships with suppliers. According to the author, these two actions enable corporations and large organisations to achieve competitive edge and sustain it over time. For Tesco this would mean careful selection of suppliers and establishment of collaboration opportunities with these suppliers and stakeholders to increase the value added to the processes and/or production. For example, in Wales the company can form relationships with local farms to purchase the highest quality meat and, once supplier loyalty takes place, discount prices can be demanded from the meat producers in exchange for continuous bulk buying. This will allow Tesco to present its customers with quality local meat at low prices, which will positively influence its lost cost leadership presence in the market. To conclude, the present work established that Tesco's generic marketing strategy is dual - regular market penetration to attract competition's customers and cost leadership to retain price sensitive and cost conscious customers.
In terms of its extended marketing mix, notable actions are: (1) offering a wide range of product categories, from which groceries remain the most popular category, tremendously contributing to Tesco's market leadership position, (2) alignment of marketing messages, communication and relative pricing, (3) various marketing and advertising activities, but the integral one remaining the loyalty card, and (4) simplicity and convenience with regards to shopping alternatives and store design. Following the discussion of Tesco's extended marketing mix, two areas for improvement were recommended - an increased emphasis on customer retention and loyalty through novel customer relationship management mechanisms and the development of a supply chain that adds value to the manufacturing processes through collaborative relationships. It is important that Tesco understands its customers' needs and suppliers' requirements, because the competition in the grocery retail industry has never been more severe due to business environments being dictated by the customers and the suppliers. In other words, market orientation is no longer dominated by supply push exchanges and transactions, but by devising marketing strategies and promotions based on customer research and feedback.
References
- Allison, I. (2015), Aldi and Lidl to consume 4% more of Tesco, Morrison, Asda and Sainsbury's marketshare by 2020, [Online], Available at: https://www.ibtimes.co.uk/aldi-lidl-consume-4-more-tesco-morrison-asda-sainsburys-marketshare-by-2020-1505572?bcsi_scan_F872AB84FAA8A40E=3KZ+wD5+BA0QaUGyNZBt2R7iyyFne/zaw== Ansoff, I. H. (1957), Strategies for diversification, Harvard Business Review, Vol. 35, No. 2, p. 113-124. Business CafA© (2009), Tesco pricing strategy - The big price drop, [Online], Available at: https://www.tutor2u.net/assets/cafe/1011-tescopricing.pdf Butler, S. and Wood, Z. (2014), UK grocery sales in decline for first time in 20 years, [Online], Available at: https://www.theguardian.com/business/2014/nov/18/uk-grocery-sales-decline-price-war-asda-sainsburys-morrisons-tesco Corporate Watch, (2004), Tesco:
- Overview, [Online], Available at: https://www.corporatewatch.org.uk/company-profiles/tesco-overview Economics Help (2014), UK Grocery Market Share, [Online], Available at: https://www.economicshelp.org/blog/6288/economics/uk-grocery-market-share/ Ewing, M., deBussy, N. and Ramaseshan, B. (2015), Integrated Marketing Communications: Conflicts of Interest, Politics and Performance, Proceedings of the 1998 Academy of Marketing Science (AMS) Annual Conference, pp. 265-272. Farris, P., Bendle, N., Pfeifer, P. and Reibstein, D. (2010), Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education Fearne, A. (2009), Sustainable Food and Wine Value Chain, Adelaide Thinker in Residence Report, [Online], Available at: https://www.thinkers.sa.gov.au/lib/pdf/Fearne_Final_ReportCopyforWeb.pdf FernA¡ndez, R. and Iniesta-Bonillo, M. (2007),
- The Concept of Perceived Value: A Systematic Review of the Research, Marketing Theory, Vol. 7, No. 4, pp. 427-451. Gamble, A., Thompson, Jr., A.J. Strickland III, John E. (2010). Crafting and executing strategy: the quest for competitive advantage: concepts and cases (17th ed.). Boston: McGraw-Hill/Irwin. Hallowell, R. (1996), The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study, International Journal of Service Industry Management, Vol. 7, No. 4, pp.27 - 42 Hennig-Thurau, T. and Klee, A. (1998), The Impact of Customer Satisfaction and Relationship Quality on Customer Retention: A Critical Reassessment and Model Development, Psychology & Marketing, Vol. 14, No. 8, pp. 737-764.
- Kantar (2015), Tesco posts strongest performance in 18 months, [Online], Available at: https://uk.kantar.com/consumer/shoppers/2015/march-kantar-worldpanel-uk-grocery-share/ KPMG (2014), The future of the grocery sector in the UK, [Online], Available at: https://www.kpmg.com/uk/en/issuesandinsights/articlespublications/newsreleases/pages/the-future-of-the-grocery-sector-in-the-uk.aspx Lee”?Kelley, L., Gilbert, D. and Mannicom, R. (2003), How e”?CRM can enhance customer loyalty, Marketing Intelligence & Planning, Vol. 21, No. 4, pp.239 - 248 Kotler, P. and Armstrong, G. (2010), Principles of Marketing, 13ed, Oxford: Pearson Prentice Hall. Porter, Michael E. (1980).
- Competitive Strategy. Cambridge: Free Press. Ruddick, G. (2015), Tesco leads the way as supermarket sales turned on their head, [Online], Available at: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11460945/Tesco-leads-the-way-as-supermarket-sales-turned-on-their-head.html Rust, R. and Zahorik, A. (1993), Customer Satisfaction, Customer Retention and Market Share, Journal of Retailing, Vol. 69, No. 2, pp. 193-215. Sweeney, J. and Soutar, G. (2001), Consumer Perceived Value: The Development of a Multi-item Scale, Journal of Retailing, Vol. 77, No. 2, pp. 203-220. Tesco Clubcard (2015), [Online],
- Available at: https://www.tesco.com/clubcard/ Tesco Clubcard Perks (2015), [Online], Available at: https://www.tesco.com/clubcard/financial-deals/ Tesco Direct, (2015), [Online], Available at: https://www.tesco.com/direct/click-and-collect/?icid=Floor%20Lamps_Click+Collect_186900029 Tesco Official website (2015), [Online], Available at: https://www.tesco.com/ Winterman, D. (2013), Tesco: How One Supermarket Came to Dominate, [Online], Available at: https://www.bbc.co.uk/news/magazine-23988795 Zabkar, V., Mumel, D. and Vanita, N. (2015), Is Management Involvement in Integrated Marketing Communications Reasonable?, Advances in Advertising Research, Vol. 5, No. 3, pp. 283-294.
Cite this page
Market Share Essay Example For Free At Magic Help. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Quality Assurance Systems in the Upscale Hotel Sector
- Tangibles - Physical facilities, equipment and appearance of personnel.
- Reliability - Ability to perform the promised service dependably and accurately.
- Responsiveness - Willingness to help customers and provide prompt service.
- Assurance - (including competence, courtesy, credibility and security). Knowledge and courtesy of employees and their ability to inspire trust and confidence.
- Empathy - (including access, communication, understanding the customer). Caring and individualized attention that the firm provides to its customers.
| Star rating | Bands |
| One star | 30-46% |
| Two stars | 47-54% |
| Three stars | 55-69% |
| Four Stars | 70-84% |
| Five Stars | 85-100% |
| LevelStandard | 1 | 2 | 3 | 4 | 5 |
| Cleanliness | X | ||||
| Service | X | ||||
| Food quality | X | ||||
| Bedrooms | X | ||||
| Bathrooms | X |
SERVQUAL criterion | 5-star hotel | Travelodge |
| Tangibility | 20% | 20% |
| Reliability | 20% | 30% |
| Responsiveness | 20% | 15% |
| Assurance | 20% | 25% |
| Empathy | 20% | 10% |
Total | 100% | 100% |
Cite this page
Quality Assurance Systems In The Upscale Hotel Sector. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Scientific Management Example for Free
As industrialization advanced rapidly across the world at the turn of the twentieth century, it transformed working practices and prompted theorists to consider how best to conduct business under such changed circumstances. The theory of scientific management has its roots in the studies conducted by F. W. Taylor during this formative period (see Taylor, 1911). There is much debate in the secondary literature about the synonymy of Taylorism and scientific management, which this paper does not discuss (for further details see, Caldari, 2007; Nelson, 1992). Rather, this paper positions Taylor as the defining early influence in a continum of scientific approaches to organizational management - all of which fall under the broader definition of scientific management and management science - that endures today. Section 1 of this paper undertakes a critical evaluation of scientific management theory before going on in Section 2 to discuss how and to what extent it is applied at the organisation, Microsoft.
Critical Evaluation of Scientific Management Theory
Taylor was one of the first theorists to consider management and process improvement as a scientific problem and, as such, is widely considered the father of scientific management. He proposed that a business's economic efficiency could be improved by simplifying and optimising work processes, which would, in turn, increase productivity. Taylorism, as a philosophy, was the product of a series of experiments and observations, such as time-motion studies, designed to determine the most effective and efficient way to complete a task. Its fundamental and inter-related principles can be summarised as follows:
- Using scientific method to challenge habitual working practices and to determine the most efficient way to perform specific work tasks;
- Matching workers' capability and motivation to the task requirements and supervising them according to the established rules and procedures;
- Establishing fair performance levels and develop a pay system that rewards, and therefore encourages, over-achievement; and
- Appropriate division of responsibilities to allow managers to apply scientific management principles to plan work and ensure workers are effective.
Taylor's work influenced a number of other contemporaneous theorists, such as Frank and Lillian Gilbreth, and, later, Henry Gantt, who also favoured empirical methods to determine the most efficient procedures. Indeed, his new scientific system of organisation was met initially with widespread support in the USA and Great Britain amongst theorists, politicians and economists alike (Nelson, 1992). However, Taylor's scientific management was not without its critics, both at the time and subsequently. By the 1930s and 40s it had broadly fallen out of favour. The following section undertakes a critical evaluation of scientific management. It discusses the arguments of Taylorism's detractors and also explores its legacy in popular modes of management practice today. One of the most popular criticisms levelled at Taylorism is its perceived lack of human appreciation (Caldari, 2007).
In the drive to increase physical efficiency, it considers the worker a part of the production process on a level equal to the tools s/he uses and, as such, strips him or her of all capacity to reason and act autonomously. All thinking and planning is taken over by management, and the worker's role is reduced to the simple repetition of standardised and simplified work flows in accordance with productivity targets. By assuming that fair payment will motivate employees to perform optimally, Taylorism overlooks the individual's subjective motivation and their need to derive personal satisfaction from their work. On the one hand, standardised work instructions have been shown to improve quality, facilitate training and reduce waste. However, on the other hand, today's low skilled and highly rationalised roles, such as call centre or fast food jobs, workers are often characterised by high absenteeism and high turnover due to low job satisfaction. Since these are drivers of increased cost, it can be argued that the strict doctrines of scientific management actually run the counterproductive risk of increasing costs and reducing productivity. A further point of controversy for Taylorism's critics is the theory that scientific process will eventually identify the 'one best way' of carrying out a specific process of work to maximum efficiency (see Ralston, 2014). They argue that the implementation of 'one best way' disregards individual talents and preferred working methods, thereby alienating workers and preventing them from developing an appreciation of their place or function in the entire industrial process. This, in turn, suppresses their initiative and the potential for discovering new and innovative ways of working. Instead, opponents of Taylorism advocate a plurality of methods for increasing productivity, which should be tailored to workers' needs. Feedback should be encouraged and decision-making shared between workers and management to engender a greater sense of participation and ownership, greater engagement, and a stronger sense of collaboration between workers and management.
In the light of the above criticisms, it is perhaps unsurprising that employees' views of Taylorism have tended to be unfavourable. In its pursuit of efficiency and productivity, Taylor's scientific management principles divide labour undemocratically, in such a way as to empower managers, benefit employers and lower workers' morale. Although Taylor advocated fair assessments of working hours, productivity and pay, his theory obliges the worker to depend upon the employer's conception of fairness, and gives the worker no voice in hiring and setting the task, in negotiating the wage rate or determining the general conditions of employment. In reality, many employers implemented Taylor's theories only partially, using strict control, punitive measures to drive maximal output. This not only caused significant additional mental and physical strain, but also increased the potential for accidents and work stoppage (Nelson, 1992).
Furthermore, workers believed down-skilling and eventual automation were responsible for growing unemployment - even if ultimately it might lead to lower prices and increased demand. They also objected to the fact that the gains of higher productivity were not shared with the workers. Rather, the major proportion was taken away by the employer in the form of higher profits. Such an imbalance of power and resultant dissatisfaction has the potential to polarise industrial relations leading to increased risks of strike action and disruption. Although there is much to criticise about Taylorism and its early implementation, it should also be acknowledged that its advent paved the way for many of the management theories and methodologies that are followed today. The division of labour into 'doers' and 'thinkers' is a dichotomy that continues to shape the separation of strategy and implementation in most organisations (Kanigel, 1997, Stoney, 2001)).
Likewise, in most organisations management and labour continue to co-exist in an uneven relationship which privileges intellectual work over manual skills. Likewise, the rationalization of processes into discrete, unambiguous units with defined work instructions has laid the foundations for knowledge transfer, automation and eventual offshoring (Drucker, 1981) - strategies that continue to be implemented in many multinational corporations today as management theory, and management itself, evolves with changing times (Witzel and Warner, 2013). Incentive schemes are still widely recognized as an effective means to encourage higher performance and are a standard component of most sales compensation packages. Meanwhile, Taylorism's simplification of skilled work and the elimination of unskilled work represents a central tenet of business process engineering techniques such as Six Sigma and lean manufacturing (Head, 2003). By the same token, modern quality assurance, operations management and total quality management methodologies arguably have their roots in scientific management. In this way, scientific management transcends the narrower confines of Taylorism by means of its direct and indirect influence on those subsequent evidence-based methodologies that also attempt to treat management and process improvement systematically as a measurable, scientific problem (Witzel and Warner, 2015).
Discussion of how Scientific Management Applies to Microsoft
Taylor's original thinking was informed by the shop floor processes of heavy industry. As such, it would be easy to assume its principles would be largely irrelevant in an industry as complex, innovative and knowledge intensive as Information Technology. Indeed, Bill Gates's professed values of entrepreneurship, ownership, creativity, honesty, frankness and open communication appear to stand in opposition to the standardised work processes and strict division of labour that Taylorism champions. However, on closer examination it becomes evident that scientific management still exerts a significant influence within Microsoft and on how it conducts its business. As with all large multi-national corporations, specialisation and division of labour is very much in evidence at Microsoft. There is a clear division between functional specialists such as software developers, project managers, marketing, sales, HR, finance and legal. As Taylorism advocates, their roles have written job descriptions with clearly defined skills and competencies to ensure employees capabilities and motivations are carefully matched to their position. Furthermore, their performance is supervised and measured regularly using SMART criteria (Specific, Measureable, Achievable, Results-based, and Time-specific) in a way that echoes Taylor's emphasis on monitoring and measuring. There are a number of colourful stories that depict the results-orientated culture that Microsoft has relied on historically in its drive for success (see, for example, Shaw, 2004). Until recently, Microsoft employed a controversial management system called 'stack ranking' which measured performance using a standard distribution curve.
Whilst those at the top received bonuses and promotions, those at the bottom were shown the door (for further details see B. R., 2012). Although this was intended to motivate performance, employees found it oppressive. Developers sought to avoid working with top performers, who threatened their own ranking, and as a result free thinking, innovation and collaboration stagnated. Microsoft abandoned stack ranking in 2013, but it is evident that performance reviews and systems such as these owe a debt to Taylor's principle of performance incentivisation through pay and reward. Indeed, Bill Gates's comment on workers and their value points towards a scientific management heritage: “A great lathe operator commands several times the wage of an average lathe operator", Bill Gates points out, “but a great writer of software code is worth 10000 time the price of an average software writer" (Schumpeter, 2015, p. 1). Microsoft's business model relies on scientific management's requirement to challenge received wisdom and to find new and better ways of doing things. This applies to Microsoft's products and production processes in equal measure. Yet rather than pursue Taylor's 'one best way' and control it by means of strict hierarchy and managerial supervision,
Microsoft has, historically, sought to empower employees at all levels. Instead of allowing workers strict 'need to know' knowledge that relates only to their discrete part of a process, Microsoft runs an intensive induction programme for new recruits, which introduces them to the overall business model, and acquaints them with colleagues and support networks. This broader knowledge equips individuals with the context to make autonomous decisions that are nevertheless aligned with the organisation's interests. This, in turn, lays the foundations for continuous improvement based on comparison, feedback and the identification of more effective and efficient work methods. Microsoft seeks to encourage improved performance not only by financial incentives, but also by considering more progressive drivers of employee motivation, participation and satisfaction. Thus, software programmers at Microsoft work long hours, but extra discretionary effort is encouraged by free food, relaxed dress code, comfortable offices, and playing games (for further details see Birkinshaw and Cramer, 2008). So, whereas Taylorism is criticised for its de-humanising tendencies, Microsoft arguably seeks to balance and blend the drive for enhanced productivity with a complementary appeal to the broader hierarchy of needs in its workforce.
Conclusion
This paper has offered a critique of Taylorism as the first and most influential theory that shaped a spectrum of subsequent management practices that fall under the wider umbrella philosophy of scientific management. The example of Microsoft shows how the principles of scientific management inform many practices that are still in use today. As a large, established, multinational organisation, Microsoft's management practices are, almost inevitably, complex and contradictory and the brevity of this paper does not permit a more detailed investigation of how and to what extent scientific management principles inform the varied practices of different functions and divisions within the organisation. For example, the process of iterative product development owes a debt to scientific management as does project management and evaluation. Nevertheless, this paper has offered a broad overview of how Microsoft has appropriated, adapted and implemented elements of Taylor's early scientific management theory, such as division of labour, employee selection, training and supervision, pay and reward, scientific evaluation, and process improvement, to improve Microsoft's productivity, quality, and economic performance today's fast-paced competitive environment.
Bibliography
B. R., 2012. Management the Microsoft Way, The Economist, 21 August Birkinshaw, Julian and Crainer, Stuart, 2008. Theory Y meets Generation Y, Management 2.0, 10 (December) Caldari, Katia, 2007. Alfred Marshall's Criticism of Scientific Management, European Journal of the History of Economic Thought 14(1) (March) Drucker, Peter, 1981. Towards the Next Economics and Other Essays. London: Heinemann Head, Simon, 2003. The New Ruthless Economy: Work and Power in the Digital Age. New York: Oxford University Press Kanigel, Robert, 1997. Taylor-made. (19th-century efficiency expert Frederick Taylor), The Sciences. 37(3) Nelson, Daniel, 1992. A Mental Revolution: Scientific Management since Taylor. Ohio: Ohio State University Press Ralston, Shane, 2014. Doing versus Thinking: John Dewey's Forgotten Critique of Scientific Management, Southwest Philosophy Review Schumpeter, 2015. Digital Taylorism', The Economist. 12 September Shaw, Karyll, 2004. Changing the goal-setting process at Microsoft, Academy of Management Executive. 18(4) Spender, J. C, and Kinje Hugo, 1996. Scientific Management: Frederick Winslow Taylor's Gift to the World? Norwell: Kluwer Stoney, Christopher, (2001) Strategic Management or strategic Taylorism? A case study into change within a UK local authority, International Journal of Public Sector Management, 14(1) Taylor, F. W., 1911. Principles of Scientific Management, New York: Harper Witzel, M. and Warner, M. (2013), 'Introduction', in M. Witzel and M. Warner (eds). Oxford Handbook of Management Theorists, Oxford and New York, NY: Oxford University Press Witzel, M. and Warner, M. (2015) Taylorism Revisited Culture, Management Theory & Paradigm Shift, Cambridge Judge Business School Working Papers. 1
Cite this page
Scientific Management Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Self-Service Technologies Essay Online for Free
Introduction
In the modern world, self-service technologies (SST) have been implemented in the service industry. There are various types of SST services such as telephone-based technologies, online banking, internet-based interfaces etc. (Yen, 2005). Despite this huge rise in SST, it cannot be simply assumed that SST's are always better than traditional services. As any other service, SST comes with its failures and disappointments (Shamdasani et al, 2008, Dimitriadis & Kyrezis, 2011, Dabholkar & Spaid, 2012). Service failures may occur in all services, as well as SST. It is known that service failure recoveries (SFR) are extremely important for organisations in order to retain existing customers and to keep up good image of the business. SFR systems are also a vital part of SSTs (Buell et al, 2010; Oghazi et al, 2012; Beatson et al, 2006; Yen, 2005; Beatson et al, 2007). This paper examines SFR within SST context and how it related to overall customer's satisfaction in any business. It is important to understand the issues that are raised about SST and get managers of organisations who provide SST to help customers by providing various failure recoveries.
The Role of Customer Complaints in SST
One of the topics that have been focused on by multiple researchers is the role of customer complaints in SFR while using SST. Meuter et al (2000), Girman et al (2009), Robertson et al (2011), and Roberson & Shaw (2009) explore the relationship between customer complaints in SFR while using SST. The four studies examine the relationships that influence customers' likelihood of voice' in SST context. The authors look at the following issue within different industries who use SST. Meuter et al (2000), Robertson et al (2011), and Roberson & Shaw (2009) do empirical studies in order to obtain their data and analysis while Girman et al (2009) only rely on other researcher's data to obtain their conclusion. All of the researchers hypothesise that there is a positive relationship between having customer complaints while undergoing service failures in SST and customers' perceptions of SST. The findings of Meuter et al (2000), Girman et al (2009), Robertson et al (2011), and Roberson & Shaw (2009) show that there is a significant relationship between customer complaints while experiencing a service failure in using STT and customers' satisfaction with the following SST. Robertson & Shaw (2009) and Meuter at al (2000) also found that ease of voice mediates the relationship between customers' perceptions of likelihood of voice success and their likelihood of voice behaviour. Meuter et al (2000), Girman et al (2009), Robertson et al (2011), and Roberson & Shaw (2009) found that having customers complain during a service failure while using SST can contribute to better SFR and therefore increase customers' satisfaction with SST and organisation as a whole.
The Role of Customer's Emotions in SST
A second issue that was found in the articles studied is the role of customer's emotions in experiencing service failures while using SST. Gelbrich (2009), Dabholkar & Bagozzi (2002), Yen (2005), and Johnson et al (2008) examine the relationship between customer's emotions in service failures while using SST and customers' overall satisfaction with SST. Their research aims to distinguish the importance of customer's behaviours and their emotions while experiencing service failures in STT. While Johnson et al (2008) and Yen (2005) hypothesise that there is a general relationship between the customers emotions in SF while using STT, Gelbrich (2009) hypothesises that anger and helplessness are negatively related to overall customer satisfaction. Furthermore, Dabholkar & Bagozzi (2002) hypothesise that it's the anxiety and stress in using SST that are negatively related to overall customer satisfaction. All four academic articles are empirical studies that look at the following issue within SST in general, not focusing on specific industries or specific types of SST. Gelbrich (2009), Dabholkar & Bagozzi (2002), Yen (2005), and Johnson's et al (2008) findings reveal that there is a significant relationship between customer's emotions in service failures while using SST and overall customer satisfaction. It was found that emotions' impact on customer reactions occurred directly and indirectly through overall customer satisfaction. The conceptual frameworks used in all four studies can be applied to future research on any service experience.
Analysis of The Role of Customer Complaints in SST
An issue that may be raised is the role of customer complaints in SST. Meuter et al (2000), Girman et al (2009), Robertson et al (2011), and Roberson & Shaw (2009) explore the relationship between customer complaints in SFR while using STT and satisfaction with using SST. The findings of all four studies reveal that there is a significant relationship between customer complaints while experiencing a service failure in using STT and customer's satisfaction with the following SST. It is argued that the role of customer complaints plays a vital role in SFR in SST, and therefore contributes to the overall customer's satisfaction. Authors argue that if customers do not make a complaint or if a timely response to these complaints are impossible the certain faults do not get fixed and therefore may lead to further failures. However, it also needs to be understood that 'SST providers should not count on failure reports by users and be proactive because it is better to correct faults before they lead to failure' (Girman et al, 2009, p. 47). It is also suggested by various researchers (e.g., Girman et al, 2009; Robertson et al, 2011; Roberson & Shaw, 2009) minor failures can end up discouraging first time users that look for perfect performance and are not familiar with SST and as for returning users, if these minor failures are repeated for some time it may demolish their trust in SST or even in the organisation who provides the following services. On the down side, there are certain limitations to the following studies. The focus solely on customer complaints within this field can be argued to be the main one. Even though it is important to look at this issue, other researchers argue that there are far more important attributes that should be concentrated on. For example, Elliot et al (2013) argue that readiness for use of technology is a very important factor that should be looked at. They focus on customers' technology readiness and argue that it also has a direct and positive influence on customers overall satisfaction and is an important factor that should be examined while looking at SFR in SST. It can be implied that role of customer complaints in SST is an important factor, however other issues should also be examined, but not necessary taken in count for. All four studies draw a relationship and show the importance of customer complaints in SST when undergoing a service failure and Meuter et al (2000), Robertson et al (2011), and Roberson & Shaw (2009) studies have sufficient amount of empirical evidence to prove the following issue. Therefore, it can be argued that it is an important issue and it should be looked upon when constructing a research within the field of service failures in SST. It is also an issue that should be addressed by managers of organisations who provide SST in order to make sure their customers are satisfied and prevent them from stopping to use SST and leaving to their competitors.
Analysis of The Role of Customer's Emotions in SST
Gelbrich (2009), Dabholkar & Bagozzi (2002), Yen (2005), and Johnson et al (2008) examine the relationship between customer's emotions in service failures while using SST and customer's overall satisfaction with SST. They found that there is significant positive relationship between customer's emotions in service failures while using SST and overall customer satisfaction. Gelbrich (2009), Yen (2005), and Johnson et al (2008) argue that customer's emotions have a very strong link with SFR in SST and also with their overall perceived satisfaction. Gelbrich (2009) focuses on customer's emotions such as anger and helplessness and suggests that they are negatively related to overall customer satisfaction, while Dabholkar & Bagozzi (2002) concentrated on emotions such as anxiety and stress in using SST and argues that they are negatively related to overall customer satisfaction as well. Yen (2005) and Johnson et al (2008) however, do not focus on any emotions in specific, on the other hand, they focus on situational factors and suggest that they affect customer's emotions and emotions in turn effect their overall satisfaction with SFR and SST. The main limitation of these studies is that those results only account for behavioural instincts and patterns that customers have, yet they do not account for emotions of the employees who might deal with SST recoveries and therefore it does not take in count how that may affect the overall customer satisfaction. Another limitation is the focus on the certain issue. As mentioned above, other researchers argue that it's the other issues that should be looked upon, such as complaints, perceived control and fun (eg. Oghazi et al, 2012 ; Dimitriadis & Kyrezis, 2011; Zhu et al, 2007; Robertson et al, 2011; Elliot et al, 2013). Also, Anitsal & Paige (2006) argue that customers in general are happy to use SST, and prefer to encounter service failures in SST than normal services with employees because they feel more in control and they think they are less likely to cause mistakes than employees. Therefore, they argue that customers' emotions as well as the other two issues are irrelevant in this filed. Overall, in the light of these limitations it can be understood that the role of customers' emotions is very important factor and should be examined by researchers and managers of organisations that provide SST services, however, it is not the only issue that should be addressed. This issue may be addressed by identifying the various emotions customers have and combining them with various situational factors to examine more in depth what actually needs to be changed and used as a guide to how managers precede with recoveries in different situations according to how customers react.
Conclusion
Service recovery is an important factor when it comes to SST, in order to keep customers satisfied and prevent them from leaving to competitors or stopping them from using SST in general. This paper suggests that there are two critical factors that play a vital role and have a great impact on SFR in SST and customers perceived satisfaction: the role of customer complaints in SST and the role of customer's emotion in SST. SFR in SST is vital and the mentioned above two key components should be looked upon and examined by managers of organisations that provide SST as well as organisations that are planning to introduce SST. This paper suggests that those key issues should be examined in order to keep customers satisfied and loyal to organisations, making SST act as a proper asset to the organisations and trying to gain as much advantage from it as possible. Although, it is argued that there are more factors that should be examined that may also influence SFR in SST and customer's overall perceived satisfaction. Many of those factors are not discussed and investigated in this paper. However, ideally those factors should also be addressed and looked upon when contrasting a further research within this context. Furthermore, this paper has a number of limitations. There was a word restriction set and due to the voluminous research made on this topic unfortunately only a few issues could be drawn from all the literature. Furthermore, the literature that has been examined and compared had their research carried out in different fields of SST and in different countries. Therefore, it can be concluded that it is hard to generalise the findings for all industries and also for a specific industry. This is because not every single one was examined. This leaves the comparison of the key issues and applicability of findings open for discussion. Due to the following limitations mentioned, it needs to be understood that the conclusions drawn from studied papers should be interpreted in the light of these limitations. It can be identified as a guideline or as issues that should be examined by managers of businesses that provide SST services and organisations that are planning on introducing SSTs. In conclusion, looking at the research with the limitations that have been drawn, it can be said that SFR plays a vital role in SST and it is important to have in order to keep customers satisfied.
References
Core Papers
Anitsal, I. and Paige, R. C. 2006. An exploratory study on consumer perceptions of service quality in technology-based self-service. Services Marketing Quarterly, 27 (3), pp. 53--67. Beatson, A., Coote, L. V. and Rudd, J. M. 2006. Determining consumer satisfaction and commitment through self-service technology and personal service usage. Journal of Marketing Management, 22 (7-8), pp. 853--882. Beatson, A., Lee, N. and Coote, L. V. 2007. Self-service technology and the service encounter. The Service Industries Journal, 27 (1), pp. 75--89. Buell, R. W., Campbell, D. and Frei, F. X. 2010. Are Self-Service Customers Satisfied or Stuck?. Production and Operations Management, 19 (6), pp. 679--697. Dabholkar, P. A. and Bagozzi, R. P. 2002. An attitudinal model of technology-based self-service: moderating effects of consumer traits and situational factors. Journal of the Academy of Marketing Science, 30 (3), pp. 184--201. Dabholkar, P. A. and Spaid, B. I. 2012. Service failure and recovery in using technology-based self-service: effects on user attributions and satisfaction. The Service Industries Journal, 32 (9), pp. 1415--1432. Dimitriadis, S. and Kyrezis, N. 2011. The effect of trust, channel technology, and transaction type on the adoption of self-service bank channels. The Service Industries Journal, 31 (8), pp. 1293--1310. Elliott, K. M., Hall, M. C. and Meng, J. G. 2013. Consumers' intention to use self-scanning technology: the role of technology readiness and perceptions toward self-service technology. Academy of Marketing Studies Journal, 17 (1). Gelbrich, K. 2009. Beyond just being dissatisfied: how angry and helpless customers react to failures when using self-service technologies. Schmalenbach Business Review (SBR), 61 (1). Girman, M., Keusch, P., & Kmec, P. 2009. Faults, failures and availability in self-service technology. Management Services, 53(4), pp.44-47. Johnson, D. S., Bardhi, F. and Dunn, D. T. 2008. Understanding how technology paradoxes affect customer satisfaction with self-service technology: The role of performance ambiguity and trust in technology. Psychology & Marketing, 25 (5), pp. 416--443. Meuter, M. L., Ostrom, A. L., Roundtree, R. I. and Bitner, M. J. 2000. Self-service technologies: understanding customer satisfaction with technology-based service encounters. Journal of marketing, 64 (3), pp. 50--64. Oghazi, P., Mostaghel, R., Hultman, M. and Parida, V. 2012. Antecedents of technology-based self-service acceptance: a proposed model. Services Marketing Quarterly, 33 (3), pp. 195--210. Robertson, N. and Shaw, R. N. 2009. Predicting the likelihood of voiced complaints in the self-service technology context. Journal of Service Research, 12 (1), pp. 100--116. Robertson, N., Mcquilken, L., K and Ampully, J. 2012. Consumer complaints and recovery through guaranteeing self-service technology. Journal of Consumer Behaviour, 11 (1), pp. 21--30. Shamdasani, P., Mukherjee, A. and Malhotra, N. 2008. Antecedents and consequences of service quality in consumer evaluation of self-service internet technologies. The Service Industries Journal, 28 (1), pp. 117--138. Yen, H. R. 2005. An attribute-based model of quality satisfaction for internet self-service technology. The Service Industries Journal, 25 (5), pp. 641--659. Zhu, Z., Nakata, C., Sivakumar, K. and Grewal, D. 2007. Self-service technology effectiveness: the role of design features and individual traits. Journal of the Academy of Marketing Science, 35 (4), pp. 492--506.
Additional Sources
Anselmsson, J. 2001. Customer-perceived service quality and technology-based self service (Doctoral dissertation). Lund University, Lund, Sweden. Bateson, J. E. G. 1985. Self-service consumer: An exploratory study. Journal of Retailing, 61(3), pp.49-76. Dabholkar, P. A. 1996. Consumer evaluations of new technology-based self-service options: An investigation of alternative models of service quality. International Journal of Research in Marketing, 13(1), pp. 29-51. Davis, F. D., Bagozzi, R. P., & Warshaw, P. R. (1989). User acceptance of computer technology: A comparison of two theoretical models. Management Science, 35, pp.982-1002.
Cite this page
Self-Service Technologies Essay Online For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Divine Chocolate Essay Online for Free
-
I. Introduction
- II. What is Social Enterprise?
- III. What do Social Enterprises do?
- IV. Are any Social Enterprises Successful?
- V. What kind of Social Enterprise is Day Chocolate Company (Divine Chocolate)?
- VI. Motivations and Expectations of the Day Chocolate Company (Divine Chocolate)
- VII. The Day Chocolate Company (Divine Chocolate) Organisation
- VIII. Day Chocolate Company's (Divine Chocolate's) Business Activity
- IX. Profits/Surpluses at Day Chocolate Company (Divine Chocolate)
- X. Strategy of Day Chocolate Company (Divine Chocolate)
- XI. Challenges of the Day Chocolate Company (Divine Chocolate)
- XII. Recommendations and Conclusion
I. Introduction
At the request of the Board of Directors, this presentation will examine the “social enterprise” organisation from several perspectives. First, the social enterprise form of organisation will be defined, with a focus on the social enterprise sector in the UK, and other data specific to social enterprise organisations operating in the UK. A description of the social enterprises currently operating in the UK will be presented. The presentation will then discuss the concept of “social firms” and how they fit in to the business environment of social enterprises previously examined. This will be followed by a discussion of several aspects of our social enterprise, the Day Chocolate Company (Divine Chocolate), beginning with its origins and mission, and concluding with recommendations on how our social enterprise can formulate an effective long-term strategy for success.
II. What is Social Enterprise?
A social enterprise can be defined as an organisation that is driven by motives that are not exclusive to earning a profit from its operations (Pepin, 2010). As of 2010 there were at least 62,000 organisations that could be defined, to some extent as social enterprises operating within the UK (Pepin, 2010). The aggregate turnover generated by these social enterprises exceeded £32 billion per year (Pepin, 2010). The additional, non-profit measures that social enterprises are measured by include various social, cultural, environmental, and other measures (Fichtl, 2007). For social enterprises, these additional non-profit measures can be viewed as being of greater significance to the organisation than the profit motive, given that social enterprises are more likely to direct surpluses generated via operations to meet certain social objectives, as compared to utilising such surpluses to increase shareholder wealth through activities such as dividend payments (Berardi, 2013). Social enterprises operate in several sectors of the economy, but are most numerous in the training, housing, education, and retail/wholesale sectors (Berardi, 2013). The main source of income for social enterprises is the general public, which accounts for 37% of income generated by social enterprises in the UK (Berardi, 2013). The public and private sectors contribute 18% and 13% respectively, and grants and donations contribute 14% to the income generated by social enterprises in the UK (Berardi, 2013).
III. What do Social Enterprises do?
Social enterprises are established in order to address certain environmental and/or social needs through the operation of their business (Berardi, 2013). The most frequent objective of social enterprises in the UK is to improve a particular community, with a quarter of all social enterprises falling in this category (Berardi, 2013). Another frequently occurring objective of social enterprises, accounting of 24% of social enterprises in the UK, is the goal of addressing social exclusion in society in general, a community in particular, and/or a sector of the economy specifically (Berardi, 2013). Additional goals common in many social enterprises are the goals of improving the health and wellbeing of a community, and helping protect the environment (Berardi, 2013). Social enterprises need not devote all of their resources to address one particular objective (Berardi, 2013). Some social enterprises attempt to achieve several goals, which in addition to those already described above, including goals such as promoting literacy, supporting vulnerable individuals in society, assisting in providing affordable housing, and helping to increase employment (Berardi, 2013).
IV. Are any Social Enterprises Successful?
There are many successful social enterprises operating in the UK (RBS, 2013). One such successful enterprise is the Green Machine organisation (RBS, 2013). Green Machine reuses paint supplies in an effort to address the estimated 56 million litres of paint wasted each year in the UK (The Green Machine, 2014). The Green Machine's labour force consists of 40% of individuals who can be categorised as disabled or disadvantaged, thus demonstrating a social enterprise attempting to address more than one social and/or environmental goal (The Green Machine, 2014). A social firm is a type of social enterprise that attempts to create quality jobs for individuals who are disadvantaged in the labour market (Social Firms UK, n.d.). The criteria required in order for an organisation to be considered a social firm is as follows: 1) “Social Firms are businesses that combine a market orientation and a social mission” ; 2) “More than 25% of employees will be disadvantaged people” ; and 3) “Social Firms are committed to the social and economic integration of disadvantaged people through employment” (Social Firms UK, n.d.). Thus, the Green Machine organisation, in addition to being a social enterprise, can also be considered a social firm, given its commitment to finding employment for disabled and disadvantaged individuals (The Green Machine, 2014).
V. What kind of Social Enterprise is Day Chocolate Company (Divine Chocolate)?
As discussed above, social enterprises do not necessarily conform to any one particular type. (Berardi, 2013). The Day Chocolate Company is partly owned by the farmers who supply the cocoa used in the production of Day Chocolate Company's chocolate products (Social Enterprise Academy, n.d.). The cocoa farmers are located in Ghana, West Africa, and own 45% of Day Chocolate Company's shares (Social Enterprise Academy, n.d.). The cocoa farmers are organised as a co-operative called Kuapa Kokoo, made up of 45,000 members across 1,000 villages in Ghana, West Africa (Doherty and Tranchell, 2005). The chocolate is purchased from the farmers on a fair trade basis, in order to achieve better trade conditions for the farmers and promote the sustainable farming of cocoa in Ghana, West Africa (Social Enterprise Academy, n.d.). Thus, Day Chocolate Company can be viewed as a social enterprise of the type that attempts to improve a particular community and by creating employment opportunities (Berardi, 2013). Secondary effects of these goals, such as promoting education and literacy are also achieved (Divine Chocolate, n.d.). When establishing a social enterprise in the UK, the organisation must be established as one of the following business structures: limited company; charity; charitable incorporated organisation; co-operative; industrial and provident society; community interest company; sole trader; or business partnership (Gov.UK, 2013). There are benefits and drawbacks to each of the aforementioned business structures, and an organisation will choose which of the business structures is most appropriate in its particular circumstance.
VI. Motivations and Expectations of the Day Chocolate Company (Divine Chocolate)
In the early part of the 1990s the cocoa production in Ghana was privatised, and the government of Ghana controlled the export of cocoa out of the country (Social Enterprise Academy, n.d.). However, when state support of the cocoa industry in Ghana collapsed the livelihoods of thousands of cocoa farmers in Ghana were put at risk (Social Enterprise Academy, n.d.). It was at this time that the idea for the Day Chocolate Company was created (Social Enterprise Academy, n.d.). The mission of the Day Chocolate Company is to improve the livelihoods of cocoa farmers in West Africa by putting them higher up the value chain (Divine Chocolate, 2012). Day Chocolate Company attempts to achieve this objective by sourcing the cocoa necessary in the production of its chocolate goods from the farmers of Ghana, West Africa according to fair trade standards (Divine Chocolate, 2012).
Rather than being motivated by a goal of increasing shareholder wealth, the Day Chocolate Company emphasises a significant return of its profits from the sales of chocolate, in markets where such products are in high demand, in particular the UK and America, back to the cocoa farmers in Ghana, West Africa (Divine Chocolate, 2012). The Day Chocolate Company was encouraged by the success of fair trade marked organisations such as the coffee company Cafedirect (Doherty and Tranchell, 2005). Cafedirect began in 1993, and by 2005 had succeeded in becoming the 6th largest coffee company in the UK (Doherty and Tranchell, 2005). The success of Cafedirect had a direct impact on the livelihoods of coffee farmers in Latin America, Africa, and Asia (Doherty and Tranchell, 2005).
VII. The Day Chocolate Company (Divine Chocolate) Organisation
The Day Chocolate Company was established in the UK in 1998 as a private company limited by shares (Doherty and Tranchell, 2005; Usa, n.d.). When it was established in 1998, Day Chocolate Company's shares were owned by the fair trade organisation Twin Trading (52%), the cosmetics company The Body Shop (12%), and the Ghana cocoa farmer co-operative Kuapa Kokoo (33%) (Social Enterprise Academy, n.d.). The cocoa farmers' share was financed by a £400,000 loan from the Department for International Trade & Development (Social Enterprise Academy, n.d.). In 2006 the Body Shop decided to donate its shares in the Day Chocolate Company to the Kuapa Kokoo co-operative (Divine Chocolate, 2011).
In January 2007 Day Chocolate Company changed its name to Divine Chocolate Ltd in order to “more closely align the company with [its] flagship brand…” (Divine Chocolate, 2011, p. 1). Day Chocolate Company has a significant presence in several countries, most notably in the UK, Canada, and the United States (Divine Chocolate, 2012). In the UK, supermarkets Waltrose and Sainsbury's expanded their Day Chocolate Company offerings in 2012, and there is now a Day Chocolate Company 45 gram chocolate bar onboard Virgin Airlines flights (Divine Chocolate, 2012). As a result of the “demise” of the company's Irish distributor, availability of the products in the Irish market decreased (Divine Chocolate, 2012). However, exports to Scandinavian countries, including Sweden and Norway increased, which served to partially offset the decline in the Irish market for the company's products (Divine Chocolate, 2012).
VIII. Day Chocolate Company's (Divine Chocolate's) Business Activity
Between the years 1998 and 1999 the Day Chocolate Company recorded sales of £103,500 (Doherty and Tranchell, 2005). By 2004 its annual sales had grown to £5.5 million (Doherty and Tranchell, 2005). For the most recent year with available financial data, the year ended 30 September 2012, the company's sales stood at £7.5 million (Divine Chocolate, 2012). However, between the years 2011 and 2012 the Day Chocolate Company's profit on ordinary activities after taxation declined significantly, from £59,000 in 2011 down to £27,000 in 2012 (Divine Chocolate, 2012). The decline in profit between 2011 and 2012 was attributed primarily to an increase in administrative expenses (Divine Chocolate, 2012). The cocoa farmed by the Kuapa Kokoo co-operative is shipped to Germany, where an independent chocolate manufacturer combines the cocoa and other ingredients into an edible chocolate product (Social Enterprise Academy, n.d.). The German facility ships the chocolate to a warehouse in Hull, from where it is distributed to wholesalers and the retailers (Social Enterprise Academy, n.d.).
IX. Profits/Surpluses at Day Chocolate Company (Divine Chocolate)
The Day Chocolate Company has used profits from its operations to expand within the UK and beyond its core UK market, in particular the United States (Divine Chocolate, 2012). The Day Chocolate Company has also remained true to its core mission, in that it has continued to utilise profits from its operations to improve the lives of the cocoa farmers of the Kuapa Kokoo co-operative in Ghana (Divine Chocolate, 2012). However, the benefits derived from the profits generated by the Day Chocolate Company are not limited to the cocoa farmers (Doherty and Tranchell, 2005). According to Doherty and Tranchell (2005), over 100,000 Ghanaians living in communities with Kuapa Kokoo societies have benefited from necessities such as medical care and medications. Several schools have been constructed, and each school serves an area covering a 4 km radius (Doherty and Tranchell, 2005). The fair trade agreement premiums that accumulated through the year 2005 were sufficient to cover the schooling costs of an estimated 250,000 Ghanaians for an entire school year (Doherty and Tranchell, 2005). A leading cause of death in many parts of Africa, water borne disease, has been reduced significantly, in significant part due to the increased availability of clean water supplies (Doherty and Tranchell, 2005).
X. Strategy of Day Chocolate Company (Divine Chocolate)
An important aspect of the Day Chocolate Company's strategy has been its concerted effort to convey to the chocolate consumer market the level of misfortune that has plagued the lives of many of the farmers responsible for the cocoa used in the manufacture of all varieties of chocolate products (Social Enterprise Academy, n.d.). Through its website, and through its direct encounters with supermarkets and other potential sellers of its products, the Day Chocolate Company has attempted to show that society can help change the lives of the Ghanaians for the better by purchasing their product (Golding, 2006; Social Enterprise Academy, n.d.). The Day Chocolate Company has also enlisted the help of organisations such as Christian Aid, in efforts to bring their products to the shelves of an increasing number of outlets (Turner, 2013). For instance, Christian Aid ran a campaign called, “Stock the Choc,” in an effort to have the Day Chocolate Company's products carried at Tesco (Christian Aid, 2009).
A similar campaign by Christian Aid succeeded in getting Sainsbury' to carry the Day Chocolate Company's products in its many stores across the UK (Lamb, 2008). The Day Chocolate Company recognises that appealing to consumers based on its mission alone will not be sufficient so sustain its organisation (Social Enterprise Academy, n.d.). The emphasis on the quality of the product itself can also be seen at the level of the Ghanaian cocoa farmers (and co-owners) themselves, as demonstrated by one farmer's statement in 2008, that “we [the Kuapa Kokoo co-operative] want people to feel good about our chocolate, not guilty about the poor farmer in the Third World” (Vidal, 1999).
XI. Challenges of the Day Chocolate Company (Divine Chocolate)
The most significant hurdle for a company such as Day Chocolate Company has been establishing itself in the market. When it first entered the market in the late 1990s, the UK chocolate market was dominated by the companies Cadbury, Nestle, Masterfoods, and Kraft Jacob Suchard (Johnson, Scholes, and Whittington, 2005). The “highly competitive” UK confectionary market did not experience any significant changes in the handful of years subsequent to the entry of the Day Chocolate Company either (Johnson, Scholes, and Whittington, 2005, p. 757). The difficulty in making an impact in the market can further be seen by comparing the sales teams at the UK confectionary leader, Cadbury, and the Day Chocolate Company (Social Enterprise Academy, n.d.). Whereas Cadbury has approximately 150 members on its sales team, the Day Chocolate Company has but three (Social Enterprise Academy, n.d.). The economies of scale of the larger firms are formidable (Doherty and Tranchell, 2005). For instance, in the late 1990s Nestle UK expended £9 million on the promotion of a single product within its vast portfolio, the Kit Kat Chunky (Doherty and Tranchell, 2005). Other challenges that the Day Chocolate Company must confront are not unique to the organisation. Most significantly, macroeconomic factors, such as a stagnant economy may impact demand, leading to another decline in sales, such as that experienced for the year ended 30 September 2012 (Divine Chocolate, 2012). In addition, an increasing number of retailers are beginning to compete in the fair trade chocolate market, which may have an impact on the Day Chocolate Company's market share of what is already a small segment of the total chocolate market (Reed, 2009; McGrath, 2012).
XII. Recommendations and Conclusion
The Day Chocolate Company has succeeded in carving out a niche for itself in the chocolate market. However, it must continue to expand into new markets, given that other organisations, including some of the large chocolate companies are beginning to compete in the fair trade chocolate market. The company should seek to leverage its experience in the fair trade chocolate market as best it can. The company may need to divert a greater amount of its profits to this growth strategy, and this may impact the amount that it uses in meeting its mission of improving the livelihood of the cocoa farmers in Ghana. Although the company may temporarily fall short of this mission, at least it will provide an opportunity to create a more stable and potentially long-lived social enterprise.
Cite this page
Divine Chocolate Essay Online For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Starbucks Essay Example Pdf
-
Recruitment at Starbucks
- Task 1 – Recruitment, Selection and Retention
- Requirement
- Essential or Desirable?
- Qualifications / Education / Training:
- Experience:
- Knowledge:
- Skills & Competencies:
- Personal Attributes:
- Other:
- Task 2 – Building Winning Teams
- Task 3 – Leadership & Motivation
- Task 4 – Work and Development Needs and Performance Management
- References
Recruitment at Starbucks
Starbucks is a speciality coffee house which originated in Seattle. Today the organisation has over 15,000 outlets worldwide. It sells a range of hot and cold drinks, food items and accessories. Its philosophy is to create an experience for the customer and a human connection. With the introduction of the Starbucks Card purchasing drinks, food etc. from the outlets has now been made a lot easier. Customers can top up their cards and use them as a method of payment. Starbucks products are also available from supermarkets. Some of the range includes packets of coffee, coffee makers, gift sets etc. Starbucks is constantly innovating its offer to keep up to date with competition from McDonald's, Cafe Nero, Costa Coffee etc. You are required to answer the following questions making reference to Starbucks.
Task 1 – Recruitment, Selection and Retention
A Barista at Starbucks must have a number of personal characteristics and skills which will enable them to carry out their role. These skills and characteristics are likely to include friendliness, attention to detail, a commitment to providing customer service and an ability to work in a fast-paced environment. Pilbeam and Coridge indicate that successful resourcing is as much to do with good organisational fit as it is to do with HRM best practice, and therefore the first stage of recruitment should be to undertake a role or person specification in order to establish the skills and attributes necessary for the role. Phillips and Gully suggest that successful recruitment, selection and retention should also be aligned to the strategic objectives of the firm and therefore care and consideration should be given to the most suitable recruitment and selection methods in order to ensure they will attract the best potential candidates and also that the entire process will result in long term employee retention. Bratton and Gold state that "recruitment is the process of generating a pool of capable people to apply for employment to an organisation. Selection is the process by which managers and others use specific instruments to choose from a pool of applicants a person or persons more likely to succeed in the job(s), given management goals and legal requirements". Accordingly, Torrington et al observe that there are a number of alternative recruitment and selection strategies including interview, assessment centre, and psychological testing. Each has its own advantages and disadvantages and therefore it is not uncommon for multiple approaches to be used in combination depending on the seniority of the role in question. However, before recruitment and selection can commence it is necessary to determine a suitable specification for the role. Thus the suggested specification for a Barista at Starbucks is given below:- Figure 1: Personal Specification Template for a Barista at Starbucks (Source, Author)
Requirement |
Essential or Desirable? |
Qualifications / Education / Training:No essential qualifications required, food safety or food hygiene would be desirable |
Desirable |
Experience:Customer service, food handling, retail |
Essential |
Knowledge:Some retail knowledge would be desirable, along with a knowledge of various coffees |
Desirable |
Skills & Competencies:attention to detail; ability to work in a high pressure environment, customer-centric |
Essential |
Personal Attributes:open & friendly, keen to provide an exceptional customer experience |
Essential |
Other:Prepared to go the extra mile to offer exceptional service and use own initiative when necessary in order to promote the brand and concept |
Desirable |
The specification is not exhaustive and further attributes may be considered such as an ability to communicate in more than one language, especially if the location of the outlet is such that overseas tourists regularly visit (eg parts of London). The most cost-effective form of recruitment and selection process for Baristas would be CV and subsequent interview as managers in Starbucks at a local level have a clear idea of their local customer demographic and demand and thus potential applications who submit a CV can be easily screened for desirable and essential skills and attributes. The manager can then interview potential applications before making a decision on selection. An interview has further benefits as it allows the manager to identify the personal attributes and characteristics of the application in order to assess how the application would fit within the existing team, as much of the Starbucks ethos and working model requires a high level of teamwork. Potential questions which might be asked at interview for the Barista would include asking the application to describe their retail experiences to date and getting them to explain how these experiences have relevance at Starbucks. This would test for depth of experience and also organisational fit in terms of focus on the customer experience. Other technical questions might relate to Food safety and handling in order to ensure that the application understands the critical importance of this when delivering an exceptional customer experience. From a regulatory perspective the manager conducting the interview must be sure not to inadvertently discriminate against any potential applications during any stage of the recruitment and selection process. Therefore all applications must be asked identical questions and none should relate to issues of gender, age, race, ethnicity or sexual orientation. In short, Starbucks is proud of its heritage as an equal opportunities employer. During the recruitment process potential applications must be offered full opportunity to ask their own questions in order to ensure that they fully appreciate the nature of the role which they may be committing to.
Task 2 – Building Winning Teams
One of the foremost scholars of team building, Meredith Belbin, identified that in order to function effectively an organisational team requires members with different skills and attributes. In her research she identified that there are nine alternative "team roles" as she described them (see Appendix for full details). Belbin observed that the most effective teams possessed at least 5 and ideally 7 of the roles, and that an individual member within a team was capable of fulfilling more than one role, but rarely more than two. Tuckman established that when people are first brought together in a team they experience various stages of team development, popularly referred to as "forming, norming, storming and performing". This concept is reflected in Figure 2 overleaf. In short, the theory holds that as employee are brought together in a group they experience an evolutionary process whereby they come to understand and appreciate one another's skills and strengths and then utilise these complementary skills for the best advantage of the team as a whole. History has shown that Tuckman's theory has almost universal application, however, when used in combination with Belbin's theory it becomes even more powerful as it becomes possible to identify in advance whether or not a group I likely to succeed based on the unique skills and attributes of each team member. For example, if there are too many "plants" within a group then it is likely that the group will be highly creative but the ideas will rarely be translated into action. Similarly, too many co-ordinations is likely to result in arguments as the co-ordinator role is known to be quite stubborn and even manipulative. When applying these theories and concepts to teams at Starbucks it can be observed that different skills are required for different parts of the operation. Holistic observation of a team working at Starbucks demonstrates the power of team working.
Each person has a defined role which they focus upon in order to ensure maximum efficiency and quality of output. For example in any Starbucks outlet one person focuses on taking orders and payments, another one or two (depending on the size of the outlet) focus on making the orders and a further team members is constantly ensuring that the outlet is clean and tidy and well stocked. It can be suggested that this
requires a high level of group communication and co-ordination and also a high level of trust as those baristas making the coffee must take on trust the orders given to them by their colleagues. Similarly because two Baristas can work on the same order simultaneously there must be complete understanding and uniformity to the order production process such that they can interchange their roles at any point. Under Tuckman's model it is clear that a team in Starbucks is at the very least in the "norming" stage of the model and most probably at the "performing" stage. The concept of team work within organisations has gained increasing prominence in recent years and with good reason as highly effective teams are more efficient and productive. Furthermore, Armstrong identifies the benefits of empowering team members within a role so that they feel more engaged with the organisation and therefore more committed to delivering the best possible experience for the customer or client. At Starbucks one means of achieving this would be to ensure that every team member is fully cross-functional and that they are given stretch performance targets which require them to work as a team. Full cross-functionality means that each team member has an appreciation for other roles and therefore they tend to be more considerate of outcomes.
Moreover, a cross -functional team which has accountability for its own results will typically find more effective means of delivering a service in order to reach targets. Armstrong also discusses how increased responsibility and accountability increase engagement which in turn increases motivation. Some HRM scholars regard the relationship between engagement and motivation as symbiotic, but there is little doubt that engagement and motivation are strong indicators of a high performance team that is committed to exceed expectation and delivering exceptional service. Furthermore, research by Saunders demonstrates that highly engaged teams have lower levels of staff churn. This point is useful as it is closely correlated to the previously discussed matter of recruitment and retention, and thus if the right people are brought into the organisation and they are motivated to stay because they feel the business (for whatever reason) is a good fit for them, then there is reduced churn, increased engagement and greater productivity. In summation, engaged team members are more profitable for the business and thus it becomes a mutually beneficial relationship.
Task 3 – Leadership & Motivation
There is a vast amount of literature and research which embraces the topic of leadership; furthermore, leadership theories have experienced a considerable amount of transition over time as societal perceptions of leadership have changed. Leadership has been defined by Mcquire and Molbherg as the "process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task". Theories of leadership range for discussions as to the traits of leaders their styles of leadership and transactional and transformational theories of leadership. One of the most popular theories used to explain leadership style is the Managerial Grid as developed by Blake and Mouton and shown in figure 3 below:- As can be seen in the figure, the Managerial Grid examines the prevailing managerial technique of leaders within an organisation in order to identify their preferred style. In ideal circumstances Blake and Mouton believe that a manager and leader should adopt a team style which is participative and empowering and allows the employees of the organisation to make their own decisions within the remit of the organisation's objectives. It can be suggested that the concepts of the Managerial Grid share some parallels with the discussions as to transformational and transactional leadership whereby Burns argues that in the longer term transformation leadership is far more effective because it empowers employees to deliver the best possible performance as they have accountability for their own daily working lives. It is evident that there are close linkages between leadership and motivation insofar as good leaders motivate their employees and team members to succeed through a combination of techniques such as engagement, empowerment and delegation of power.
Armstrong and Cheese et al believe that the use of these techniques in conjunction with other factors such as employee voice ensure that individual employees align their personal aims and objectives with those of the organisation and therefore voluntarily strive to ensure that the service provided by the organisation is a success. It should also be acknowledge that several scholars perceive there is a difference between a manager and a leader within an organisation. The distinction is subtle and relates to the fact that managers generally focus on day to day operational tasks and leaders tend to occupy a more strategic role. However the distinction is certainly not clear cut and considerable debate still centres on this division of roles. Furthermore a leader can also be a manager by dint of their role within the organisation, and thus leadership tends to be regarded as a personality trait as opposed to an organisational position. In short, a leader tends to be more effective at motivating and inspiring employees because of their ability to engage them and encourage them to strive for enhanced performance. In times of change and development, and also in times of difficult circumstances such as recession, leadership and talent management skills are highly valued. In application to Starbucks it should be observed that in times of recession when consumers tend to cut back on luxuries such as coffee from coffee shops, Starbucks must strive to offer improved service to customers in order to retain them. The managers (and ideally leaders) of Starbucks must also continually strive to motivate Baristas to deliver exceptional service even when customers become more demanding. This concept is closely correlated with that change management and goal setting whereby engaging Baristas with the process can ensure that they feel empowered to respond to the challenge and that they have responsibility for it.
At a local level this may mean running small promotions which would suit the customer demographic in order to attract and retain more customers. Furthermore, if Starbucks wish to retain their employees it is prudent to continue to invest in training and development in order to ensure that they are highly skilled and capable of responding rapidly to changes in customer demand. This might include job exchanges with Baristas from other retail outlets in order to share best practice, or creating a forum where Baristas can put forward their suggestions for improvement. Although these are relatively small steps they can help individual Baristas to progress within Starbucks and this ensures that Starbucks generates a reputation as an employer of choice which fosters home grown talent and treats employees with fairness and respect. Research into the prevailing management style at Starbucks reveals that they have a relatively flat hierarchy which ensures that it is easy to disseminate information widely and effectively within the organisation. Starbucks has a clear mission "to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time" and this is fully evidenced in their training policies and ethos. The structure and leadership style of Starbucks also ensures that the business can be responsive to customer needs because the baristas are in direct contact with customers every single day and also have the necessary mechanisms to ensure that they can provide valid and timely feedback to their managers in order to improve the customer experience.
Task 4 – Work and Development Needs and Performance Management
Armstrong defines performance management as "a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved". It is important to observe that from a HRM perspective performance management is not solely concerned with disciplinary procedures, but rather it is concerned with ensuring that each and every employee has the necessary support to achieve their objectives and potential. Thus, performance management is often closely correlated with learning and development as in order to achieve to their maximum potential employees must continue to expand their skills and to develop their capabilities. Furthermore, scholars such as Benson et al have observed a link between training and development and employee retention, which as previously identified, helps to ensure increased engagement and reduced employee churn. However in order to monitor and improve employee performance it is first necessary to set suitable objectives and targets and to apply metrics and benchmarks to these objectives and targets in order to objectively assess employee performance and development. At Starbucks there are two core elements which form the basis of employee performance; these are technical capability that is to say the ability to consistently produce a high quality cup of coffee, and secondly the ability to interact with other stakeholders including team colleagues and customers.
The former can be objectively assessed by observation against agreed performance metrics such as speed of production and consistency of taste. This has benefit to individual employees and Starbucks as a whole because it ensures consistency of service and product quality across the network of franchises meaning that the reputation of Starbucks is maintained and also that Baristas are employable across a range of franchises that they may be prepared to travel to, thus increasing their value to the company. The second performance metric to assess is more intangible and pertains to perceived service level and customer and colleague interaction. In terms of colleague interaction this can be assessed through a variety of measures such as 360 degree feedback, line manager observation and self-reflection during a performance review. Research has shown that generally speaking individual employees are reasonably self-aware of their skills and capabilities and it is rare that a performance review highlights anything that the employee was not at least already aware of at some level. However the benefit of performance review is that it can demonstrate to individual employees specific areas where they could improve or would benefit from training to enhance their skills set. For example a food safety certificate to help ensure that an individual franchise was fully compliant with legislation, or perhaps rudimentary book-keeping skills to help ensure that the cash is managed accurately in each store. In terms of assessing Barista performance when interacting with customers this can be achieved through feedback forms and customer incentives. For example it is becoming increasingly common that receipts from retailers encourage customers to provide feedback about their service online. This has the dual benefit of helping the organisation to become more engaged with customers and response more rapidly to customer feedback. It can also be used to gather individual barista feedback if specific questions in the feedback questionnaire relate to performance and service such as speed and friendliness and helpfulness of the Barista.
The information gathered from feedback surveys can be fed back to each barista in regular performance reviews in order to help them identify areas of development and subsequently improve performance. As noted at the outset of this section, performance management techniques should not be designed with the sole intention of discipline employees, although it is almost inevitable that at some stage a form of discipline may be required for certain employee. However, best practice makes it clear that regular performance reviews can help to forestall any such issues as if they are held regularly and reasonably frequently it should be possible to forestall any problems before they become issues of concern. Finally it is necessary to consider how Starbucks applies principles of delegation in order to motivate Baristas. As discussed previously in this review, Starbucks encourages team working and the creation of stretch targets to help Baristas develop and to take responsibility for their own areas of production. This approach is closely linked to effective performance management because empowering Baristas to set and achieve their own targets helps to motivate them to achieve as they feel in control of their targets and daily responsibilities. Targets can be used to monitor and evaluate Barista performance and at each performance review they can be revised as necessary in order to help the Barista improve. For example in the early days of a barista's employment this could be to improve the speed of production and to obtain a certain customer service rating. In due course this could progress to internal training courses in advanced customer service management and customer experience. This holistic process also helps Baristas to appreciate that they are valued and therefore this leads to them becoming more engaged and motivated and delivering improved performance.
References
- A Handbook of Human Resource Management Practice (11th Edition) – Kogan Page, London Beardwell, J. Claydon, T. (2007)
- Human Resource Management: A Contemporary Approach (5th Edition) – Pearson Education, London Belbin, R.M. (2010)
- Management teams: why they succeed or fail. 3rd ed. London: Butterworth-Heinemann. Benson, G. S., Finegold, D., & Mohrman, S. A. (2004)
- You paid for the skills, now keep them: Tuition-reimbursement and voluntary turnover. Academy of Management Journal, 47(3): 315–331. Blake, R.; Mouton, J. (1985).
- The Managerial Grid III: The Key to Leadership Excellence. Houston: Gulf Publishing Co. Bloisi, W. 2007. Management and organisational behaviour. 2nd ed. Maidenhead: McGraw-Hill. Boddy, D (2008)
- Management: An Introduction (4th Edition) – Prentice Hall, London Bratton, J. & Gold (2007).
- Work and organizational behaviour. 2nd ed. Basingstoke: Palgrave Macmillan. Burns, J. M. (1978).
- Leadership. New York: Harper and Row Publishers Inc.. Cheese, P., Thomas, R.J. and Craig, E. (2008)
- The talent powered organization: strategies for globalization, talent management and high performance. London: Kogan Page. Foti, R.J., & Hauenstein, N.M.A. (2007).
- Pattern and variable approaches in leadership emergence and effectiveness. Journal of Applied Psychology, 92, 347-355. Govaerts, Natalie, et al. (2010)
- Influence of learning and working climate on the retention of talented employees", Journal of Workplace Learning 23:1. Harrison R (2009)
- Learning and Development, London, CIPD Hoque, K & Noon, M (2004)
- Equal Opportunities Policy and Practice in Britain in Work, Employment & Society vol.18 no.3 pp.481-506 Huczynski A, Buchanan D (2003)
- Organisational Behaviour: An Introductory Text – Pearson Higher Education, London Mcquire, D., & Molbherg J. K., (2011)
- Human Resource Development Theory & Practice London: Sage. Murphy, N. (2009)
- Talent management's role in a time of recession. IRS Employment Review. No 927, 13 August. 5pp. Phillips and Gully (2009)
- Strategic Staffing Pearson Education, Upper Saddle River, New Jersey, pp12-35 Pilbeam, S. & Corbridge, M. (2010)
- People Resourcing: Contemporary HRM in practice. 4th ed. London: Prentice Hall International. Ch 2 Saunders, M.N.K., (2011)
- Trust and strategic change: an organisational justice perspective' in R Searle and D Skinner (eds) Trust and Human Resource Management. Cheltenham: Edward Elgar. Starbucks (2012)
- Search and Apply [online] available at https://careers.starbucks.co.uk/job-search-and-apply retrieved 3rd Feb 2012 Starbucks (2012)
- Mission Statement [online] available at https://starbucks.co.uk/about-us/company-information/mission-statement retrieved 3rd Feb 2012 Torrington, D. Hall, L. Taylor S (2007)
- Human Resource Management (7th Edition) – Prentice Hall, London Zaccaro, S. J., Gulick, L.M.V. & Khare, V.P. (2008).
- Personality and leadership. In C. J. Hoyt, G. R. Goethals & D. R. Forsyth (Eds.), Leadership at the crossroads (Vol 1) (pp. 13-29). Westport, CT: Praege
Cite this page
Starbucks Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Retail Sector Essay Example Pdf
-
Retail Sector Course Work
- Introduction:
- P.1 The Structure of the Retail sector
- Types of Retailers
- Sales trends:
- Location and Size:
- Trends in the Number of Retailers:
- Employment:
- P.2 Local Convenience Stores
- Small and Large Retailers:
- Distribution Channels:
- Transport Methods:
- Storage – Manufacture to Consumer:
- P.3 Slide notes
- Slide 1 – Overview
- Slide 2 – Porters Five Forces Model
- Slide 3 – Generic Strategy
- Slide 4 – Economic Overview
- Slide 5 – Alternative Market Challenges
- P.4 Store format
- P.5 Distribution Channel Tables and Diagrams
- Bibliography
Retail Sector Course Work
Introduction:
In conducting the research for this coursework a number of sources of data have been used. In the first instance, the bulk of the research conducted has been done making use of secondary sources of research, including books, journal articles, company annual reports and items from the business and trade press. Secondly, where relevant the researcher has also made use of a number of contacts within the retail sector which have facilitated primary research into a number of the companies which have been used as case study examples in the coursework. Primary research was conducted in the form of a number of informal style interviews with a relevant management level employee of the organisations in question.P.1 The Structure of the Retail sector
Types of Retailers
At present the UK may be seen as having a wide variety of retailers all with a range of corporate and organisational objectives. In general terms, the UK retail sector may be divided and segmented on the basis of product type. Major retail groupings include the food retail segment, clothing segment and other non-food based segments which include electronics, DIY and other forms of specific fast moving consumer goods (FMCG). Those operating within such product segmented retail segments range in size from single one man operations with a sole trader legal status to large multi-national retail companies offering standardised products and services on an international basis. In addition to these core segments, one should also consider the not for profits retail segment. This includes a wide range of retailers for whom the objective is the generation of a surplus rather than a profit. The surplus is then used to fund the underlying objectives of the not for profits organisation, usually associated with a charitable cause. Whilst the not for profits sector is often associated with low end cost leadership retail models this is not the only model used. Recent developments have seen not for profits organisations such as Oxfam embracing the premium end of the segment with the opening of the organisations flagship Bond Street store. In addition, other organisations such as the Co-operative bank offer a range of financial products and services within the retail banking sector which are of comparable quality to those of the for profits retail banking and financial services sector . One bone of contention may be to consider the supermarket segment as a separate sub-segment of the retail sector altogether. Whilst the supermarket sector may be seen as having its origins in the food retail sector, the consideration is that such businesses have in recent years become diversified businesses which only retail food and food related products as a part of their total business. In actually fact the true success of many in the modern supermarket sector relies on the ability of such businesses to be able to market a wide range of diversified products from food to financial products and services.Sales trends:
The UK retail sector is worth an estimated A£265bn annually which accounts for 8% of the entire countries GDP, this is estimated to grow to A£312bn by 2011. Of the total retail sector, a large part of the sales come from the food based sub segment, however the total retail segment is made up of a wide range of retailers marketing a variety of goods including food, clothing, electronics and other fast moving consumer goods. A present, due to the recent economic downturn, sales within the UK retail sector are seeing their slowest rate of growth since April 2006 at just 2.3% higher than a year ago. Despite this down turn in the rate of growth a more positive view would be that despite difficult trading conditions growth in the sector has been maintained, with the sector not suffering the consequences of a contraction in sales. In considering how the economic downturn has affected the retail sector there are multiple views. Some, such as Anagboso and McLaren indicate that non-food retailers have done better in the recession as a function of falling prices in the underlying input goods, which has led to a boost in profits. Others argue that it is the food retail sector which has been more resilient due to the necessity nature of the goods sold by incumbent suppliers.Location and Size:
Considering the location and size of retail outlets, this is an area which has seen a large transformation in recent decades. In past eras, the high street was the focal point of the consumer retailing experience, with an emphasis placed upon the presence of many small to medium sized stores located within the centre of towns and cities. However, over time the retail model as shifted with stores becoming every larger in physical size and the range of goods offered to consumers. As such, this has led to a pattern of retailers moving into out of town locations in which large scale stores are opened using a hypermarket or warehouse format. Whilst there has been much criticism of retailers for abandoning the high street in favour of more convenient and easy to service out of town locations. One consideration is that such larger establishments and shift in location mirrors the changing nature of society, which has seen an increase in car ownership and a preference for standardisation of goods and services offered on a national basis.Trends in the Number of Retailers:
Overall sources would seem to indicate that the number of retailers within the UK retail segment has decreased in recent years through a pattern of industry consolidation and merger and acquisition activities. One of the key drivers of the consolidation within the industry may be seen as the emergence of the modern form of the supermarket. Initially the supermarket was a part of the retail sector associated with the sale of primarily food and food related products. However, over time the supermarket sector has in itself diversified and now sells a variety of products which were all previously only obtainable from alternative retail establishments such as clothing, electronics and financial products and services. As such, consumers now have less of a need to make use of the services of retailers who have stuck to a core set of products, consumers instead showing a preference for the convenience of being able to buy a multitude of goods and services in a single retail out let. The result for the sector has been a reduction in the total number of players in the retail market in favour of a smaller number of diversified retail businesses. However, consumer convenience is not the only driver of consolidation within the industry. Price is also another factor of importance, sources indicating that along with convenience price is one of the single most important factors in determining the spending habits of consumers. As such, a smaller number of larger players in the market are able to deliver ever lower prices through what Porter would have referred to as a cost leadership strategy. As such, consumers opting for low cost providers will naturally create a preference for a smaller number of large players, as opposed to a larger number of small retailers, who are unable to benefit from the larger economies of scale of larger establishments.Employment:
At present the UK retail sector employs a high proportion of the total number of people in employment, it is estimated that currently 3 million people in the UK work within the retail sector. This accounts for around 11% of the total work force of the UK. Despite the growth of the sector, the general trend in employment within the retail sector is one of a downward trend. Sources indicate that over the past five years the number of employees within the sector has declined by 76,000. Whilst some of the reduction may be attributable to the recent economic downturn, only a limited number of the past five years may be seen as falling into the recessionary period, as such one may consider that the overall growth of the sector against a backdrop of falling employment points to structural changes within the industry, rather than a problem with the growth of the sector. Technologies such as the self-service check out may be seen as one of the key structural changes which has aided retailers to reduce the total number of employees needed within the business. Sources indicate that that the implementation of such technologies may in effect allow a single employee in the future to do the same amount of work as five employees in stores where not such technology is deployed. This points to a significant reduction in the number of grass roots level employees required in the future from the deployment of just one technological development within the retail segment.P.2 Local Convenience Stores
For the purpose of this example two products have been selected, one a perishable food product and another a non-perishable item of FMCG. Here the example of a food product considers the logistics operation behind a microwave meal product, whilst the example of a non-perishable product will relate to a cleaning product in the form of washing powder. Both will be considered in the context of the distribution channel within the Spar retail business, one of the key players within the convenience retail sector. Spar has been selected as an appropriate retailer as not only does the business operate within the convenience retail sector, but the researcher has also been able to make use of a key contact within the organisation facilitating the input of primary as well as secondary research into the project.Small and Large Retailers:
The size of a retailer will determine many factors in relation to both its operations, marketing strategy and its general business and corporate level strategies. On the one hand, large retailers such as the "big four" in the UK which include Tesco, ASDA, Sainsbury and Morrison's are able to focus on a strategy of building large out of town stores, which are designed to maximise efficiencies by operating on the basis of economies of scale which are used to generate a cost leadership strategy . As such, the strategies of large retailers are based upon buying large volumes of product which lowers the unit cost of products. In addition, large retailers buying on such a large scale are often able to benefit from other cost savings which are associated with the distribution and logistics channel. Many large retailers buying in such a large volume will be able to receive full loads of product delivered directly into the store directly from the vendor. As such, this eliminates the need for additional costs which are associated with multiple handlings of stock delivered into a network of regional and national distribution centres, as is the case with many smaller scale retailers. On the other hand, small retailers not being able to compete on the basis of a cost leadership strategy must focus on a form of differentiation or market focus. Despite the advantage of large out of town locations, the small retailer is able to set up a network of smaller stores within metropolitan and high population density areas, which larger retailers may not be able to operate their business models. In addition smaller retailers may be able to offer additional differentiated levels of services such as around the clock opening hours. This however, is a competitive advantage which has been eroded in recent years, with many main stream retailers beginning to offer 24 hour opening schedules. Given that small retailers are unable to compete on the basis of price with larger retailers within the sector, such differentiated levels of service must always be seen as having the ability to generate additional levels of value in the eyes of the consumer, which will ultimately lead to the ability of the small convenience based retailer to charge a premium in comparison to the larger cost leader based competitor. Considering the two products in question the perceived strategy would seem to be the same in the context of both kinds of retailer. For the large retailer the consideration is that the company can offer both products at a lower price than that of the small convenience retailer. However, access to the product may require the purchaser to travel a significant distance to obtain a product and thus the element of convenience is traded off for a lower price. On the other hand, the small convenience based retailer adopts an opposite competitive strategy to that of the larger retailer. In the case of both products, the small convenience based retailer offers a product which may be viewed as a necessity in both cases with instant access to the product. However, in allowing the consumer a more convenient level of access to the product, whether this be on the basis of a closer location or the fact that store opening hours are longer that those of a larger retailer, a premium will be charged against that of the low cost retailer. As such, the consumer is asked to make a trade off in which convenience in the form of instant access is prioritised over the consideration of a lower price as offered by the larger retailer.Distribution Channels:
The distribution channel considers the various parties for whom a product or service will travel through from the time when the product is manufactured to the point at which the end user will consume the product. In considering such parties there are a number of considerations which include both internal and external parties such as a consideration of the various staging posts a product will pass through including, warehouses, distribution and consolidation centres before finally arriving in the store and ultimately reaching the consumer. In the case of the products being considered it is important firstly to identify the elements present in the distribution channel of the specific organisation in question, in this case the case study is considering the distribution channel for the Spar brand of convenience stores. For many smaller scale independent convenience stores the distribution channel may be one of much greater complexity including movement of goods between manufacture to wholesaler and then a second movement of goods from wholesaler to the retailer in smaller quantities, each transaction adding an additional layer of cost to the product . However in the case of the Spar operation much of the distribution channel is handled in house thus resulting in greater efficiencies in the distribution channel and a reduction in costs as volume discounts are still achievable from buying in bulk. In addition one of the contemporary issues in the distribution channel is to consider the impact of the internet however, in the case of the convenience store the distribution of the product largely takes the form of a traditional physical distribution. In the first instance taking the example of a washing powder, the product is purchased directly from the manufacturer on a full load basis. The product is subsequently delivered directly from the vendor into one of Spar's national distribution centres, this allows the company to buy in bulk and receive the benefits of discounted purchasing. However, at this level the amount of product bought directly from the vendor is too large to be received by stores operating within the chain, this may be seen as a key difference when comparing the ability of larger supermarkets to be able to handle large deliveries of stock directly from the manufacturer. As such, the product remaining on full pallets is redistributed to a number of smaller regional distribution and consolidation centres, the product is shipped alongside other non-perishable items which allows the regional distribution and consolidation centres to stock a greater number of products in the appropriate quantities for regional stores to draw upon. Once the product has arrived at the regional distribution centre, the consideration is that full pallets of a product are still too large to handle for the kind of stores operating within the Spar chain. As such, full pallets of washing powder a broken down and mixed with other products onto a range of devices such as cages which can then be used to distribute a large variety of products to a store in small quantities, thus facilitating a wide range of product availability in store, without incurring large levels of wastage due to the over stocking of products. Considering the distribution channel of the microwave meal in the same chain of stores the overall distributional channel is quite a different one, this is largely the function of the nature of the product in its self. Here the primary concern is that the amount of time which the product spends in the distribution channel must be much lower than that of a non-perishable item such as a washing powder. In the case of a microwave meal the goods is purchased on the behalf of Spar however, this time loads are delivered on the behalf of the manufacturer by a third party logistics company specialising in chilled distribution. The product is brought directly into one of Spar's regional distribution centres with a chilled warehousing facility. As such this eliminates one layer from the distribution channel in which the washing powder was first taken to a national distribution centre. Again at this stage, despite the smaller deliveries made into the regional distribution centre, the quantities of product purchased are still far to great for distribution directly into the stores operated by the Spar chain. Again the relatively large quantities of product delivered into the regional distribution centres are subsequently broken down and the microwave meals are load built with other products of a perishable nature requiring chilled distribution. Once a suitable load has been built, the company's fleet of small chilled trucks will redistribute the products to the stores in the appropriate quantities. As such, the whole processes sees that the perishable food product spends the minimum amount of time in the distribution channel in comparison to products of a non-perishable nature, where the time of distribution is a less critical issue.Transport Methods:
In both cases the products in consideration are usually produced within the UK and will be transported via road transport by one method or another. However, the difference between the transport of the perishable food item and an item of non-perishable FMCG such as washing powder is likely to be significantly different within the road transport network. Taking for instance the perishable food item in the first case, the microwave meal. Here one of the prime considerations is that if the product is not handled and transported in the correct way, then there is a high risk that the product will be spoiled and thus have to be written off at a cost to the business. In addition to this commercial consideration, the is the concern that where a perishable food product is poorly treated in the transportation process there are health and legal issues as well as commercial interests at stake. Mistreatment of a perishable food product in the transportation process could lead to quality issues which include but are not limited to serious food poisoning and ultimately death as a causation, both of which would have an adverse impact upon the profitability of an organisation engaged in such activities. Having considered the above factors, it is not surprising that the documentation and procedural considerations associated with the transport of perishable food stuffs are much higher than those of a non-perishable items of FMCG such as washing power. Such additional documentation may include the recording of transportation times between locations and the documentation of the temperature at which goods were transported between locations. In addition to the regulations observed, another factor which may be considered in the transportation of perishable food items such as a microwave meal is the element of cost. Whilst a non-perishable item of FMCG may be transported using basic methods of road haulage, the transportation of perishable food items such as a microwave meal is likely to require the use of a specialist chilled distribution fleet between chilled warehouses, all of which implies an additional cost in the direct costs of transportation. On the other hand, the distribution of a non-perishable product such as washing powder via the road network may be seen as much more simple and cost effective operation. Here, the sole consideration is that transport allows the product to arrive in its desired location in good condition and in accordance with the desired delivery schedule to facilitate greater on shelf availability. As such, as long as the product is not mal-treated during the transportation process, a non-perishable product will not automatically deteriorate during the transportation process simply as a function of time. In addition, where a product is damaged in the transportation process, the consequences for the retailer are much lower than in comparison to that of a perishable food product. Where a product is damaged in transport which is non-food based, the cost is limited to the write off of the product and even here, the retailer may be able to recoup a certain percentage of the value of the product by offering a discount on the item.Storage – Manufacture to Consumer:
One of the critical elements in the whole distribution process is to consider the storage of the products in question from initial production at the manufactures operation through to the final presentation before the consumer purchases the product. Effective storage of a product is one of the key way in which those operating within the distribution and logistics function are able to minimise additional costs associated with wastage and product damage. In the case of the washing powder, the product is produced in its retail format, in that of a standardised box. The boxes are then palletised which facilitates a palletised approach to the further storage and distribution of the product. After initial manufacture, the product is stored in a large automated warehousing facility at the point of manufacture. The product can be stored in such a location for several months until a customer order is placed, given that the product is non-perishable in nature the sole concern is that the product is not damaged through multiple handlings or exposure to light. Once a customer order is placed by Spar, the product is similarly stored in a large automated warehousing operation which largely mirrors that of the storage faculties of the initial manufacturer of the product. Again the primary concern of storage is to minimise the potential damage to the product through multiple stock handlings and other elements such as light. As such, once product arrives it is quickly placed into location within the warehouse and pallets are maintained in their current format so as to ensure minimal opportunity for damage. On receiving goods, pallets are labelled by the warehouse, a process which allows for an effective program of stock rotation seeing that the first product in is also the first product to be redistributed an inventory management technique referred to as "first in first out" or FIFO. On reaching the regional distribution depots pallets of the washing powder are initially stored in their current format. However after an initial storage period, individual pallets are relocated into a "breakdown area". Here pickers are able to access the product directly so as to enable small loads to be built to send out to stores. As such, the emphasis of the storage operation changes between the large national distributions centre in which the ability to hold a large amount of product in good condition is the primary focus. At the regional distribution centre, the primary consideration is the ability to effectively access the product for the purposes of redistribution to the stores in the appropriate format. Finally, on reaching the store the washing powder has two further elements of storage. Initially the stock is held in a non-chilled part of the in store warehouse where the goods is stored for a short period of time before being brought into the store to replenish sales out. Once in the store the washing powder is stored on an ambient shelf facilitating ease of access for the consumer and thus sales out. In considering the storage associated with the microwave meal, a perishable item of food one may see that both the emphasis of storage and the complexity involved is much greater than that of the non-perishable FMCG item. From initial manufacture of the microwave meal the product is stored in a blast chillier to ensure that the product reaches a suitable temperature for storage within the manufacturers own faculties. After an initial storage period, the product is tested to ensure that the correct temperature has been achieved and the product subsequently put into a chilled warehouse within the manufacturer own establishment. The manufacturer's warehouse is designed to facilitate speed of distribution within the storage function, products frequently spending less than 24hours on the manufacturer's site before leaving the plant for redistribution to customers. Once reaching the regional distribution centres, products are labelled and checked into the chilled section of the warehouse. At this stage there is a high degree of emphasis placed upon documentation, each batch of goods requiring documentation that the product has previously been stored in the correct way, including during the transportation process. Once checked in inventories are managed by a computer system which sees that pickers again use a FIFO system to break down larger quantities of goods for further onward distribution into the stores within the Spar chain. Once the goods arrive at the local convenience stores there are two further considerations for storage. Larger stores have a chilled section of an in store warehouse available, in such circumstances the product is stored initially in the chilled section of the warehouse, before being brought into the store to replenish sales. However, many smaller stores within the Spar chain lack chilled warehousing faculties in store due to a lack of space. In these cases the product must be stored directly in the chillers which are to be the point of sale. As such, this indicate the importance of correct inventory management and the ability to distribute small quantities of product to a given store. Failure to conduct such an efficient operation could lead to increasing levels of wastage and stock write offs. As such, one can see that there is a large difference in the storage part of the distribution function when comparing the distribution of washing powder against that of the microwave meal. The emphasis of the storage of washing powder was simply the ability to handle large amounts of product in a safe way which protected the stock. The emphasis of the storage of the microwave meal included facilitating the speed of distribution and making use of systems, which enable a comprehensive audit trail of documentation in relation to the maintenance of the quality of the product from a temperature control perspective.P.3 Slide notes
This section provides a comprehensive set of notes to accompany the PowerPoint presentation discussing the challenges facing Sainsbury's supermarkets. The challenges identified have largely been taken from the information provided in the company's annual report, as well as considering items taken from the business and trade press.Slide 1 – Overview
At present despite the challenges of the market Sainsbury's has a market share of 16.1%, a market share which has grown by 0.2% in the last twelve months. Currently Sainsbury's is experiencing a rapid rate of growth in its non-food based segments, non-food sales have grown three times faster than the company's food based sales in recent years. One of the key areas for growth is that of the online distribution channel which has been a 20% rise in growth in the last year. Other key areas of growth may be seen as alternative format stores such as Sainsbury's conveniences based stores. In summary, Sainsbury's is an organisation with growing sales and profitability driven by the development of non-food sales and alternative distribution channel. The challenge for Sainsbury's will be to maintain growth in the increasingly competitive core market of the supermarket sector.Slide 2 – Porters Five Forces Model
Introduce Porter's five forces analysis as a standard industry analytical tool for the consideration of the competitive nature of a given industry or market. Overall Level of Rivalry – The overall level of rivalry in the industry and segment may be seen as significant. Whilst the sector is dominated by just a few competitors which include Tesco, ASDA and Morrison's each of these players are large companies with access to considerable levels of resources. As such, the industry represents an oligarchy style of industrial structure. Power of Buyer – The power of buyers is relatively high, consumers are easily able to switch between providers with relatively little transactional costs incurred as a result. Whilst there are few major players in the market, there is a sufficient number for the consumer to still effectively change providers. Power of Supplier – The power of suppliers within the supermarket sector is relatively low. Many suppliers are supplying generic goods for which there are a high number of producers available. In addition, the volume of products purchased by the supermarkets allow suppliers to be dominated with putative trading terms and conditions. Threat of Entrants – The threat of entry into the market is relatively low. The oligarchy style industrial structure is often off putting to new incumbents and the requirement to invest a significant amount of capital in the required infrastructure and distribution network makes the supermarket sector less attractive than many markets with lower barriers to entry from a capital perspective. Threat of Substitution – Given that many of the products a supermarket sells are related to food and the household, there is relatively little threat of substitution. The main threat of substitution may be seen as coming in the form of substitution to another provider of goods and services, rather than a switch in goods purchased. There may be additional risks for Sainsbury's operating a value added strategy in that consumers may as a result of the recent economic downturn choose to switch superior premium prices goods for less expensive standard quality offerings.Slide 3 – Generic Strategy
Give a brief overview of Porter's three generic strategies of cost leadership, differentiation and market focus. Then apply the model to the various competitors within the supermarket segment. In addition to introducing the main strategies, make reference to the fact that Porter indicates that whilst the strategies are not mutually exclusive, very few companies managed to follow more than a single of the generic strategies with success. Those that opt not to follow one of the generic strategies or attempt to follow more than one strategy are referred to as "stuck in the middle". The pursuit of more than a single generic strategy often results in a firm attempting to meet the needs of a wider group of consumers however, such firms usually deliver poor value to all segments. Sainsbury's – Sainsbury's may be seen as following a differentiated generic strategy in trying to create a competitive advantage in the face of its competitors. As such, Sainsbury's adapts its product range to incorporate a high number of value added products including, organic foods, freedom foods and speciality products. Sainsbury's strategy may be seen one of attempting to beat the competition by offering an around better shopping experience including superior products and service levels. At this point it may be worth considering that there is a possible conflict of strategic fit between the Sainsbury's generic strategy and the conditions within the environment. It should also be indicated that an attempt to change generic strategies may result in the organisation following a strategic path for which the company has few strategic resources and competencies to follow. ASDA and Morrison's – Both of these supermarkets may be seen as following a cost leader generic strategy, here the primary message to the consumer is one of low price and a focus on the generation of large volumes of sales aimed at keeping down costs within the supply chain. In particular Morrison's in perusing such a strategy also has a much more limited product portfolio than that of Tesco or ASDA. Tesco – Whilst it is debatable to consider what generic strategy Tesco is perusing one argument is that the company is following a strategy based around the concept of market focus. The specific focus may be seen as that of the convenience market, with Tesco offering an every larger range of diversified products and services encouraging the consumer to use Tesco as a one stop convenience store for all their needs.Slide 4 – Economic Overview
Many of the challenges to the retail sector may be seen as related to the consequences of the recent economic downturn. At present there is a divergence of opinion between analysts as to how fact the economy will recover. For Sainsbury's this may be a significant issue in considering how the company will react to the strategies of its competitors. On the one hand, should economic recovery take place, then the differentiated generic strategy may be an appropriate one to create a competitive advantage over incumbents in the market. However, if on the other hand the UK economy slips into a double dip recession, then those operating a cost leadership strategy may find they have a better source of a competitive advantage, leaving Sainsbury's having to adapt its corporate level strategy. In addition, whilst Sainsbury's must also consider future economic development the company should also analyse past trends and data. The resent economic downturn has already seen a large change in the spending patterns and behaviour of consumers. Many consumers have in recent years chosen to "trade down" with falls in areas of significant interest to Sainsbury's such as organic foods and other premium end food and non-food items.Slide 5 – Alternative Market Challenges
Sainsbury's has developed a significant amount of growth in many non-core areas of the business which includes but is not limited to home delivery, web sales, non-food items and alternative format stores such as the Sainsbury's convenience store format. This however, presents Sainsbury's with two key challenges. In the first instance the company faces increasing levels of competition with these new markets. Whilst Sainsbury's has entered these new markets and distribution channels in order to offset losses in the company's core activities, Sainsbury's competitors have also followed the same trend thus creating a greater level of competition within these subsectors of the supermarket segment. The second issue is that in entering such new markets Sainsbury's risks losing focus on its core market of food retailing and creating a business model for which the company does not have access to the key resources and competencies. This is often a pattern seen in industries where companies choose to over diversify outside of their core markets and customer groups.P.4 Store format
Recent years have seen the supermarket sector embrace a range of store formats, Tesco supermarkets in the UK have been one of the key players to embrace a range of formats which include the traditional supermarket format, the metro format and the extra format, each with a aimed at a different target market but using the Tesco brand and range of products. This section will now consider each of the formats in detail, considering the relative advantages and disadvantages of each of the formats and why each format may be chosen as a shopping location by both the consumer and the supermarket choosing to locate the store. Supermarket – This is the standard format for a Tesco store, the emphasis from a product range perspective is on the sale of food products which are augmented by a limited range of non-food based products such as household cleaning products and other items of FMCG commonly associated with the supermarket sector of retail over an extended period of time. The standard format of the Tesco supermarket are often located within striking distance of town and city centres or suburban areas. Tesco supermarket format stores may be seen as located in areas which have sufficient space to build a large establishment, but where overall space limits the ability to build a larger format store. From the consumer perspective, the standard format of store is able to offer a wider range of products, without the need for an out of town shopping experience. The location of many stores in this format means that shoppers whilst benefiting from car ownership are not necessarily required to own a car in order to take advantage of the benefits of the format. Extra – This may be seen as the flagship format for new Tesco stores. Here Tesco extra stores are large retail establishments often built in out of town locations, either as a standalone operation or part of a wider out of town retail project. The emphasis of the Tesco Extra format is on the provision of a wider range of goods and services than are available in the smaller standard supermarket format. Products sold in the Tesco Extra format go far beyond the core food and non-food items usually associated with the supermarket sector. Store which have been built in the Tesco Extra format sell a whole range of products which include but are not limited to electronics, kitchenware, clothing and financial products and services. In addition to the products and services sold in the main retail area of the Tesco Extra format, stores often include auxiliary goods and services including petrol and food sold at Tesco branded petrol stations and in store restaurants. From the consumer perspective, the major advantage of the Tesco Extra format is the ability to select from a wide range of goods and services at a price which is associated with a cost leader model. In addition, the ability to purchase such a large range of goods in a single retail outlet also adds value in the form of convenience for the consumer. Here the consumer may buy a wide range of goods without the need to visit several specialist stores. In addition, one of the benefits of the Tesco Extra format is that it allows consumers to buy complex products, such as electronics in a relatively impersonal way. This may be seen as a key positive for many consumers who are put off the purchase of such products by high pressure tactics associated with alternative retail outlets and specialist producers. The major disadvantage of the Tesco Extra format from the consumer perspective may be seen as lack of convenience in relation to the physical location of the store. In their first instance many Tesco Extra stores are located in out of town locations requiring a car to access the site realistically. Secondly in order to get to a Tesco Extra store a consumer may have to travel a significant distance and pass many smaller format stores of numerous brands before reaching their destination. From the Tesco business model perspective, it is critical that the Tesco Extra format stores are located at large out of town sites. In the first instance, large open spaces are required in order to build a store of sufficient size to both offer a comprehensive range of products and store goods on site for replenishment. Secondly, in order to ensure that stores are able to effectively replenish high volumes of sales, sites must be located near to major transport networks such as motorways and transport hubs. As such, out of town locations are a prime site for stores from a logistical point of view. Metro – One of the problems for the supermarket sector has been an inability to compete with local convenience based stores, who are able to sell into the market by offering a convenient physical location, close to where local residents live. As such the Tesco Metro format addresses this problem, Tesco Metro format stores are located in a range of town and city centre locations and target both local residents and office works who may have previously made a purchase from a convenience store. The Tesco Metro format sees the company offer a much more limited range of products in comparison to its larger Supermarket and Extra formats however, the format allows the company to access geographic locations for which it would be impossible to build a larger store stocking a greater range of products. The benefit from the consumer perspective would appear to be that they are no longer required to pay the premium prices previously commanded by convenience stores for the benefit of being able to buy products locally within metropolitan and residential areas. The major disadvantage of the format from the consumer perspective would be that the range of products and services available are much more limited than those offered in the company's standard format stores. Again one may see that there is a high degree of correlation between location and format, the consideration is that the limitations of space within densely populated areas prevents Tesco from building larger establishments with a wider range of products and services. As such, the Metro format is one solution which allows Tesco access to such markets, all be it by using a smaller format store. Express – Finally Tesco has recently launched its Express format which may be seen as having a resonance closer to the Metro format of store rather than the standard Supermarket and Extra formats. The Express format of store sees Tesco setting up retail establishments in a variety of convenience locations, most notably making use of a partnership with Esso petrol stations. The Tesco Express format offers consumers a limited range of products in strategically located stores such as at petrol station sites and other sites where impulse and last minute purchases are made. Like the Metro format, the benefits and drawbacks for the consumer may be seen as largely similar. Again, the consumer benefits from the ability to buy a limited range of products at a lower price than such sites may traditionally provide. In addition, there is also the consideration that the Tesco Express format also offers consumers a wider range of opening hours than the Metro format, thus giving additional benefits from the convenience perspective. Like the Metro format, the major disadvantages of the format may be seen as the limited range of products sold in comparison to alternative formats of Tesco stores. Again, one may see that there is a large correlation between the format and the location of Tesco Extra stores. Once again, there is the consideration that sites chosen for Tesco Express format stores usually lack the space for a larger store and may suffer from poor infrastructural access required to sell a higher volume or wider range of goods and services. Space however is not the only link, one may also consider that the locations of Tesco Extra sites represent a strategic opportunity for Tesco to expand into a location for which the company may have previously had no presence and for which is there is little demand for an alternative format of store. Such may be the case with those stores linked to the Esso chain of petrol stations. In summary one consideration is that the location of a site and the format of a store to be build are often indivisibly linked. The link is often one of space, with smaller sites and locations with high population density often being unsuitable for larger format stores. However, the same population density often represents a considerable market for Tesco which encourages the development of smaller formats of store. In addition, there may also be the consideration that location also gives Tesco a strategic reason to build alternative formats to the standard Supermarket and Extra format as has been considered with the development of both the Tesco Metro and Express format stores. From the consumer perspective each of the formats of store have both benefits and drawbacks, in all cases one may consider that the major advantage across all formats is one of price. However, when considering the sliding scale between smaller formats such as the Metro and Express format and larger formats such as the Supermarket and Extra format there is a clear trade-off between convenience on the one hand provided by the smaller stores and the range of products on the other which are provided in the larger stores.P.5 Distribution Channel Tables and Diagrams
The following is an illustration of the main elements of the distribution channel for a perishable and a non-perishable product as distributed within the Spar distribution channel from manufacturer to consumer in a tabular format. Spar Distribution Channel Stage Perishable Item Non Perishable Item 1 Initial Manufacture Initial Manufacture 2 Storage On Site Storage On Site 3 Distribution to Regional Centre Distribution to National Centre 4 Redistribution to Store Redistribution to Regional Centre 5 Storage at Point of Sale Redistribution to Store 6 Sold to Customer Initial Storage in Store Warehouse 7 Replenished onto the Shelf 8 Sold to Customer Story BoardsBibliography
Anagboso, M, McLaren, C. 2009. The impact of the recession on retail sales volumes. Economic and labour market review. Vol.3. No.8. Available online at: https://www.statistics.gov.uk/elmr/08_09/downloads/ELMR_Aug09_Anagbos.pdf [Accessed on 05/12/10]. Brassington, F, Pettitt, S. 2007. Essentials of marketing. 2nd ed. Harlow: FT Prentice Hall. Bornstein, D. 2007. How to change the world. Oxford: Oxford University Press. Christopher, M. 2005. Logistics and supply chain management: creating value-adding networks. 3rd ed. Harlow: FT Prentice Hall. Co-op Bank. 2007. The ethical consumerism report 2007. The Co-operative bank. Available online at: https://www.co-operativebank.co.uk/images/pdf/ethical_consumer_report_2007.pdf [Accessed on 12/07/09]. Corporate Watch. 2010. Bye-bye high street. Available online at: https://www.corporatewatch.org.uk/?lid=2599 [Accessed on 05/12/10]. Daily Mail. 2010. Are the days of the check worker numbered? Available online at: https://www.dailymail.co.uk/news/article-1221940/Death-checkout-worker-Tesco-pioneers-self-service-store.html [Accessed on 05/12/10]. Dyson, J, R. 2007. Accounting for non-accounting students. 7th ed. Harlow: FT Prentice hall. Food Business Review. 2009. Supermarket Sweep – UK Strategies for success. Available online at: https://www.foodprocessing-technology.com/features/feature56457/ [Accessed on 05/12/10]. Grant, R, M. 2008. Contemporary strategy analysis. 6th ed. Oxford: Blackwell Publishing. Grant Thornton. 2010. ONS retail statistics still understanding extent of current UK retail malaise. Available online at: https://www.grant-thornton.co.uk/thinking/press_room/ons_retail_sales_statistics_st.aspx [Accessed on 05/12/10]. Jobber, D. 2007. Principles and practice of marketing. 5th ed. London: McGraw Hill. Johnson, G, Scholes, K, Whittington, R. 2008. Exploring corporate strategy Text and cases. 8th Ed. Harlow: FT Prentice Hall. Just Food. 2009. UK: Food retail resilient in recession. Available online at: https://www.just-food.com/article.aspx?id=105228&cid=0&ei=MpSBSde4EZWi0QXlqpmxAQ&usg=AFQjCNHCh8cJWipPmEgRK2C96Uqly-z81g [Accessed on 27/11/09]. O'Conner, B. 2001. Shoppers abandon high street. Available online at: https://www.thisismoney.co.uk/news/article.html?in_article_id=365497&in_page_id=2 [Accessed on 05/12/10]. OECD. 2009. OECD Economic outlook. 2009. Vol 2. No. 86. Nov. ONS. 2010. GDP growth. Available online at: https://www.statistics.gov.uk/cci/nugget.asp?id=192 [Accessed on 03/05/10]. Oxfam. 2009. Beating poverty with style. Available online at: https://www.oxfam.org.uk/applications/blogs/cymru/2009/10/beating_poverty_with_style.html [Accessed on 06/12/10]. Price Waterhouse Coopers. 2010. UK retail and consumer group. Available online at: https://www.pwc.co.uk/pdf/PwCUK-RandCSoQ.pdf [Accessed on 05/12/10]. Prospects. 2010. Retail overview. Available online at: https://www.prospects.ac.uk/industries_retail_overview.htm [Accessed on 05/12/10]. Retail Directory. 2010. John Lewis sales hit by cold weather. Available online at: https://www.theretaildirectory.co.uk/ [Accessed on 05/12/10]. Sainsbury's. 2010. Annual Report. Available online at: https://www.jsainsburys.co.uk/files/reports/ar2010_report.pdf [Accessed on 06/12/10]. Talking Retail. 2009. Food drives continued retail growth. Available online at: https://www.talkingretail.com/news/9115/ [Accessed on 07/12/09]. Tesco. 2009. Annual report. Available online at: https://www.tescoplc.com/annualreport09/ [Accessed on 06/12/10]. Waters, D. 2009. Supply chain management: An introduction to logistics. 2nd ed. Basingstoke: Palgrave Macmillan. Watkins, M. 2003. The phenomenon of out of town retailing in the UK. Available online at: https://www.kamcity.com/library/articles/ACNhyper.htm [Accessed on 05/12/10]Cite this page
Retail Sector Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Intrapreneurship Essay Online for Free
Abstract
Intrapreneurship is an inevitable aspect for the success and sustenance of an organisation that keeps in pace with the changing trends in the market and relies on innovative concepts for growth. Innovative ideas are usually suggested by the research and development experts of an organisation. However, research by the employees of the organisation who are well aware of the organisational objective is a cost and time effective method to venture into a new business, or to improve an existing product. An employee who acts as an entrepreneur and researches the development of innovative ideas is called an intrapreneurial researcher. The role of intrapreneurial researchers is highly sought after in organisations that diversifies and improves its various business ventures.Introduction
Intrapreneurship is beneficial for the performance and revitalization of large organizations and small and medium enterprises. Intrapreneurial research is significant to develop innovative ideas to diversify existing business with the production of new services, products and technologies. Intrapreneurial research also supports the revitalization process such as reorganization, strategy reformulation and organizational change. Intrapreneurial research is undertaken by an intrapreneur who has inherent qualities like competitiveness, initiative, aggressiveness and the courage to take risk to achieve organizational objectives. The orientation, activities and emphasis of intrapreneurship is similar to the traits required for entrepreneurship as recommended in Schumpeterian innovation. In a general view, the improvement of existing products and services and the use of administrative techniques, markets and technologies to conduct organizational operations such as marketing, production, distribution and sale and establishing a change in organising, strategy and managing competitors are innovations made by the intrapreneurial researcher. Intrapreneurship is an important attribute that predicts the absolute growth of an organization and overcomes traditional bureaucratic barriers to adhere to high standards for open communications, assessment of business environment and the renewal of business policies to act proactively in the ever competitive marketplace. An intrapreneurial researcher plays a significant role in transition economies to adapt to the changing standards of developed economies to sustain the profitability and growth of existing organizations (Antoncic, B. & Hisrich, R.D. 2001 p.495-527).Who are intrapreneurs?
Intrapreneurs or in-house entrepreneurs are dreamers and doers who have the capability to accelerate the speed and improve the cost effectiveness of transferring technology to the market place. Traditional research methods ignore the services of the intrapreneur. This method does not yield a good result during product innovation because an outside researcher requires more time to understand the organisational objectives and therefore this kind of research is time consuming and expensive. The size of the budget and the extent of self sufficiency are important factors during innovation. A cost effective innovation emerges out of an organization when a person is passionate about bringing out an innovative concept and functions with enthusiasm to develop it using the available organisational system. This gives a new insight for the R & D managers to recognize and understand the significance of intrapreneurs (Pinchot, G. 1987).Risk and Returns in intrapreneurial research
Intrapreneurial research is carried out by intrapreneurs or employee entrepreneurs or intra-corporate entrepreneurs working within an organisation who risk something of value to achieve a greater objective. The risk may be in the form of the time required to accomplish a preliminary research or a business plan while simultaneously holding the responsibilities as a corporate manager. The risk may also include financial sacrifices in the way of cut down on increments until the successful accomplishment of the new business or a reduction of certain percent of salary until the bonus for accomplishment is declared. The intrapreneur has to negotiate the quantum of risk for each project with the management, since risk is a factor that tests and improves the drive and conviction of the intrapreneur. Further, the organization is bound by an implied contract to abstain from interrupting the actions of the intrapreneur unless in the case of poor performance. In the course of the product development, the researcher intrapreneur must make use of the opportunity to create a value similar to capital. On successful completion of a research project, the intrapreneur has the right to avail rewards and incentives from the organization based on the completed research which is predetermined by a trusted committee. The amount of reward is calculated either as a fraction of the value of the project or on the basis of accounting systems of the organisation. Other than the cash bonus, the intrapreneur has total control over a specific amount of research and development funds which the intrapreneur can invest on behalf of the organization for future research projects. These funds are called intra-capital (Pinchot III, G. & Pinchot, E.S. 1978).Who can become intrapreneurs?
Intrapreneurial research is delegated to employees with a good performance record and business acumen during the initial stage of innovation. These traits enable a seasoned manager to face challenges with respect to the new venture efficiently (Pinchot,G. &Pellman, R. 1999 p.33). When an intrapreneur is given the responsibility in a large organization to work with the internal service intraprise, they tend to show more enthusiasm to achieve their mission because they are responsible to manage the internal profit centres. In the due course, intrapreneurs pay attention to notice the highest revenue generating function and use customer feedbacks to understand their requirements in a better, faster and cheaper manner (Pinchot,G. & Pellman, R. 1999P.36). The creativity in the intrapreneurs enable them to foresee how potential customers would envisage a new product (Pinchot,G. & Pellman, R. 1999P.37). The outcome of delegating responsibility in this manner is a complete intrapreneurial organization that results in new vistas in productivity and innovation.Support from the organisation
The organisation is also accountable while delegating intrapreneurial research. The organisation has to support the intrapreneurial researcher in terms of periodical coaching in addition to the initial workshop, and allocate essential resources. The extent of progress in the research has to be reviewed after six months and any obstacles identified in the research has to be rectified (Pinchot,G. &Pellman, R. 1999P.36). Intrapreneurship in research and development requires the intrapreneur to possess different levels of skill from the one possessed as a corporate manager. The strategies of traditional managers to follow existing hierarchical structures with less risk factor and more short term goals inhibits the flexibility, creativity and risk needed to accomplish innovative ventures. Therefore, while setting up intrapreneurship, encouragement from the organization to experiment new concepts together with an environment for voluntary intrapreneurship and the promotion of teamwork is essential. The intrapreneur must work within the organizational structure diplomatically with open discussions and support from team members and must be persistent to overcome unavoidable barriers (Hisrich et al. 2005 p.54). The intrapreneur also avails freedom and privilege in terms of exemptions from controls that exist in a large organization (McKenna, E.F.2000 p.241).Traits and tasks of intrapreneurs
One of the most important qualities in an intrapreneurial researcher is the awareness about competitors. The awareness that customers have alternatives in the marketplace enables the intrapreneur to research and design innovative products by considering the reality. Intrapreneurial research entails the researcher to place positive concern over the product, generate leads for the products, ascertain the leads, respond to the needs of customers, explain the product, handle objections, close sale and offer after sale support (Pinchot,G. & Pellman, R. 1999 p.38) Intrapreneurship in research begins with a business plan. The early stage of a business plan is a mere fantasy which the intrapreneurial researcher has to transform into a reality. In the course of the transition various questions arise about the plausibility and consistency of the innovation. This step is followed by the research to find solutions to complex assumptions. On completion of the process, intrapreneurs observe the fact, and the errors in the innovation plan are then corrected to meet the actual objective of the research (Pinchot,G. & Pellman, R. 1999 p.39).Intrapreneurship and the organisation
On completion of the research project, intrapreneur has to take the project to the business development stage by testing and validating the new concept. This is called proof of concept. In case the intrapreneur has conducted market testing for a product, the same can be provided as a proof to support the claim that there is market potential for the innovative venture (Alterowitz, R & Zonderman,J. 2006 p.92).Conclusion
It may be concluded that intrapreneurs are highly motivated, committed and proactive individuals who can sense opportunities in the market and employ entrepreneurial principals in the creation of innovative marketing decisions (Weaven, S.2004). Intrapreneurial researchers persistently reassess the dimensions that forecast, describe and design circumstances in which intrapreneurship flourish (Hornsby et al. 1993). These traits of an intrapreneurial researcher are also observed in an entrepreneur.References:
Alterowitz, R & Zonderman, J. 2006 Financing your business made easy California: Entrepreneur Press Antoncic, B. & Hisrich, R.D. 2001 Intrapreneurship: Construct refinement and cross-cultural validation Journal of Business Venturing Vol.16, Iss.5, p.495-527 Available: https://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VDH-42JYW56-4&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=976947237&_rerunOrigin=scholar.google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=10e7cdbbcecfa450fc64c7d3d5982cef. Retrieved on August 14, 2009 Hornsby, J.S., Naffziger, D.W., Kuratko,D.F. & Montagno, R.V. 1993 An Interactive Model of the Corporate Entrepreneurship Process Entrepreneurship: Theory and Practice, Vol. 17 https://www.questia.com/googleScholar.qst?docId=5002192997. Retrieved on August 14, 2009 McKenna, E.F.2000 Business psychology and organisational behaviour: a student's handbook New York: Psychology Press Pinchot III, G. & Pinchot, E.S. (1978) Intra-Corporate Entrepreneurship Available: https://www.intrapreneur.com/MainPages/History/IntraCorp.html. Retrieved on August 14, 2009 Pinchot, G. (1987) Innovation through intrapreneuring Research Management Volume XXX No.2 Available: https://www.intrapreneur.com/MainPages/History/InnovThruIntra.html. Retrieved on August 14, 2009 Pinchot,G. &Pellman, R. 1999 Intrapreneuring in action: a handbook for business innovation San Francisco: Berrett-Koehler Hisrich, R.D., Peters, M.P. & Shepherd,D.A. 2005 Entrepreneurship New York: McGraw Hill Professional Weaven, S. 2004 Intrapreneurial Behaviour within the Franchising Context Marketing Accountabilities and Responsibilities - Conference Proceedings of ANZMAC 2004 Available: https://www98.griffith.edu.au/dspace/bitstream/10072/2340/1/26238_1.pdf. Retrieved on August 14, 2009Cite this page
Intrapreneurship Essay Online For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Cooperative Group Example for Free
Introduction
This report outlines some of the key concerns of the Cooperative Groups employees regarding the overall ethical direction of the Group. The Group prides itself on its commitment to ethical business, be it in the fair trade, environmental or locally sourced areas, and yet it is employees concerns that such standards are inconsistent throughout the Group and are therefore undermining the good reputation of the organisation. This report is particularly critical of the ongoing decision of the group to sell non fair trade products alongside the groups own fair trade products, specifically the promotion of these on a national level. In addition, the report emphasises the need to create much stronger links with local communities both as a means of engaging more with the communities in which the group operates, but also to create a more flexible supply structure based on the availability of local products.Fair trade and non-fair trade
It is the employees considered opinion that the issue of fair trade and non-fair trade is a key problem within the group's grocery stores at present. The ethical stance taken by the group in sourcing all of its own brand products from sustainable farms and fair trade networks is certainly to be commended, however, the wider decision which has been taken to still stock products such as Nescafe and Galaxy and Mars chocolate continues to undermine this decision. The ethics of this situation are clear – either one is for fair trade and the wider benefits which this brings, or one is against it and believes that the free market will provide for all. By stocking and thereby profiting from products which do not take this stance the group undermines its commitment to these causes , particularly given the fact that the groups own products in this area are high sellers and are particularly competitive. A stronger commitment here would do much to boost the ethical background of the group. It is also the employee's belief that this could be tied in strongly with the Cooperative Banks commitment to development projects in developing nations. It seems ridiculous to be giving with one hand and taking with the other and therefore the employees would like to see a more explicit and concrete commitment on this level which could be taken across the Group as a whole. Much of the key development literature on the problem of poverty in Sub Saharan Africa focuses on the problem of creating sustained investment and providing important markets for export for products. The Cooperative Group is in a unique position as the owner of a large bank and a grocery outlet to provide this support and could be a real leader in this field. The public relations benefits of such an approach do not need to be laboured but more importantly there is a real opportunity to use the organisation for good in the world. With the growth of ethical consumerism and the notion of green marketing there is a real opportunity to make a difference in this sector.Becoming truly local
It is the experience of many of the Group's employees that many customers who come to the Groups grocery stores feel somewhat let down by the failure to push forward with stocking local produce. Many of these have highlighted the fact that larger retailers such as Morrison's and Tesco have made strong headway on dealing with this issue. This issue is a key one in the sense that it engages with several of the key ethical considerations of the Group, as laid out on the Group's website. These include the environmental considerations of moving products great distances. There is an important issue here with central distribution centres and the way in which these operate. It is often the case that products will be produced in one area of the country, moved to another hundreds of miles away and then returned via a wagon to a point two villages away. This undermines the credibility of the organisation on an environmental level but also on a local level. Whilst employees appreciate the fact that such operations are often cheaper and are part of keeping the cost down, it is important to acknowledge the good public relations which could be created through enhancing the Group's commitment to local job creation. A more dynamic supply network would certainly create this as it would require a significant step up in administration for it to be successful. However, the employees of the Group believe that this would be a significant PR coup and would therefore win the Group significant support, particularly in more rural areas. It would combine to create jobs, reduce the carbon footprint of the Group and also help the Group provide a real service to local people. Most people agree that the fresher the produce, the better.Moving the organisation forward
Whilst this report is critical of the Group on several levels it must be acknowledged that the Group is to be significantly commended, particularly when one considers the current situation with many of its major competitors in the Grocery market. However, in a constantly changing world it is vital for such organisations as the Cooperative Group to continue to show the lead on issues such as local produce, carbon reduction programmes and ethical consumerism. To that end the organisation needs to examine fully what it believes the next level to be. This report embodies some of the views which should be seen as coming from the 'shop floor'. They are based on the direct experience and views of the man on the street and from those who work in the Group's outlets. Doubtless there are greater ethical considerations to be made and doubtless there are significant economic and financial aspects to be taken into account. However, for the Group to continue to pride itself on its ethical commitment it does need to take the next step forward. This report suggests that looking to make radical changes in the sourcing of produce could provide a significant amount of jobs in the country (through the necessary management and administration structures which would be created), could reduce the organisations carbon footprint and would provide fresher and therefore better produce to all of its customers. This would represents a public relations coup and would fall directly in line with the Groups ethical commitments. A further step which the organisation would like to see is through the role of the Bank. Once again, this is certainly deserving of significant support and plaudits for the work which it has done but the employees once again feel that a more concrete set of explicit principles could further improve both the reputation of the Bank as well as its ethical standing. These principles would also include a commitment to employees of the organisation but would also include the promise of support to small businesses which would be set up in support of the wider Cooperative Group operations. One example here would be of a small firm of delivery drivers which would be operating in support of rural farms in Northern Scotland. These would directly support the work of the Group in the sense of attempting to make the Group more local through sourcing food more locally and would therefore be supported by the Group knowing that there would be strong business there as the structure of the organisation changed.The current economic climate and the Group
In making these critical comments of the Cooperative Group the employees would like to stress their knowledge and acceptance of the problems currently associated with the economic crisis within Europe and the wider world. However, it remains their belief that the Cooperative Group can become a beacon of what ethical business operations can do for the communities in which they operate. The employees believe that much of the current economic crisis was caused fundamentally by greed, be it the greed of investment bankers who made investments that they knew would not pay off, or invested in projects which they knew were unethical and which would result in damaged livelihoods. The Cooperative Group can stand opposed to these problems by creating a clear charter that it will not pay Directors hundreds of thousands of pounds in bonuses but will reinvest this money in local communities, supporting local farmers and local transport networks, supporting developing nations and the farmers who work there, helping to build links between the nations. It is the belief of the employees that if the Cooperative Group were to move forward and take on this more advanced ethical stance that it would be financially costly in the first instance as infrastructures would need implementing and there would doubtless be problems associated with this. However, it is also the belief of the employees that many people would support such businesses, particularly where they knew that it was directly affecting local business. It is certainly true that for many consumers the major consideration would remain price. However, the employees firmly belief that with hard work and the commitment of the wider Group, these ethical changes can be implemented in a successful manner.Conclusion and Recommendations
• A stronger more direct commitment to moving the organisation forward in a sustainable and truly ethical manner. • The Groups stance on issues such as Fair Trade is commendable and has been an important step in raising the profile of products such as chocolate and coffee and the issues surrounding the sourcing of the key commodities which these require. • However, the Group must now acknowledge that the stance which it is taking on this issue is hypocritical – on the one hand advertising its own advocation of ethical sourcing and the importance of a fair price for growers whilst on the other hand continuing to directly profit from products which do not meet these standards. • The Group would therefore benefit from a much more clear cut and well defined ethical approach in which its Grocery stores were operated on principles similar if not identical to those of the Food Wholesaler SUMA. • The Group should oppose the sale of non-fair trade products under any circumstances and should work to source as many products as it can locally in order to support local industries, provide fresher produce to its customers and to provide greater local involvement. • This process will encourage a greater involvement with local communities and will help the Group in becoming a dynamic and ethical supplier to local communities which becomes a part of these communities rather than being another huge chain which rips the soul out of local values and towns. • To create an ethical pledge and commitment which will encompass all aspects of the Groups current ethical policies in a much more explicit and coherent way. One key example of this which the employees would particularly like to see is the following - The Group will not only commit itself to sourcing its own brand chocolate from fair trade farms it will actively support such farms with financial assistance from the bank and will undermine the market for non-fair trade products by refusing outright to stock such products.References and Bibliography
Bevins, Vincent. "Guardian survey reveals shoppers' green concerns." The Guardian London: The Guardian, 2010. Cooperative Group. "Ethical Trading and Fairtrade." Manchester: Cooperative Group, 2010. Cooperative Group. "Food Ethics." Manchester: Cooperative Group, 2010. Cooperative Group. "Food and Drink." Manchester: Cooperative Group, 2010. Klein, Naomi. "No Logo." London: Fourth Estate, 2010. Lang et al. "Food wars: the global battle for mouths, minds and markets." London: Earthscan, 2003. Moshirian, Fariborz. "Globalisation, growth and institutions." Journal of Banking and Finance 32.4 (2008): 472-479. Sachs, Jeffrey. "The End of Poverty: How We Can Make It Happen in Our Lifetime." London: Penguin, 2005. Stiglitz, Joseph. "Globalisation and its Discontents." London: Penguin, 2002. Stiglitz, Joseph. Sen, Amartya and Fitoussi, Jean-Paul. "Report by the Commission on the Measurement of Economic Performance and Social Progress." 2009. Weis, Tony. "The global food economy: the battle for the future of farming." London: Zed Books, 2007.Cite this page
Cooperative Group Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Transnational Corporations Example for Free
1. Discuss the basis of the three different views of the motivation of transnational corporation (TNCs) below.
The view that TNCs aim to maximise shareholder value is a reflection of the economic model of the firm. This model sees all corporations, including TNCs, as production – distribution units whose sole goal is to provide maximum value to their owners. As such, under this model TNCs will always pursue maximum shareholder value according to the duty that they have to their owners to maximise the return on investment (Coase, 1937). In contrast, agency theory holds that as the owners appoint managers to act as their agents, the interests of these managers will often override those of the owners. This is particularly relevant for major multinational corporations, who are likely to have a number of disparate owners who are unable to exercise effective control over the managers and the company as a whole. As such, the top managers' goals can override those of the owners as the top managers are directing the TNC's activity (Ietto-Gillies, 2001). However, in a major TNC the top managers themselves are often unable to effectively exercise control over the entire organisation, and have to devolve responsibility to divisional and unit managers. In this case, it is the techno-structure itself, defined as the number of managerial and control levels in the TNC, that determines the overall direction of the TNC, with limited influence from top managers and owners. The techno structure defines these interests depending on how many levels of management there are, hence defining how well the owners and top managers can maintain any control.
2. Why do firms seek to expand their productive activity overseas, instead of simply exporting overseas? Compare the contributions of ANY TWO of the following to this question. S . Hynmer, R. Vemon and J. Dunning.
One of the main reasons that firms look to expand their production activity overseas, instead of simply exporting overseas, is to keep control of their production. The process of exporting results in a loss of control of production, as local agents have to be responsible for distribution and retail, and these agents may make decisions to suit their own ends. In addition, control will be reduced by the fact that the exporting firm can only export their surplus production, and may not be able to increase capacity to the point where they can fully satisfy the overseas market, thus reducing their ability to use capacity to suppress any competition (Hymer, 1960). In contrast, according to the eclectic paradigm devised by Dunning (1988), expanding production overseas is the only way that firms can take advantage of locational advantages such as cheap labour and raw materials. As such, under the eclectic paradigm, the expansion of production overseas will be driven by the need to maximise production efficiency, rather than the need to maintain control over foreign sales.
3(b) Explain the functions of the headquarters of a large transnational corporation (TNC) and explain the variety in way TNCs organise both their research and development and production facilities internationally.
The headquarters of a large TNC serves two main functions. The first is to coordinate and monitor the activities of the different aspects of the techno structure of the TNC, and hence ensure that they are all pursuing the interests of the owners and directors, and not the interests of the techno structure itself. The second is to provide centralised functions such as human resources and payroll to help maximise the efficiency of these supporting back office functions and ensure that costs are kept low (Ietto-Gillies, 2001). In terms of the organisation of research and development and production facilities, TNCs have a number of choices in this regard. Firstly, they can choose to locate them in the nations with the lowest labour cost and most favourable investment regimes, such as China and South East Asia. This provides significant cost advantages, but can create increased transport times and requires the loss of some control. Another option is to locate them in the most productive and advanced nations. This is more suitable for products such as pharmaceuticals, which require significant skills and economic development in order to develop and manufacture successfully, and also command a higher premium. Finally, TNCs can choose to outsource some or all of their R&D and production to specialists, which can dramatically reduce costs and risks, but at the cost of losing some control (Ietto-Gillies, 2001).
4. Consider the major changes, since the 1970s, in the relationships transnational corporations (TNCs) have to ANY THREE or the following; to other firms, to their individual customers, to their workers, to the communities they operate in, to national governments and to supranational organisations such as the World Trade Organisation.
Since the 1970s, the development of the European Union as a supranational organisation has changed the operations of TNCs operating in any countries in the EU. With the EU now being viewed as a unified market, and the European Commission acting as an overall regulator, the actions of TNCs are now largely influenced by EU policy, rather than by the policies of individual member states. This can be seen in the case of Microsoft, which was fined by the EU for anti-trust practices rather than by any member state. With regards to the relationships with individual customers, the most marked change has been in a shift away from selling to customers, and towards marketing to them. Previously, organisations concentrate on manufacturing goods and then selling them to customers by convincing the customers that they wanted them. However, in recent years as the range of companies and products has increased the paradigm has shifted towards using marketing to identify problems and needs, and then demonstrate to consumers how a specific product or service solves their problems or addresses their needs. This is a more individual approach to consumers than in previous years (Ietto-Gillies, 2001). Finally, the relationships between TNCs and their workers have become much more complicated. Firstly, increasing levels of labour legislation have given the workers more power to switch jobs without penalty and with minimal notice, whilst employers are less able to reduce their workforce in times of crisis. This has in turn led to TNCs focusing more on using contracts for peripheral activities such as marketing, whilst only maintaining a small core of full time employees for the most critical activities such as research (CIPD, 2008).
(b) Discuss the argument that the socio-cultural and political consequences of trans-national corporation (TNC) activity globally are harmful both to rich and poor nations alike.
The main focus of this argument is that the activities of TNCs are aimed at providing benefits to their owners and managers, not to the nations in which they operate. As such, TNCs always look to move their manufacturing and other operations to the country that is most beneficial to them. This implies harm to rich nations, who will see a fall in available jobs due to the price of labour, hence an increase in unemployment which reflects badly on government and society. For poor nations, this means that much of their economic growth is focused on being attractive to TNCs, which places downward pressure on labour rights and reduces the ability of governments to shape policy. This leads to a rise in the number of sweatshops and other labour intensive manufacturing operations in poorer nations. Whilst these may pay more than traditional jobs such as subsistence agriculture, they also often require longer working hours and in harsher conditions. The manufacturing also creates environmental damage thus harming the population as a whole (Frynas and Pegg, 2003).
6. In his (1973) Economics and the Public Purpose, J.K. Galbraith argued that large corporations transcend the nation state to create an international planning community (p. 180). Discuss the relevance of Galbraith's view of the power of trans-national corporations to replace the market both nationally in today's world.
In the modern world it can be argued that TNCs have largely evolved and developed to transcend national markets. This can most clearly be seen in the case of major information and media companies that are now able to serve the entire world from a single offering, such as Apple's 'iTunes' music downloading service. However, factors such as these are arguably due more to developments in communications and transport efficiency, with any company of any size able to use the internet to market and sell products around the world and arrange for international shipping over the phone. Indeed, if anything the large size of large corporations has made them more vulnerable to the interventions of nation states, as the corporations are as dependent on the richer nation states for access to their markets as the nation states are on the corporations for access to goods and services. As such, the only area in which the nation state can be said to have transcended nation states is amongst the poor nation states who are reliant on TNCs for much of their economic growth and employment (Frynas and Pegg, 2003).
7. Answer both part to this question:
(a) What is 'Civil Regulation' and how is it supposed to discipline trans-national corporation (TNCs)
Civil regulation is the process by which nongovernmental organisations, NGOs, exercise some power over TNCs through setting codes of conduct for businesses and holding them to these codes across the world. The theory behind civil regulation is that governments can only have a limited impact on TNCs, as they are wary of antagonising them and hence losing the benefits of TNC operations. NGOs are not subject to the same concerns, and hence are able to set codes of conduct for TNCs around labour relations, pricing and other factors. Whilst the TNCs do not have to follow these codes, the NGOs often have a significant impact on consumer attitudes, and hence can rally consumers to boycott TNCs who flaunt accepted guidelines (Sethi, 2003).
(b) Examine the problem TNCs face in responding to Civil Regulation and the main strategies TNCs have adopted to cope.
The main problem that TNCs face in responding to civil regulation is that businesses and NGOs tend to have diametrically opposing views. NGOs are strongly focused on social welfare and, if TNCs followed all of their recommendations, they would tend to make only marginal profits, hence losing investment and causing owners to replace the managers. TNCs have adapted to cope with this problem by cooperating and negotiating with NGOs to produce guidelines that allow for the achievement of a reasonable profit whilst adhering to some guidelines. In addition, TNCs have begun forming and sponsoring NGOs of their own, who act to challenge some of the claims around the negative impacts of the TNCs, and help to minimise the impact of any consumer backlash (Sethi, 2003).
8. In his The Civil Corporation' (2001), S. Zadek argued that corporate responsibility' or corporate citizenship' required a move away from Civil Regulation' of trans-national corporations. Explain and assess Zadek's argument.
The main thrust of Zadek's (2001) argument is that civil regulation requires NGOs to effectively regulate TNCs, whilst corporate responsibility requires TNCs to regulate themselves. As such, as long as civil regulation is prevalent, TNCs will tend to defer to its rules, and placate their customers by achieving the minimum possible compliance with accepted civil regulations. This actively discourages businesses from taking further innovative steps to become more responsible, as they can effectively claim that they comply with all applicable civil regulations and hence need do no more. This argument has merit, as in the absence of formal civil regulation; businesses could effectively compete for customers by competing to become more responsible. However, the argument assumes that consumers will take the time to compare and judge the responsibility of different businesses, which may well not be the case. In addition, without clear guidelines and regulations to judge businesses by, it may be difficult to objectively measure the social responsibility of a business, allowing TNCs to market themselves as socially responsible even if they are not.
9. Consider the following quotation from D. Korten (2001 :pp. 19-20)
The client believed global corporations might offer an answer to the problem of poverty and human conflict. The client has since concluded, however, that the systemic forces nurturing the growth and dominance of global corporations are the heart of the current dilemma. The client now believes that to avoid collective catastrophe we must radically transform the underlying system of business to restore power to the small and local. Drawing on the arguments or R. Douthwaite (1996) and C. Hines (2000) consider how local changes in behaviour and global changes to the rules of finance, production and trade might help restore power to the small and local. Douthwaite (1996) argues that one of the main changes in behaviour required to restore power to the small and local is the shift towards localised production and distribution networks, particularly for food. This is based on the argument that global food production networks focus on producing high priced food for richer nations, hence putting pressure on agricultural resources and damaging them, reducing food security and food democracy. A shift to local production and consumption would keep wealth within local economies as they would be producing and buying food amongst the community, hence keeping power local. In terms of rule changes, Hines (2000) argues that taxes are needed on energy and resource use, as well as on pollution. In order to achieve this, citizens will need to demand that the trade system is changed to reduce the impact of the World Trade Organisation, and instead focus on creating localised trade. This will reduce the power of TNCs, thus allowing a shift in regulation and global rules to support small and local operations and promote social and environmental priorities ahead of global trade and economic growth.
References
1. CIPD (2008) CIPD - The Nature and Terms of the Contract Employment: Workbook. BPP Learning Media. 2. Coase, R. H. (1937) The Nature of the Firm. Economica; vol. 4, p. 386-405. 3. Douthwaite, R. (1996) Short Circuit. Strengthening Local Economics for Security in an Unstable World. The Lilliput Press. 4. Dunning, J. H. (1988) The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions. Journal of International Business Studies; Vol. 19, Issue 1, p. 1-31. 5. Frynas, J. G. and Pegg, S. (2003) Transnational Corporations and Human Rights. Palgrave MacMillan. 6. Hines, C. (2000) Localization: A Global Manifesto. Earthscan. 7. Hymer, S. H. (1960) The International Operations of National Firms: A Study of Direct Foreign Investment. PhD Dissertation. Published posthumously. The MIT Press, 1976. 8. Ietto-Gillies, G. (2001) Transnational Corporations. Routledge. 9. Zadek, S. (2001) The Civil Corporation: the New Economy of Corporate Citizenship. Earthscan.
Cite this page
Transnational Corporations Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Kirkpatrick’s Essay Download Pdf
Introduction
Following the post-2008 worldwide economic slump, businesses have continued to keep a tight control on their costs and expenditure. At the same time, they have also sought to remain competitive in their markets by keeping abreast of the latest industry developments and progress. As such, senior executives have often come to see training and development, on the one hand, as one of a number of competing internal requests for investment. But, on the other hand, it is also the potential source of competitive advantage. As a result of this tension, HR business leaders are under increased pressure from senior managers to justify the value of training by providing supporting evidence, such as business cases and ROI forecasts. However, studies in recent years have suggested that fewer than five percent of organisations are able to provide any hard data on how their investment in learning and development has affected their bottom line (Bersin, 2013). Indeed, training managers in the corporate learning function have routinely identified measurement and evaluation as their top challenge (Bersin, 2006). This paper discusses the challenges of measuring the business impact of learning and development within organisations. It discusses the advantages and disadvantages of Donald L. Kirkpatrick's four-level framework (1998) for evaluating the effectiveness of training programmes, before drawing conclusions about its relevance in today's economic environment. The tension between the benefit and cost of training also characterises the literature that investigates the relationship between training, human resource, employee performance and financial outcomes. Some argue that workplace learning is essential for an organisation's competitiveness and believe that substantial investments should lead to improved performance and/or results (Salas & Cannon-Bowers, 2001). Others, conversely, criticise training for not transferring to the job and being too expensive (Kraiger, 2003) and question the link between training and results criteria (Alliger et al, 1997). The contrasting opinions point strongly towards a lack of consensus, both practically and theoretically, about how to evaluate learning and development programmes. In order to understand the reasons for a lack of confidence in training evaluation, it is helpful to consider current practice. The best-known model for evaluating training programmes was developed by Donald Kirkpatrick in the late 1950s. A cursory glance at popular business websites today shows how his four-level framework continues to characterise training evaluation models today. The following section describes the model in more detail before discussing the benefits and disadvantages, which may underpin to the on-going cost-benefit debates.
Kirkpatrick's Four-Levels
In his model, Kirkpatrick set out to evaluate the impact of training by assessing the following key areas: (1) reaction, or the extent to which learners were satisfied with the programme; (2) learning, or the extent to which learners took on board the course content; (3) behaviour, or the extent to which learners applied their knowledge in role; and (4) results, or the extent to which targeted outcomes were achieved, such as cost reduction, increased quality and productivity.
Level One: Reaction
Results at Level One are typically measured by means of post-training questionnaires which encourage participants to appraise criteria such as the topic, materials, and instructor. Reaction level evaluation is popular with training professionals as it is relatively easy to administrate and provides immediate information to managers and supervisors about how valuable participants found the programme. Indeed, Morrow et al (1997) describe how some professionals choose to rely solely on this level of evaluation. However, to use the reaction-level exclusively as an accurate measure of training effectiveness is to overlook its limitations. 'Smile sheets' (Davis et al 1998) do not indicate the extent to which participants have internalised the programme's goals, nor do they offer direct insight into how the organisation will benefit from the investment. Indeed, participants' subjective responses may be influenced by a wide variety of personal factors, from lack of interest in the topic, to personal problems and distractions. By responding to this level of feedback in isolation, organisations risk revising programmes needlessly (Aldrich, 2002). Clearly, organisations need to consider further, complementary levels of evaluation to generate a more holistic view of training's impact.
Level Two: Learning
Learning results are frequently measured either by end-of-training examination, or by participants' self-assessment about whether learning expectations have been met. Whereas the latter evaluation method remains open to criticism about participants' subjectivity, the former does not necessarily indicate whether the participant can transfer and apply their classroom knowledge to the workplace. Indeed, research still quoted today suggests that only 10%-30% of training content translates to the workplace knowledge and skills (Ford & Weissbein, 1997). As Wisher et al (2001) point out , data sources need to be unbiased, understandable and immune to irrelevant influences if they are to indicate accurately a training session's effectiveness. Thus, Level Two, like Level One, remains a useful source of information, but is not substantiated by hard facts and therefore cannot be relied on exclusively as a measure of effectiveness.
Level Three: Behaviour
Kirkpatrick's third level aims to measure the continuity between learning and practice by assessing how training participants apply their new knowledge and skills in the workplace. Traditionally, this would have been measured subjectively by supervisors, whose evaluation skills and working relationships with the employee would inevitably vary greatly. However, increasingly, technological solutions are used to assess objectively and consistently whether a participant can apply their knowledge and skills to perform tasks, take actions and solve problems (Galloway, 2005). As technology advances, it is likely that these indicators of proficiency and competency will become more sophisticated and accurate. Thus, Level Three evaluation attempts to address the barriers to transfer that Levels One and Two both neglect. In doing so, it contributes to an organisation's understanding of the strengths and weaknesses of its training and development process. It permits the identification of successful participants one the one hand, and, on the other, creates the opportunity to reinforce important points to those who have not grasped them. As such, Level Three evaluation begins to indicate how well training is aligned with certain organisational goals and the likelihood of achievement (Phillips, 1994).
Level Four: Results
Evaluation at Kirkpatrick's fourth level aims to produce evidence of how training has a measurable impact on an organisation's performance. Hard data, such as sales, costs, profit, productivity, and quality metrics are used to quantify the benefits and to justify or improve subsequent training and development activities. For business leaders, this is arguably the most important level of evaluation. Yet, it is also the most difficult level to understand, define and execute well. As Wile (2009) points out, the challenge is to connect the results specifically to the training. Not only is it necessary to identify the most relevant measures, but it is also essential to attribute any change in those measures to the intervention of training.
Discussion
Kirkpatrick's model is relatively simple to understand and presents a useful taxonomy for considering the impact of training programmes at different organisational levels. As discussed above, there are risks and weaknesses to using the individual levels in isolation. However, Kirkpatrick did not mean for the framework to be so used. Rather, each level of evaluation is intended to answer whether a fundamental requirement of the training program was met, with a view to building up a picture of the whole-business impact of the training. All levels are important as they contain diagnostic checkpoints for their predecessors enabling root cause analysis of any problems identified. For example, if participants did not learn (Level Two), participant reactions gathered at Level One (Reaction) may reveal barriers to learning that can be addressed in subsequent programmes. Thus, used correctly, the evaluation framework can benefit organisations in a number of ways. Firstly, the evaluation framework can validate training as a business tool. Training is one of many options that can improve performance and profitability. Proper evaluation allows comparisons and informed selection in preference to, or in combination with, other methods. Secondly, effective evaluation can justify the costs incurred in training. When the money is tight, training budgets are amongst the first to be sacrificed. Only by thorough, quantitative analysis can training departments make the case necessary to resist these cuts. Thirdly, the right measurement and feedback can help to improve the design of training. Training programmes need continuous improvement and updating to provide better value and increased benefits. Without a formal evaluation, the basis for change is subjective. Lastly, systematic evaluation techniques can allow organisations to make informed choices about the best training methods to deliver specific results. A variety of training approaches are available at different prices with different outcomes. By using comparative evaluation techniques, organisations can make evidence-based decisions about how to get the most value for money, and thereby minimise the risk of wasting resources on ineffective training programmes. Despite its popularity, Kirkpatrick's model is not without its critics. Some argue that the model is too simple conceptually and does not take into account the wide range of organisational, individual, and design and delivery factors that can influence training effectiveness before, during, or after training. As Bates (2004) points out, contextual factors, such as organisational learning cultures and values, support in the workplace for skill acquisition and behavioural change, and the adequacy of tools, equipment and supplies can greatly influence the effectiveness of both the process and outcomes of training. Other detractors criticise the model's assumptions of linear causality, which assumes that positive reactions lead to greater learning, which in turn, increases the likelihood of better transfer and, ultimately, more positive organisational results (Alliger et al, 1997). Training professionals also criticise the simplicity of the Kirkpatrick model on a practical level. Bersin (2006) observes how practitioners struggle routinely to apply the model fully. Since it offers no guidance about how to measure its levels and concepts, users often find it difficult to translate the model's different initiatives. They are often obliged to make assumptions and leaps of logic that leave their cost-benefit analyses open to criticism. Most are able to gather Level 1 and Level 2 feedback and metrics with relative ease, but find the difficulty, complexity and cost of conducting an evaluation increases as the Levels advance and become more vague. Bersin claims that only five per cent of organisations measure ROI (and they do so for a small percentage of their programs) and fewer than ten per cent regularly measure business impact. Paradoxically, therefore, it is precisely the elements that Heads of Learning and Development want to measure, that they end up measuring the least. On a more fundamental level, some have taken issue with the content of Kirkpatrick's model. Philips (1994), for example, adds a fifth level to the framework in order to address the recurring need for organisations to measure return on investment in training and development activity. Bersin (2006) goes further still and calls into question the overall relevance of Kirkpatrick's framework as a means of measuring the business impact of training. He argues that the model fundamentally overlooks the role of learning and development as a business support function. Whilst it is appropriate for business critical lines to be measured according to the outputs for which they are directly accountable, e.g. revenue, profit or customer satisfaction, it is not reasonable to measure HR and Training by the same means. Since these non-revenue-generating functions exist to support strategic initiatives and to make business lines run better, their business impact needs to be measured differently. Since Kirkpatrick's model overlooks this, practitioners who attempt to apply it to their business activity end up spending large amounts of time and energy trying to evaluate direct business impact, where there is only indirect responsibility.
Conclusion
Kirkpatrick's four-level framework is a simple, flexible and comprehensible means of evaluating the business impact of training. Its enduring influence on evaluation methods used by training professionals today is a testament to its adaptability and practicality. However, evidence suggests that most organisations succeed only partially in executing all levels of measurement. By focussing on the reaction and learning levels, they rely on subjective participant-related feedback at the cost of assessing the full impact at the organisation-level. Confusion about precisely what to measure at the higher levels, and how to do so, further detracts from evaluation. Thus, although Kirkpatrick provides a useful point of reference for evaluating the business impact of learning and development, its limitations are evident from training professionals' on-going call for a simple, repeatable, standardised measuring process that is more flexible, scalable and business orientated.
References
Aldrich, C. (2002) Measuring success: In a post-Maslow/Kirkpatrick world, which metrics matter? Online Learning 6(2), 30-32 Alliger, G. M., Tamnenbaum, S. I. ; Bennett, W. Jr. ; Traver, H. and Shotland, A (1997) A meta-analysis on the relations among training criteria. Personnel Psychology 50, 341-358 Bates, R. (2004) A critical analysis of evaluation practice: the Kirkpatrick model and the principle of beneficence Evaluation and Program Planning 27, 341-347 Bersin J., (2006) High-Impact Learning Measurement: Best Practices, Models, and Business-Driven Solutions for the Measurement and Evaluation of Corporate Training. [Online] Available from https://www.bersin.com Bersin by Deloitte. (2013) The Corporate Learning Factbook 2013. [Online] Available from https://www.bersin.com Davis, A., Davis, J., & Van Wert, F. (1998) Effective training strategies: A comprehensive guide to maximising learning in organisations. Philadelphia: Berret-JKoehler Ford, J. K. & Weissbein, D. A., (1997) transfer of training: An updated review and analysis. Performance Improvement Quarterly 10(2), 22-41 Galloway, D. L. (2005) Evaluating distance delivery and e-learning: Is Kirkpatrick's Model Relevant?. Performance Improvement 44(4), 21-27 Kirkpatrick, D. L. (1998) Evaluating training programmes. The four levels. Philadelphia: Berrett-Koehler Kraiger, K. (2003) Perspectives on training and development. In W. C. Borman, D. R. Ilgen, & R. J. Klimoski (eds.), Handbook of Psychology: Industrial and Organisational Psychology (pp. 171-192) Hoboken: Wiley Morrow, C. C., Jarrett, M. Q. & Rupinski, M. T. (1997) An investigation of the effect and economic utility of corporate-wide training. Personnel Psychology 50, 91-119 Phillips, J. J., (1994) Measuring return on investment, Alexandria: American Society for Training and Investment Salas, E. & Cannon-Bowers, J. A. (2001) The science of training: A decade of progress. Annual Review of Psychology 52, 471-499 Wile, N. (2009) Kirkpatrick four level evaluation model. In B. Hoffman (ed.) Encyclopaedia of educational technology. [Online] Available from https://eet.sdsu.edu Wisher, R. A. , Curnow, C. K., Drenth, D. J. (2001) From student reactions to job performance: A cross-sectional analysis of distance learning effectiveness. Proceedings of the 17th Annual Conference on distance teaching and learning. (pp. 399-404) Madison: Wisconsin University
Cite this page
Kirkpatrick's Essay Download Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
The Psychological Essay Example Pdf
Introduction
The psychological contract (TPC) was first coined by Argyris (1960), who observed an unwritten agreement existed between employer and employee, summarising that staff performed to a higher level if they received fair wages and had a degree of autonomy in the manner in which they worked. TPC consists of expectations, beliefs and implied obligations; none of which are written in the tangible contract between the employer and employee (Schein, 1985). Rousseau (1995, P.9) developed this idea and defined TPC as 'individual beliefs, shaped by the organisation, regarding the terms of an exchange agreement between the individual and their organisation'. This essay will proceed to discuss the importance for organisations of managing the psychological contract (TPC) and the implications of a breach. The essay will move on to critically analyse the difficulties organisations face in managing TPC, with particular reference to those resultant of the shift from the traditional to the contemporary employment relationship. This essay concludes with a brief summary of the importance of managing TPC and the key challenges which arise when attempting to do so.The importance of managing the psychological contract
Fulfilment of TPC from employers has been proven to result in reciprocation from employees, leading to positive organisational attitudes, affective commitment (Tekleab & Taylor, 2000) and reduced turnover intention (Montes & Zweig, 2009), which lowers an organisations recruitment and training costs, therefore it increases its efficiency (Wilton, 2013). A balanced PC is linked with organisational citizenship behaviour (Decktop, Mangel and Cirka, 1999) and high employee engagement - meaning the employee has a high level of commitment to the organisation and its values, and exhibits willingness to help their colleagues (CIPD, 2009). Due to TPC consisting of unarticulated beliefs, expectations and perceived obligations breaches are not uncommon (Wilton, 2013) as neither party can ever fully know what the other expects of them (Cullinane and Dundon, 2006). Social Exchange theory undergirds TPC postulating that employees and employers engage in exchanges with each reciprocating the contribution of the other (Blau, 1964). In line with the theory of reciprocity (Gouldner, 1960), when employers do not fulfil their implied or understood obligations a breach of TPC can occur, resulting in the employee reciprocating by withholding their effort from work (Bal, Chiaburu, & Jansen, 2010), negative organisational attitudes (Piccoli and De Witte, 2015), reduced performance (Restubog, Bordia, & Bordia, 2011) and workplace deviance (Bordia, Restubog, & Tang, 2008). Many organisations attempt to manage TPC in order to mitigate these potentially harmful effects. A breach of TPC can occur for reasons such as implementation of large scale organisational change often without employee consultation (Gerber et al, 2012). Resistance to change can be extremely problematic for organisations, and the adjustment period to such change can cause vast decreases in efficiency leading to loss of competitive advantage (Dawson and Andriopoulos, 2014). Heuvel, Schalk and Assen (2015) found organisations which communicated their full intentions of change with employees implemented large scale organisational change with lower levels of resistance, due to perceived fulfilment of TPC. This suggests balancing TPC can reduce the resistance to change many employees experience and help to mitigate the potential for loss of competitive advantage. A study by Atkinson (2007) discovered the expectations within TPC widely vary between individuals and organisations, Restubog et al, (2015) found that an aggressive and competitive culture within an organisation exacerbated any breach of TPC and increased the likelihood of employees actively seeking revenge. This suggests that organisations requiring their employees to behave in a highly competitive manner are at greater risk of negative effects from TPC breach and should take necessary measures to minimise the likelihood of this occurrence (Bankins, 2015), as the effects on the organisation will likely be more damaging than if the employee were to simply withhold their effort or decide to leave the firm. Rousseau (1995) implied that within TPC the employer was the independent variable and the employee the dependant variable, believing the employment relationship to be dependant on the actions of the employer and their ability to recognise and meet the expectations of the employee, however this proved contentious. Theorists such as Guest and Conway (2002) advance that TPC is subject to both parties meeting the others expectations rather than just the employer meeting the employee's, and concluded that the state of TPC is dependent on mutual trust, fairness and delivery of the deal. The following section will discuss the ways in which organisations can attempt to manage TPC and the difficulties that arise in doing so, with particular reference to the contemporary employment relationship.The challenges of managing the psychological contract
The dynamics of the labour market have constantly changed and evolved over time (Wilton, 2013), in particular the rise in organisational demand for flexibility has resulted in a paradigm shift from an exchange of job security in return for organisational loyalty to one in which experience is offered to the individual in exchange for temporary service to improve their future employability (Adamson, Dochetry and Viney 1998). Resultantly the contemporary employment relationship can be seen as much more individualised, with Rousseau (2004) terming this as a shift from a relational to a transactional employment relationship. The new PC consists of employee assurances to work hard and be flexible and employer's obligation to provide adequate pay, opportunities for skill development and interesting work (CIPD, 2009). A prevalent issue in managing TPC is known as "multiple agency" (Hui, Lee and Wang, 2015). This refers to employees receiving different messages from the different managers they come into contact with within the organisation. It is therefore imperative for an organisation to ensure that they manage to maintain congruency in their messages throughout their organisation (Lapalme, Simard and Tremblay, 2011). Wilton (2013) suggests that an organisation must utilise a mechanism through which clear communication can be ensured between employer and employee in order to explain managerial decisions and give a platform for employees to voice their opinions. This is in line with Guest and Conway's (2002) findings that employee voice in relation to managerial decisions positively influenced TPC. Internal social media is an increasingly popular method for firms to improve internal communications within their organisation and promote the brand internally in order to positively influence TPC (Mazzei, 2010). Ironically the implementation of internal social media is exactly the type of large scale organisational change which, without the correct communications could encounter significant resistance to change (Dawson and Andriopoulos, 2014) and result in a PC breach. Critics of social media note that it is impossible to regulate (Jones, 2015), as such employees could use this platform to exact revenge for a perceived breach of TPC in a more public and far reaching way than before, so organisations should exact caution when implementing this as a strategy for managing TPC. Organisational policies which are adopted in the favour of the workforce will likely positively effect TPC and result in improved workforce efficiency. This systematic adaption of a corporation's policies to improve their attractiveness as an employer is known as employer branding (Taylor, 2005), however while this can positively affect TPC, organisations perusing this strategy must be aware that those with stronger employer branding must work harder to maintain TPC due to raised employee expectations (Bains, 2015). Bowen (2015) cites generational differences in comfortability utilising social media platforms, and so using internal social media to give employees a voice could potentially alienate some of the workforce, which if not addressed, could result in a breach of TPC. In order to mitigate this risk, training could be provided on the platform, which will likely have a positive impact on TPC as it is in line with the new psychological contract which emphasises the employer providing training and new skills for employees (CIPD, 2009). A challenge for organisations attempting to manage TPC within this contemporary relationship is the generational diversity of the workforce. (Lyons,and Kuron, 2014). Lub et al (2015) found that different generations held very different expectations of their employer's obligation and their own personal contribution to that organisation, suggesting that a multi-generational cohort solution offers the most effective way to maintain a positive psychological contract with the workforce. In countries with an aging workforce like the United Kingdom the generational diversity is likely to be extremely high (Hertel and Zacher, 2015), making it costly and time consuming for management to implement policies to balance the psychological contract for all. This could therefore constitute an area for further research, in order to realise the most efficient way to collectively manage the expectations of such a diverse workforce. It is not only generation diversity which has increased within the modern employment relationship, there has also been rapid growth of a cultural diversity within the global workforce due to the phenomena of globalisation - resulting in what is known as the global workforce (Ryan and Wessel, 2015). Some commentators argue that many of the theoretical frameworks within HRM are underpinned by western cultural values, and that perspective which much of the HRM discourse is written from does not hold a universally applicable view of employment attitudes to authority or risk (Yi et al, 2015). Westwood, Sparrow and Leung (2001) found the dynamics of TPC of junior and senior management from Hong Kong proved, from a western perspective, to be extremely one sided. It seemed the underlying sense of duty and respect which is deep-seated in Chinese culture is reflected in the attitude of the employee, who believes they are more obligated to their employer than their employer is to them. This is in direct contradiction of the western findings of Rousseau (2004) who stated that the employer was the dependant variable and the employee the independent, highlighting the cultural disparity in how TPC is viewed. Not only is the holistic view of TPC likely to be different depending on the cultural context, there are likely to be international differences in the extent to which employees respond to a breach of TPC (Lucas, Lupton and Mathison, 2006), not only making it harder for managers to balance the psychological contract within the confines of foreign cultures, but also making it more difficult for management to predict what retaliation, if any, is likely to occur. A huge challenge facing managers can occur when they are of a different cultural profile to the employees they are managing, due to the commonality of difference in both motivation and interpretation of the parties (Thomas, Au and Ravlin, 2003). As a result it is recommended that organisations with cross cultural management practices give time to understanding the complexities of TPC within their workforce, and work hard to ensure that it can remain balanced.Conclusion
The importance of an organisation managing the psychological contract within a western cultural context is well documented within HRM discourse, allowing organisations to reap the rewards of improved employee relations (Tekleab & Taylor, 2000), and mitigate the risks associated with PC breach (Piccoli and De Witte, 2015). If an organisation does not manage TPC negative work behaviours such as withholding effort or employee deviance could become typical for the organisations workforce (Bankins, 2015) causing loss of competitive advantage. The main challenges with managing TPC in the contemporary employment relationship stem from the widening generational and cultural diversity experienced in many workforces due to the global aging population and globalisation. HRM discourse is primarily based on western cultural assumptions, many of which do not hold true in other cultural contexts (Wilton, 2013). This presents challenges for managers working outside of their own culture or working within a multicultural society. Due to the unwritten and unspoken nature of TPC any organisation would be advised to adequately research the expectations of employees in any foreign context in which they plan to engage, in order to avoid discrepancy. It can be argued that HRM practices developed within the western culture offer ineffective ways to manage labour in divergent cultural settings, constituting a possible area for further research. The growing generational diversity of the global workforce presents difficulty for organisations seeking to implement policies to manage TPC (Cogin, 2012), due to differing generational expectations. Thus to effectively manage such a diverse workforce time must be taken to individualise TPC (Lub et al, 2015). Managing TPC in the individualised manner required of a culturally and generationally diverse global workforce has the potential to be both financially and time intensive. Organisations should therefore analyse the potential implications of non-effective management of TPC before adopting this policy. Consideration should be given to the individual organisational culture, as in organisations with a more competitive and aggressive culture the implications for not managing TPC can be extremely serious, with heightened likelihood of employee revenge (Restubog et al, 2015). Such an organisation would therefore be ill advised to not pursue a policy of PC management.References
Adamson, S., Dochetry, N., and Viney, C., (1998). The meanings of career revisited. British Journal of Management. 9 (1), 251-259. Atkinson, C., (2007). Trust and the psychological contract. Employee Relations. 29 (3), 227-246. Argyris, C., (1960). Understanding Organizational Behaviour. Homewood, IL: Dorsey Press. Bankins, S., (2015). A process perspective on psychological contract change: Making sense of, and repairing, psychological contract breach and violation through employee coping actions. Journal of Organizational Behaviour. 3 (1), 1-17 Bains, G., (2015). Empirical evidence on employer branding and its impact on the formation of psychological contract. JIMS8M: The Journal of Indian Management & Strategy. 20 (2), 28-35. Bal, P. M., Chiaburu, D. S., and Jansen, P. G. W., (2010). Psychological contract breach and work performance. Journal of Managerial Psychology. 25, 252-273. Blau, P. M., (1964). Exchange and power in social life. New York, NY: John Wiley & Sons. Bordia, P., Restubog, S. L. D., and Tang, R. L., (2008). When employees strike back: Investigating the mediating mechanisms between psychological contract breach and workplace deviance. Journal of Applied Psychology. 93 (1), 1104-1117. Bowen, J. T., (2015). Common Themes across Social Media Research. Worldwide Hospitality and Tourism Themes. 7 (3), 46-58. Chartered Institute of Personal Development (CIPD) (2009). Employee engagement factsheet. London: CIPD. -. Cogin, J., (2012). Are generational differences in work values fact or fiction? Multi-country evidence and implications. The International Journal of Human Resource Management. 23 (3), 2268-2294. Cullinane, N., and Dundon, T., (2006). The psychological contract, a critical review. International journal of management reviews. 8 (2), 113-129. Dawson, P., and Andriopoulos, C., (2014) Managing change, creativity and innovation. London: Sage. Decktop, J., Mangel, R., and Cirka, C., (1999). Getting more than you paid for: Organisational citizenship behaviour and pay-for-performance plans. Academy of Management Journal. 42 (4), 420-428. Gerber, M., Grote, G., Geiser, C., and Raeder, S., (2012). Managing psychological contracts in the era of the "new" career. European Journal of Work and Organizational Psychology. 21 (2), 195-221. Gouldner, A. W., (1960). The norm of reciprocity: A preliminary statement. American Sociological Review. 25 (2), 161-178. Guest, D.E., and Conway, N., (2002). Communicating the psychological contract: an employer perspective, Human Resource Management Journal. 12 (2), 132-149. Hertel, G., and Zacher, H., (2015). Managing the aging workforce. Handbook of Industrial, Work, & Organizational Psychology. 2 (1), 1-93. Heuvel, S., Schalk, R., and Assen, M., (2015) Does a Well-Informed Employee Have a More Positive Attitude Toward Change? The Mediating Role of Psychological Contract Fulfilment, Trust, and Perceived Need for Change. Journal of applied behavioural science. 51 (3). 401 - 422 Hui, C., Lee, C., and Wang, H., (2015). Organizational inducements and employee citizenship behaviour: The mediating role of perceived insider status and the moderating role of collectivism. Human Resource Management. 54 (3), 439-436. Jones, J. (2015). Developing Social Media Policies: A Team Learning Approach. . Cases on Strategic Social Media Utilization in the Nonprofit Sector. 1 (2), 210. Lapalme, M. Aˆ., Simard, G., and Tremblay, M., (2011). The influence of psychological contract breach on temporary workers' commitment and behaviours: A multiple agency perspective. Journal of business and psychology. 26 (3), 311-324. Lub, X., Bal, M., Blomme, R., and Schalk, R., (2015). One job, one deal…or not: do generations respond differently to psychological contract fulfilment?. The International Journal of Human Resource Management. 1 (1), 1-28. Lucas, R., Lupton, B., and Mathison, H., (2006). Human Resource Management in an international context. London: CIPD. 1-326. Lyons, S. T., and Kuron, L. K. J., (2014). Generational differences in the workplace: A review of the evidence and directions for future research. Journal of Organizational Behaviour. 35 (7), 180-207. Mazzei, A., (2010). Promoting active communication behaviours through internal communication.. Corporate Communications: An International Journal. 15 (3), 221-234. Montes, S. D., and Zweig, D., (2009). Do promises matter? An exploration of the role of promises in psychological contract breach. The Journal of Applied Psychology. 94 (5), 1243-1260. Piccoli, B., and De Witte, H., (2015). Job insecurity and emotional exhaustion: Testing psychological contract breach versus distributive injustice as indicators of lack of reciprocity. Work & Stress. 1 (1), 1-18 Restubog, S., Bordia, P., and Bordia, S., (2011). Investigating the role of psychological contract breach on career success: Convergent evidence from two longitudinal studies. Journal of Vocational Behaviour. 7 (1), 428-437 Restubog, S., Zagenczyk, T., Bordia, P., Bordia, S., and Champan, G., (2015). If You Wrong Us, Shall We Not Revenge? Moderating Roles of Self-Control and Perceived Aggressive Work Culture in Predicting Responses to Psychological Contract Breach. Journal of Management. 41 (4), 1132-1154. Rousseau, D.M., (1995) Psychological contracts in organizations: Understanding written and unwritten agreements. Newbury Park, CA: Sage. Rousseau, D. M., (2004). Psychological contracts in the workplace: Understanding the ties that motivate. The Academy of Management Executive. 18 (1), 120-127 Ryan, A. M., and Wessel, J. L., (2015). Implications of a changing workforce and workplace for justice perceptions and expectations. Human Resource Management Review. 25 (2), 162-175. Schein, E. H., (1985). Increasing organisational effectiveness through better human resource planning and development. Readings in Human Resource Management, 376. Taylor, S., (2005). People Resourcing. 3rd ED. London. Chartered Institute of Personnel Development. Tekleab, A. G., and Taylor, M. S., (2000). Easing the pain: Determinants and effects of psychological contract violations. Paper presented at the Academy of Management meeting, Toronto, Canada. Thomas, D., Au, K., and Ravlin, E., (2003). Cultural variation and the psychological contract. Journal of organisational behaviour. 24 (1), 451-471. Westwood, R., Sparrow, P., and Leung, A., (2001). Challenges to the psychological contract in Hong Kong. The International Journal of Human Resource Management. 12 (4), 621-651. Wilton, N., (2013) An Introduction to Human Resource Management. 2nd. London: SAGE. ISBN Yi, X., Ribbens, B., Fu, L., and Cheng, W., (2015). Variation in career and workplace attitudes by generation, gender, and culture differences in career perceptions in the United States and China. Employee Relations, 37 (1), 66-82.Cite this page
The Psychological Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Implications in Supermarkets Example for Free
Introduction
In hypercompetitive industries (D'Aveni 2010) such as characterised by the present UK supermarket retail sector where competitive rules are changing fast with disruptive business models from new entrants like Aldi and Lidl (Savage 2014) continuing to pressure the market share of hitherto brand leaders like Tesco and Asda; brand differentiation can be an effective tool to counter the effects of resulting downward pressure on prices and profits (Kumar 2006; Matzler et al 2009). Understanding the expectations of the customer with respect to the brand is an important factor in the innovative process. This paper will analyse the dynamics that define customer based brand equity. The strategic elements involved in creating brand equity along with its inter-relationship with competitive advantage will be discussed. The implications and relevance of strong branding and customer based brand equity will be reviewed pertaining to the present UK supermarket business environment. A firm's competitive advantage and the extent to which it differentiates its presence in the marketplace depend on how well it consistently fulfils the expectations of its targeted customers. It is emphasised that in achieving this consistently through a combination of visible and invisible processes, it is able to intuitively develop a distinct identity within its sector, an imprint or 'branding' on its products or services (Kapferer 2008).
The Meaning of Branding
The American Marketing Association (AMA) defines a brand as a 'name, term, sign, symbol or a combination of them that is designed to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors'. Within industry however, it is common to define branding as injecting products and services with distinct attributes representing an organisation, creating specific awareness and identity in the marketplace (Keller 2002). Hence it can be concluded that specific advantages, attributes, ideals and benefits are associated with a brand other than its name and labelling that allow the product to stand out and be distinguished when compared to a competitor (Kapferer 2008). In other words, branding comes from within, transcending superficial identifications. Numerous studies have shown that the strength of a brand, nurtured through accumulation of innovations over time to exert influence on the perceptions of customers, their level of satisfaction and expectations also result in economic advantages (Aaker 1996; Keller 2002). The financial value as a result of these economic advantages is referred to as brand equity.
Brand Equity
It can be inferred that an effective and strong brand will be reflected in a sustainable, loyal customer base whose collection of tangible and intangible experiences with the brand determines how the brand performs in the future (Aaker 1996; Keller 2002). According to Kapferer (2008), performance of the brand and its equity is reflected at three major levels:
- Assets which encompass signs, imagery, name, identity and reputations.
- Strength, consisting of its market share and position, degree of loyalty, growth rate and pricing advantage.
- Value, reflecting financial advantages including marketing costs.
Aaker (1996) contends that the advantages (or disadvantages) provided by a brand to its firm is embodied in five main categories:
- Brand Loyalty
- Brand Awareness
- Perceived Quality
- Brand Associations
- Other Proprietary Assets
Aaker (1996) developed a brand equity model which is based on the above assets explaining how the various categories interplay to add (or remove) value to a firm and seeks to connect this to future performance of the brand. A schematic view of the model is shown below: Figure 1: Illustration of Aaker's Brand Equity Model Source: Aaker 1996, P.9 In considering brand equity mainly from the consumer behaviour viewpoint, Keller (2002) defines 'customer based brand equity' as consisting of the differential effect that the knowledge of and familiarity with a brand has on the behaviour of consumers to the marketing of the brand. The customer based brand equity (CBBE) model developed by Keller (2002) with respect to this definition will be examined in closer detail in the following section.
Customer Based Brand Equity
Within this model, a brand is considered to have positive customer based brand equity when consumer reaction to the marketing of a product is more favourable when that specific brand is mentioned as opposed to an unnamed or generic version of the product. To achieve this, the consumer has to be knowledgeable about the brand showing a high degree of awareness and familiarity along with corresponding strong and unique brand associations in memory (Keller 2002). To build a strong brand, Keller argues the importance of a number of sequential activities over time involving the development of a brand identity, defining brand meaning in the mind of consumers, repeatedly and consistently generating correct brand responses and ensuring a strong relationship with customers resulting in long term bonding and brand loyalty. These four stages according to Keller's (2001) CBBE model is based on a brand establishing six core values forming the basis of a 'brand resonance pyramid' or a customer based brand equity pyramid. The six core values consist of brand salience, brand performance, brand imagery, consumer judgements, consumer feelings and consumer brand resonance. The six core values along with the elements of the four stages and four questions customers ask of brands as shown in figure 2 will be examined in greater detail. Figure 2: Customer Based Brand Equity Pyramid Source: Keller 2001, p.7
- Brand Salience is connected to the awareness of the brand and how well it stands out in its category. This is the cornerstone for building brand equity. It addresses the basic customer question of 'Who are you?', the first step in engaging with the product. Breadth and depth of awareness influence how clearly the brand distinguishes itself within its category and that it will be one of the considered options for purchase and usage in terms of consumption. In situations where customers have little information about a product category or do not have much purchase interest, salience becomes the major criteria for the choice made (Keller 2001).
- Brand performance is an essential component of brand meaning since the features of the product itself are at the centre of creating brand equity. It is the performance of the product that the consumer directly experiences. Brand loyalty and resonance requires that the product meets with or preferably exceeds expectations. Key attributes of performance include reliability, serviceability, durability, price, style and design (Keller 2001). Crucial to brand performance is the level of service effectiveness, empathy and efficiency associated with the product. This defines how well customer services associated with the brand satisfies the customer including the speed and manner in which it is delivered in addition to care and consideration for the customer.
- Brand imagery represents an intangible component of brand meaning where the psychological perceptions of how the product meets customer's needs in the minds of the consumer are considered. It is reflected in four major categories (Keller 2001):
- User profiles which connotes demographic groups or types of persons who would use the brand. In some cases this may be actual users or aspirational users. Furthermore, it may be thought that the brand is favoured by a large group of people and thus popular.
- Purchase and Usage situation including channels of distributions such as department stores, exclusive stores, context of use, location or where the brand is used and time of use, for example valentine day.
- Personality and values traits similar to that of people. This could be sincerity, cheerfulness, ruggedness, excitement or sophistication to name a few.
- History, heritage and experiences are also part of the abstract imagery associated with a brand. It could be that the brand is associated with family events, certain occasions in history or personal experiences.
- Brand judgments represent how the brand is evaluated by an individual with regard to their personal opinion and thus responses to the brand. Four considerations are important towards building a strong brand from the judgment stand point:
- Brand quality which represents the brand's value and level of satisfaction.
- Brand credibility defining the extent to which the brand as a whole is liked and trusted by the customer as well as the degree to which the brand is seen as capable, innovative or a leader.
- Brand consideration explains the relevance of a brand to the customer.
- Brand superiority is a reflection of how unique the customer finds the brand in comparison to others. This is where brand differentiation and advantages is evaluated. Superiority is considered crucial in building loyalty and intense relationships.
- Consumer feelings describe the emotions evoked by the brand or its associated marketing activities. This is a strong component of customer responses to the brand and can be positive, negative, intense, mild or enduring. Six types important in brand building are warmth, fun, excitement, security, social approval and self-respect.
- Consumer brand resonance is the final step in the model and dwells on how well the relationship between the brand and the consumer works. The level of relationship intensity and understanding between consumer and brand is important in building strong loyalty and the activities associated with this such as pride in brand, associated clubs, frequent and repeat purchases, events, and seeking out information about brand. Four dimensions that have been identified in brand resonance are behavioural loyalty, attitudinal attachment, sense of community and active engagement.
Relationship between CBBE and the UK supermarket business environment
The UK supermarket marketplace consists of four major players, known as the 'big four'; Tesco, Asda, Sainsbury and Morrisons (Dahlen et al 2010; Savage 2014). Other notable participants within the sector include Co-op, Waitrose, Aldi, Lidl and Iceland. Within the sector, different positioning strategies are employed to gain market share. Tesco is positioned based on convenience and affordability while Asda and Morrisons focus on these attributes but at lower prices in comparison (TNS Global 2012). Sainsbury and Aldi were identified as serving two different groups in the marketplace where Aldi focuses on price-positioning, Sainsbury focuses on quality positioning (Dahlen et al 2010). Waitrose is positioned more upmarket than Sainsbury while Lidl competes with Aldi within the downmarket sector. Aldi and Lidl, recognised for their strong price-positioned brands are increasingly taking market share from the big four with the market leader, Tesco suffering the most (Savage 2014). The supermarket sector faces a state of change and reorganisation as the affected firms look for solutions to eroding market share. However, it appears that brands such as Waitrose and Asda have fared reasonably well so far as shown in figure 3. Figure 3: Supermarket Sales Growth 2013/2014 (%) Source: Savage, 2014 This brief seeks to examine what factors influence customer loyalty and the intensity of brand relationship and how this may have played in the ability of different supermarkets to hold on to market share in the advent of intense competition. Research carried out by TNS Global in 2012 found that Waitrose was identified as being able to gain market share if it was to reduce prices while Tesco, Asda and Morrisons, though viewed favourably by most of the respondents were associated with feelings of ambivalence by consumers (TNS Global 2012). While the effects of loss aversion are in play here where customers see the opportunity to acquire otherwise high quality products at low prices (Hardie et al 1993; Putler D.S. 1992) it can also be argued, based on our knowledge of CBBE that Waitrose is able to draw on its brand equity to defend its market share. One of the ways a firm can draw on its brand equity to counter low price competition is in the creation of a middle brand drawing market share from the low cost rival (Jara and Cliquet 2008; Heath and Chatterjee 1995). Tesco, Sainsbury and Morrisons are the hardest hit firms based on figure 3. This could be explained in part by the fact that while Sainsbury seeks to position as an upmarket quality brand, there are elements of sameness between the three brands. Also in play is the dynamic that the three supermarkets are positioned in the middle of the market where the market share added to the downmarket sector is most likely to come from (Jara and Cliquet 2008; Heath and Chatterjee 1995). In the case of Asda, it has developed some recognition over time as a low priced option despite being similar in positioning to the other three. It would appear that this perception provides it a buffer to some extent from competitive attacks based on low-price positioning (Bronnenberg and Wathieu 1996; Kumar 2006)
Conclusion
In this study, it was sought to understand the various elements of customer based brand equity and to analyse how the concept relates to ongoing market share changes and reorganisation in the UK supermarket environment. The scope of this brief makes it difficult to draw definitive conclusions on the exact effects of CBBE on customer loyalties with respect to the supermarkets, however it is surmised that it does exert an important level of effect. It will be useful to investigate this further through empirical studies to gain better insights and understanding of the concept with respect to the supermarket environment.
Reference List
Aaker, D.A. (1996). Building Strong Brands. New York: The Free Press Bronnenberg, B.J.A.M., Wathieu, L. (1996). Asymmetric promotion effects and brand positioning. Marketing Science, Volume 15, No.4, pp. 379-394. Dahlen, M., Lange, F., Smith T. (2010). Marketing Communications: A Brand Narrative Approach. Chichester, UK: John Wiley and Sons D'Aveni, R.A. (2010). Hypercompetition. New York: Simon and Schuster Hardie, B.G.S., Johnson, E.J., Fader, P.S. (1993). Modelling Loss Aversion and Reference Dependence Effects on Brand Choice. Marketing Science, Volume 12, No.4, pp. 378-394. Heath, T. B., Chatterjee, S. (1995). Asymmetric Decoy Effects on Lower-Quality versus Higher-Quality Brands: Meta-Analytic and Experimental Evidence. Journal of Consumer Research, Volume 22, No.3, pp. 268-284. Jara, M., Cliquet G. (2008). Retail brand equity: a conceptual and differentiated approach. European Association of Education and Research in Commercial Distribution, pp.1-30. Kapferer, J.N. (2008). The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term. London: Kogan Page Keller, K.L. (2001). Building Customer Based Brand Equity. Massachusetts, USA: Marketing Science Institute Keller, K.L. (2002). Branding and Brand Equity. Massachusetts, USA: Relevant Knowledge Series, Marketing Science Institute Kumar, N. (2006). Strategies to Fight Low Cost Rivals. Boston, USA: Harvard Business Press Matzler, K., Bailom, F., Anschober, M., Richardson, S. (2009). Hypercompetition, customer-value competition, and the new role of market research. Innovative Marketing, Volume 5, No.2, pp 6-10 Putler, D.S. (1992). Incorporating Reference Price Effects into a Theory of Consumer Choice. Marketing Science, Volume 11, No.3, pp. 287-309. Savage, R. (2014). Tesco sales keep rotting as Waitrose nabs record market share. Management Today [Online] Available from: https://www.managementtoday.co.uk/news/1318059/tesco-sales-keep-rotting-waitrose-nabs-record-market-share/ TNS Global. (2012). A£7.1bn of grocery spend up for grabs if Waitrose can convert 'Shallow Shoppers' [Online] Available from : https://www.tnsglobal.com/press-release/%C2%A371bn-grocery-spend-grabs-if-waitrose-can-convert-%E2%80%98shallow-shoppers%E2%80%99
Bibliography
Kirenz, J. (2010). Linking Consumer Mindset Metrics to Consumer Behavior and Capital Market Valuation. Gmbh: Josef Eul Verlag Kumar, N. (2007). Private Label Strategy: How to Meet the Store Brand Challenge. Boston, USA: Harvard Business Press Lambin, J.J. (2008). Changing Market Relationships in the Internet Age. Leuven, Belgium: Presses univ. de Louvain Rao, A.R., Bergen, M.E., Davis, S. (2000). How to Fight a Price War. Harvard Business Review, March-April 2000 Issue.
Cite this page
Implications in Supermarkets Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
The Hospitality Industry Essay Example Pdf
INTRODUCTION
This paper presents a review of the literature relevant to the topic of intercultural communication in the hospitality industry. It begins with an examination of Brown and Levinson's politeness theory, followed by a critique of Hofstede's five cultural dimensions and Edward Hall and others' theories of cultural awareness, concluding with a synthesis of the research on intercultural communication by leading commentators in this field. This analysis thus provides insight into the issues influencing the perception of politeness between the Spanish and English cultures in the hotel workplace.LITERATURE REVIEW
1. Politeness theory
In their 1978 and 1987 works on the theory of politeness, Brown and Levinson put forward a rational model of politeness, arguing that individuals across all cultures want to be approved of by others and free from unnecessary constraints, or positive and negative "face", respectively (Greene, 1997). In response to their argument that politeness is a universal part of language, Watts (2003) contends that this theory is overly idealistic because it ignores the means by which individuals in society struggle with politeness in their interactions with others. He holds that these features of social interaction are more important than the role of politeness in intercultural communication. Using a practical example of politeness theory, O'Dowd (2003) conducted primary research examining the interaction of Spanish and English cultures in business situations and found that if participants perceived another person as being interested in descriptions of their own culture, they subsequently felt encouraged to communicate more but, if they felt their positive face was threatened by the other person showing a lack of interest in their cultural background, they were more reluctant.2. Hofstede's five dimensions
Geert Hofstede describes culture as the collective characteristics of members of one group of people (Hofstede, 2001; Hofstede et al, 2010). His theories search for meaning in the correlation between a country's cultural indicators and his five dimensions of power distance, uncertainty avoidance, individualism, masculinity and long-term orientation (Vinken et al, 2004). In his most recent work, Hofstede adds a new sixth dimension of culture called "indulgence versus restraint" and introduces the concept of a "moral circle" to the debate (Hofstede et al, 2010). In a 1998 article, Hofstede builds on his earlier seminal works (1980; 1991) and further specifies that the main criteria for comparison are values and attitudes, also known as "constructs". He acknowledges that there has been much criticism of his methodology of using nations as the units for studying and comparing culture, but nevertheless contents that many nations contain a sufficient amount of comparable aspects. Hofstede suggests that cross-cultural misunderstanding is often based on the dimension of value variation between cultures, with the Spanish having a more group-orientated culture than the English. When an activity is planned by Spanish people, it is much more common to invite a large group than just one or two others, demonstrating collectivism over individualism. In addition, Hofstede suggests that the English not only have a high level of individualism, they exhibit above average masculinity and lower power distance and uncertainty avoidance than the Spanish.3. Cultural awareness
While Hofstede's work provides a useful framework, there is large body of research that explores in more detail the definitions and role of culture and cultural awareness, and it is valuable in the analysis of these cultures in relation to the hospitality industry. Holliday et al (2004:3) describe culture as being a "fluid, creative social force which binds different groupings and aspects of behaviour in different ways", and cultural awareness requires a fundamental understanding of this fluidity and how it impacts on various social interactions, particularly intercultural ones. The attitudes and perceptions associated with different national cultures exerts a strong influence on many business situations, including that of English receptionists interacting with Spanish customers, and the studies of cultural awareness by Edward T. Hall illustrate this point further. He describes culture as a "hidden force" and goes as far as to suggest that culture is synonymous with communication. When an English receptionist communicates with a Spanish customer, it is inevitable that each party will apply their own cultural framework not only in the way they communicate with each other, but in how they perceive the interaction. Other experts reinforce the notion that there are significant barriers to be overcome in terms of intercultural business issues (Larsson and Risberg, 1998). Bennett (1993) for one contends that it is important to be able to distance oneself from one's own cultural backgrounds in order to understand others, and Byram (1997) goes on to suggest that sensitivity to issues such as directness and politeness in language is an essential component of intercultural awareness. These theories can all be applied to help English receptionists and Spanish customers to have greater levels of cultural awareness and sensitivity, thus enhancing the business relationship.4. Intercultural communication
Building on the analysis in the previous sections, Charles (2007) points to the fact that English has become the accepted "lingua franca" of international business, and this is referred to by others as the "built-in bias" of the English language (Munshie and McKie, 2001). The hospitality industry is a prime example of this, and it has become accepted practice for customer-facing hotel staff to be able to speak English to come extent, regardless of the country in which the hotel is located. It is much less likely for an English receptionist to speak Spanish, for example. One expert has pointed out that frequently non-verbal communication can be misinterpreted. For example, she says: "Normally a handshake is brief but in Spain it may be prolonged for several seconds. This does not show deep personal warmth as it might somewhere else McLaren, 1998:137)." And as Welch et al (2005:11) point out, intercultural communication can actually be "an irritating reminder of what may be involved in crossing foreign cultures, and managing in a cross-cultural environment." Based on extensive primary research, Charles (2007) recommends that businesses should increase their awareness of the importance of cultural diversity in communication and develop a better understanding of how individuals relate to each other across language and cultural barriers. Another commentator (Verluyten, 1997) has provided evidence of the importance of intercultural training and awareness in this process, the lack of which can lead to "disastrous" results.CONCLUSIONS
This paper has presented a summary of the relevant literature and provided some interesting insights into the role of intercultural communication in the hospitality industry, especially between Spanish and English cultures. For one, an analysis of Hofstede and Brown and Levinson contributes to a better understanding the issues underpinning the differences between these two cultures and the various influences on people's behaviour, such as politeness and individualism versus collectivism. In particular, the work by Hall and others demonstrates that learning a second language, not just English as is normally the case, is important in today's working environment within the hospitality industry. A lack of cultural awareness especially can lead to barriers of miscommunication. For example, Spanish customers could potentially be seen as rude or overly direct by English receptionists who do not understand the cultural differences. The receptionists therefore often apply their own cultural background to the interaction and, as a result, expect a sometimes unreasonably high level of politeness. Communication can be significantly improved by efforts to raise intercultural awareness and sensitivity within the hospitality industry.BIBLIOGRAPHY
Bennett, M., 1993. Towards ethnorelativism: A development model of intercultural sensitivity. In M. Paige, ed., Education for the Intercultural Experience, pp.21-71. Yarmouth: Intercultural Press. Brown P. and Levinson S., 1978. Universals in language usage: Politeness phenomena. In E. Goody, ed., Questions and Politeness, pp.56-311. Cambridge: Cambridge University Press. Brown P. and Levinson S., 1987. Politeness: Some Universals in Language Usage. Cambridge: Cambridge University Press. Byram, M., 1997. Teaching and Assessing Intercultural Communicative Competence. Clevedon: Multilingual Matters. Charles, M., 2007. Language Matters in Global Communication. The Journal of Business Communication, 44(3). p.260. Greene, J.O., ed., 1997. Message Production: Advances in Communication Theory. Mahwah: Lawrence Erlbaum Associates. Hall, E.T., 1959. The Silent Language. New York: Doubleday. Hofstede, G., 1980. Culture's Consequences: International Differences in Work-Related Values. Beverly Hills: Sage Publications. Hofstede, G., 1991. Cultures and Organizations: Software of the Mind. New York: McGraw-Hill. Hofstede, G., 1998. A Case for Comparing Apples with Oranges: International Differences in Values. International Journal of Comparative Sociology, 39(1). pp.16-31. Hofstede, G., 2001. Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations, 2nd ed. Thousand Oaks: Sage Publications. Hofstede, G., Hofstede, G.J. and Minkov, M., 2010. Cultures and Organizations: Software of the Mind, 3rd ed. New York: McGraw-Hill. Holliday, A., Hyde, M. and Kullman, J., 2004. Intercultural Communication: An Advanced Resource Book. London: Routledge. Larsson, R. and Risberg, A., 1998. Cultural awareness and national versus corporate barriers to acculturation. In M. Gertsen, A-M. Soderberg, and J. E. Torp, eds., Cultural dimensions of international acquisitions, pp.168-196. Berlin: Walther de Gruyter. McLaren, M.C., 1998. Interpreting Cultural Differences: the Challenge of Intercultural Communication. Dereham: Peter Francis Publishers. Munshie, D. and McKie, D., 2001. Toward a New Cartography of Intercultural Communication: Mapping Bias, Business, and Diversity. Business Communication Quarterly, 64(3). p.9. O'Dowd, R., 2003. Understanding the "Other Side": Intercultural Learning in a Spanish-English E-Mail Exchange. Language, Learning & Technology, 7(2). p.118. Thomas, D.C. and Inkson, K., 2003. Cultural Intelligence: People skills for global business. San Francisco: Berrett-Koehler. Verluyten, S.P., 1997. Business Communication and Intercultural Communication in Europe: The State of the Art. Business Communication Quarterly, 60(2). p.135. Vinken, H., Soeters, J. and Ester, P., eds., 2004. Comparing Cultures: Dimensions of Culture in a Comparative Perspective. Boston: Brill. Watts, R.J., 2003. Politeness. Cambridge: Cambridge University Press.Cite this page
The Hospitality Industry Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Lidl Grocery Store Example for Free
The UK grocery market is a highly competitive and saturated market with thousands of competitors. Demand is distinct for being price elastic such is the nature of the market. This makes it notoriously difficult to make any advances on market share (Burt and Sparks, 2003). Since entering this market in 1994, Lidl have become deeply entrenched with over 600 stores at its disposal which expresses the phenomenal success that they have achieved (Lidl 2012). They are now a formidable competitor feared by the other major supermarkets. The big four supermarkets in the UK such as Tesco and Asda have now endured a decrease to their market share, as the discount supermarket Lidl has made gains (Butler, 2015). Brinded (2015) outlined that as of May 2015, Lidl had accomplished a record market share of 3.9% with an 8.8% increase in sales. Such displays of growth are very much owed to the marketing strategy implemented by Lidl. Fifield (1998, p.27) defines marketing strategy as the "process by which the organisation translates its business objective and business strategy into market activity". He also emphasises the importance of executing plans quickly in response to various market changes. Lidl as will be explained has executed this definition to great success. This essay will analyse the marketing strategies devised by Lidl and will also propose suitable recommendations to enhance the marketing strategy to sustain financial performance and UK expansion, with a brief insight into the enormous challenges encountered by Lidl.
Barriers to Entry
With the price per majority of products being relatively small it is crucial that stores sell a high volume with great variety. Therefore a large and repeat buying consumer base is crucial for any long term success (Oliver, 1999). Such a rigid outline for success means that the barriers to entry are quite formidable. Stigler (1968, p.67) categorised barriers to entry as "a cost of producing that must be borne by firms seeking to enter an industry but is not borne by firms already". Of course Lidl was and still is a massive supermarket in Germany from the 1980's and was recognised throughout other European countries but it was completely diverse to the stores in the UK which made Lidl's introduction a risk. It doesn't seem cynical to suggest that there also exists a long established oligopoly whose economic dominance makes the market even more challenging to infiltrate (Blythman, 2008). BBC (2006) support this view by reporting in 2006 that Tesco, Asda, Sainsbury's and Morrison's controlled 74.4% of the market. This oligopoly means that there are higher barriers of entry, requiring significant capital to overcome. It has also fostered extreme levels of customer loyalty which is a complex obstacle in itself to overturn. Such dominance translates to quite high profit margins when compared to discount stores. Ferrell and Hartline (2014) identified capital, advertising, government regulations and adequate infrastructure as the primary barriers to entry in a market which is oligopolistic.
Marketing Strategy incorporated by Lidl
From their European operations Lidl had already amassed a substantial budget, giving it the economic strength to establish a corporate base in the UK market. However initially Lidl did not aim to match supermarkets such as Tesco for store size as they recognised that their brand simple wasn't reputable enough in the UK for such an aggressive strategy. They operated on a financial scale below that of the larger supermarkets which helped them to systematically build their operations from a small and solid foundation. Aaker and Mcloughlin (2010) distinguished four key principles needed to ensure a successful marketing strategy. These were strategic analysis, innovation, multiple businesses and sustainable advantage. Lidl's marketing strategy was extremely competent at orchestrating these principles as interpreted below; Strategic Analysis- Lidl's rise to prominence during the financial crisis was a massive example of how strategic analysis benefited their marketing strategy. Senior and Swailes (2010) were adamant that for any successful marketing strategy the information needed to be accurate and timely. In specific they pinpointed environmental triggers of change which encompasses, political, economic, social, technological, legal and ecological factors.
Lidl regarded the financial crisis as an opportunity and began to stock greater numbers of cheaper products. Most notably middle class consumers who before the crisis would not have shopped at a discount store were attracted by the cheaper prices of products. This stimulated an uplift in customers, leading to a massive increase in sales. It is evident that Lidl's marketing strategy is identifiable with that of the evolutionary approach, whereby reacting to changing market conditions by launching initiatives has been a success (Fifield, 1998). Johnson and Scholes (2000) believed a SWOT analysis was an efficient method of enhancing any marketing strategy. While a SWOT analysis portrays the financial crisis as an opportunity it would also highlight major weaknesses so that they can be confronted. Poor reputation and brand image would seem to be Lidl's major weakness with Connolly (2008) exposing poor working conditions and minimum wage throughout the UK stores.
This illustrates that there are areas which Lidl's marketing strategy did not address. Innovation- Although simplistic, Lidl incorporated a basic standard of store interior where stock was commonly placed in bulk on pallets with minimal or no additional services such as a butchers which is a familiar service in most supermarkets. It is apparent that Lidl have relied heavily on the framework of the generic strategy of cost leadership. Porter (1985) presented this strategy as one where a competitive advantage is engineered by minimising costs and lowering prices. This has been cardinal to Lidl capturing market share, whilst producing considerable profits. This strategy has also been successful for huge multinational companies such as Ryanair who can offer greatly reduced prices by maintaining a low standard of service. As can be seen with Porter's (1985) generic strategies matrix, Lidl's marketing strategy achieved optimum success as they had a broad market scope to aim at. Figure 1. Porter's Generic Strategies Matrix (Porter, 1985 p.12) Multiple Businesses- Lidl was already a major force in mainland Europe and therefore had massive capital to sustain large scale expansion into other countries. The marketing resources were present and availed of in an ambitious marketing strategy where Lidl would operate below the level of the larger supermarkets, aspiring to build themselves up eventually to that pedigree. Hooley et al (2008, p.289) commentated that "marketing assets and capabilities have potential for exploitation". Lidl's marketing strategy utilised the assets of the company to allow them to continuously grow without any cash flow shortages. Sustainable Advantage- Higher quality consumables that can match the quality of household brands primarily stocked in the major supermarkets has attracted a larger range of consumers.
Moreover it has provided an effective competitive advantage which diversifies Lidl. Small, unknown brands mean that Lidl can comparatively sell at a much lower price than what is demanded from market leading brands. Durrani (2015) highlighted that in 2012 alone Lidl had spent A£21 million on advertising activity, another key factor in the effectiveness of their strategy. In contrast to Porter's theory of cost leadership, it must be appreciated that this strategy in isolation does not sell the product. McCarthy (1960) constructed the marketing mix which gives a much more definitive portrayal of how to produce sales. From the above analysis it is clear that Lidl's marketing mix which as McCarthy (1960) outlines involves product, pricing, place and promotion worked with emphatic success.
Recommendations for Future
Interestingly it has been contested that much of Lidl's success has been owed to the financial crisis of 2008. While this does demonstrate Lidl's competency at processing information and intelligent decision making, they now must be proactive and plan for the future. It is likely that they will again exist in a strong economy where consumers will be more inclined to spend on luxury brands and in stores such as Marks and Spencer's. With the grocery market being so dynamic and volatile it is crucial that Lidl engage in further market research to identify exactly what consumers want so that the company can be improved to accommodate for these demands. If done so correctly customer loyalty will be retained. Oliver (1999, p.33) has discovered that "the net present value increase in profits that results from a 5% increase in customer retention varies between 25% and 95% in 14 different countries". With regards to this information it would be advisable for Lidl to engage in loyalty schemes where repeat buyers are rewarded with discount and exclusive offers. However it is a complex task to estimate factors such as consumer spending as explained by Dekimpe et al (2010, p.29) who states that "predicting aggregate consumer spending is vitally important to marketing planning, yet traditional economic theory holds that predicting changes in aggregate consumer spending is not possible".
This demonstrates how challenging it is to make accurate assumptions. As proposed by Chisnall (1995) it would be recommendable that Lidl should execute multiple sourcing on a wider scale whereby a larger variety of suppliers are contracted. He explained that this would secure expansion as it would limit the consequences of a main supplier defaulting. Brand repositioning is the possibly the most important recommendation to ensure Lidl continue making substantial market gains. Burt (2000) noted that although discount stores can potentially make significant gains it is essential that for long term success their brand image must be improved. It was revealed by igd (2015) that the UK market on March 31st was worth A£177.5 billion, an increase of 1.7% from the previous year. An indication that consumers may begin to expect greater quality, which could leave Lidl surplus to requirements. To reinforce the need to improve the brand image Ross Millar, the managing director of Lidl Scotland (Lidl 2012) revealed that 63% of customers interviewed agreed that if they had more money they would buy better quality food. It is clear that Lidl will have to improve the quality of produce that they source. Further large investment is required to modernise store interiors with additional services needed to be established. This will not only increase revenue due to diversification but as mentioned above the brand image will be vastly improved.
Lidl will be transformed from the perception of being solely a discount retailer to being a 'one stop' shop where consumers can purchase all of the groceries that they plan on purchasing. Furthermore a popular feature of larger supermarkets is 'online shopping' whereby by customers can make online orders for home delivery. It has been a huge success for Tesco which has also boosted its brand image. For Lidl to continue to compete with the larger supermarkets in the future and to prosper, they too must develop an online shopping service. Such is the age we now live in where spending is heavily dictated by technology it would be naA¯ve of Lidl to ignore such an opportunity (Burt and Sparks, 2003). It also promotes brand awareness. Blackman (1975) suggested that corporate social responsibility (CSR) is another factor which many large multinational companies are having to introduce as it ranks highly in priorities demanded by stakeholders in the 21st century. Lidl have already began to source fair trade products, but they must do a lot more as consumers now expect fresh produce and a range of ethical products. Drucker (1984) was of the view that CSR will influence consumer behaviour greatly as it is increasingly in the interest of society. However Boulstridge and Carrigan (2000) maintained that price, quality, brand familiarity and value were still the key factors that controlled consumer spending.
Conclusion
Lidl's marketing strategy has been as innovative as it has been opportunistic, which reflects the position it now finds itself. Ferrell and Hartline (2014, p.17) stated that marketing strategy "is a plan for how the organisation will use its strengths and capabilities to match the needs and requirements of the market". It is apparent that Lidl have executed their marketing strategy to maximum effect, exploiting an opportunity in the market with exceptional financial performance as a result. Lidl's ascendency is summarised by Fuller (1999, p.3) who defines marketing success as "satisfied consumers and concurrent profit for the firm". Lidl's performance as a direct result of their marketing strategy firmly reflects this concept, which is testimony to all that they have achieved. However just as change brought Lidl success, it must be acknowledged that it can usher in collapse.
Lidl have constructed a vast infrastructure in the UK that will allow them to pursue even more market share. The strategies that they deployed in the past seven years may no longer be adequate so it is vital that they continue to evaluate their environment and make decisions accordingly. Brand awareness and changing brand perception is the most vital area for the future marketing strategy as it will determine continued customer loyalty. Lidl now undoubtedly have the platform to become a market leader in the long term future if they continue to fuel growth by reacting to the ever changing consumer demands which has helped them climb to such a prosperous position. Structural inertia must not be allowed to breed, with moving forward the primary focus.
Cite this page
Lidl Grocery Store Example For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Stock Market Essay Example Pdf
Critically discuss the various modes of entry for which an organisation can internationalise their operations. Is there one mode that is preferred above others? International expansion is one of the key strategic devices available to any firm looking to grow its operations. However, once the decision to internationalise has been arrived at, organizations have at their disposal numerous options in terms of mode of entry. Each of these strategies offers advantages and drawbacks in regards to the opportunity for the firm to realise transaction savings, enhanced market access and returns, and improved level of control. This paper critically appraises the key choices available to businesses seeking to expand globally. Following an empirical comparison of the costs and benefits of these approaches, and drawing on the key theoretical framework in the international business literature (OLI eclectic paradigm), the paper seeks to identify whether one mode of entry is preferred above others. In examining both the international business literature and the empirical movements of internationalising firms, it is clear that the number of options open to globally expanding businesses is myriad . It is worthwhile, therefore to provide an overview of the principal benefits and drawbacks of those options. Table 1 demonstrates that in making their decision, internationalising firms must balance a number of possible gains and losses.
Table 1: Key modes of entry to foreign markets, costs and benefits
Mode of entry |
Costs |
Benefits |
| Exporting an existing product or service | Transaction costs may be high. Trade and tariff barriers may exist | Firm may realise economies of location and experience |
| International franchising or licensing | Limited control over overseas product/service quality. Limited capacity for international strategic coordination | Relatively low risk since the business model has already been tested in a market. |
| Turnkey contracts | Long term market presence is limited | Opportunity to realise process technology returns in economies with limited experience of Foreign Direct Investment |
| Horizontal acquisition | Relatively high risk, particularly in relation to cultural differences | Capacity for international strategic coordination Firms can realise economies of experience and location. Technology/patents are protected |
| Joint Ventures/Strategic alliances | Firm loses control over quality and technology. | Costs of development and other risks are shared with the collaborative partner. Internationalising firm can access the localised knowledge of its partner. |
In the modern globalised economy, the most popular international activity of producing firms is exporting (Buckley, 2009). Although there is some scholarly debate regarding the extent to which exporting activity can truly be deemed ‘internationalisation', sending goods abroad for sale in overseas markets seems to be the preferred way for businesses to enter foreign markets, and it can often provide a foretaste or capability building for those seeking physical international expansion at some point in the future (Chang, 1995). This mode of entry is particularly useful for businesses that are lacking in financial and other resources necessary for physical location overseas, and for this reason, it is a particularly popular internationalisation activity of small and medium-sized enterprises (SMEs) (Lu and Beamish, 2006; Coviello and McAuley, 1999). For these firms, as well as their larger counterparts, the key benefit of exporting home-produced goods is often that the costs of setting up a new, wholly owned plant abroad – which are often substantial, and subject to significant regulation – can be avoided (Welch, Benito and Petersen, 2007). Firms that take a longer-term strategic view and have access to the necessary resources, do, however, often find that the costs of production are cheaper overseas, particularly if the internationalising firm is based in the West and relocates to the Far East or Indian subcontinent (Argawal and Ramaswami, 2002).
Nevertheless, exporting firms can realise substantial economies of both location and experience through the boost to their global sales volume offered by a new exporting activity. In spite of the opportunity to reduce costs in this way, there are other costs associated with exporting. The firm will likely face trade barriers that vary depending on the laws and regulations governing the target market; these are usually in the form of tariffs, but may take other forms, such as caps (Hill, 2010). Incurring such costs will increase the expense associated with exporting. Extensive government regulation - such as the import tariffs just mentioned - can hinder the level of Foreign Direct Investment (FDI) attracted to an economy, and in these instances, it is often preferable for the home firm to involve itself in what is known as a turnkey contract, rather than in exporting activity (Hill, 2010). Turnkey contracts refer to projects in which two or more firms provide resources to establish a production facility. Typically, such contracts are entered into when the home firm possesses specific knowledge relating to the production of the good, but a collaborating partner, or contractor is needed to input the technological capital, market knowledge or some other resource specific to the host nation (Sitkin and Bowen, 2010). The ability to bypass trade barriers is thus the major benefit of these collaborative projects; furthermore, the internationalising firm has access to the expertise of the host partner. Despite these advantages, there are some drawbacks to this mode of entry.
In allowing the host firm access to its own capabilities, the internationalising firm may inadvertently be creating a competitor once the contract comes to a conclusion (Sitkin and Bowen, 2010). To combat this drawback, a longer-term partnership may be necessary, and the key devices for these are licenses and franchising agreements (Hill, 2010). While these two methods of foreign entry are distinct in terms of contractual format, they do share commonalities in terms of nature, and as such, are considered together here. A licensing arrangement is an agreement through which the firm in the host country is granted the rights to produce or offer a product in return for payments of a regular royalty. Franchising involves a similar agreement, although the terms of the contract are often shorter, and the arrangement typically involves a service instead of a product. As with turnkey projects and exporting arrangements, such agreements enable the internationalising business to avoid the risks and costs associated with the physical establishment of a plant in an overseas market . This also enables the business to gain a foothold in several international markets simultaneously, so that this mode of entry is particularly attractive for businesses seeking to expand quickly. On the other hand, by extending the license to produce its product or offer its services to an overseas, unrelated firm, the host company correspondingly relinquishes control of its strategic development, marketing and sales activities, and, importantly, reputation. This is a crucial disadvantage for retail and other service-oriented companies in particular, for their customers are unable to cognitively perceive ownership differences among franchised entities and typically demand the same level of service from all branches operating under identical titular umbrellas.
Until now, the foreign market entry modes that have been considered have been distal in terms of the relationship between the home and the host country. The remaining two methods of entry differ in that they do involve the physical establishment of the internationalising firm in the host country. A firm utilising a horizontal acquisitional strategy procures a company that already exists in its target market, typically by purchasing the firm's shares, stocks or assets (DePamphilis, 2009). Acquisitions may be either friendly or hostile. A friendly acquisition involves the presentation of offers and counter offers among the executives of the bidding and target organization, while a hostile acquisition, known as a takeover, occurs in spite of the wishes of the target firm. There are considerable advantages associated with an expansionary strategy pursued through acquisitions. Primarily, the internationalising firm is able to achieve economies of scales, “whereby long-run average total costs falls as the quantity of output increases” . With the purchase of an existing operation comes its bundle of resources, including its technology, inventory, manpower and human capital. The addition of these assets to those already held by the home company enables the firm to boost both its output, and its efficiency, which in turn, lowers per-unit costs (Hill, 2010). The internationalising company is also, through this method, able to acquire the proprietary rights to the goods produced by the acquired firm. This serves as a unique benefit for it is likely that the products that are produced by the acquired firm are already settled in the foreign market. Thus, such an acquisition is an effective means for the internationalising firm to gain a foothold in a foreign market which is likely to be unfamiliar to them.
In addition, the acquiring company can develop its technical know-how through the procurement of the proprietary information, and the local human capital (for instance in operations management, research and development, or distribution) that would be otherwise difficult to come by on the open market (Hill, 2010). In business parlance, this is known as knowledge transfer and it is known to be a major driver of innovation, performance and growth. Yet mergers and acquisitions are known to be complicated, drawn out affairs. As well as the resistance that is often met from shareholders, employees and, even, at times, the government, the accounting, legal and taxation requirements of acquisitions can be extremely onerous. Any firm wishing to enter a foreign market using this strategy will need to hire experts in the local regulations, which can substantially increase costs. Relatedly, appraising the value of the target firm can often prove difficult and will involve the use of lawyers, corporate intelligence investigators, accountants and other consultants. These experts are particularly necessary when the takeover is hostile. These costs are largely avoided by internationalising firms that opt instead to start a joint venture with a similarly minded entity based in the target foreign market. A joint venture is a new firm established by two or more parties, and it offers considerable advantages, principal of which is the ability of each partner to “absorb the skills of the other”. As suggested by the resource based view of the firm, competitiveness and overall business success generally accrues to those firms that, relative to others, are able to capitalise on their resources or skills in a given market.
Through a joint venture, collaborating parties are able access the resources and capital (social, financial, and human) of the other. One contemporary example of this is given by Costa Coffee China, which is a joint venture between a UK based corporation, Costa Coffee, and two Chinese firms, Yueda South Holdings and Hualian Group (Swan, 2012). In a case study offered by Swan (2012), it is theorised that Costa entered into this partnership instead of going it alone (as, for example, its American competitor, Starbucks does in China), because Costa wanted to capitalise on the knowledge of the local, embryonic coffee market held by those firms, and the opportunity for assistance in navigating the considerable red tape facing businesses in China. As with franchising, however, there is some relinquishment of control, and the success of joint ventures is inextricably linked to the ability of partners to overcome cultural differences. Indeed, it has been estimated that the failure rates of joint ventures due to cultural misunderstandings is as high as 90 per cent (Sitkin and Bowen, 2010). To summarise then, there are a myriad of options open to businesses seeking to internationalise. But, is any one mode preferred above all others? Considered in a decontextualised way, the fact that each mode has both drawbacks and advantages (see table 1) would suggest that no one method is favourable.
However, no decision is entered into in a vacuum and several theories have been advanced to predict the optimal choice for firms. Chief of these is John Dunning's OLI Eclectic Paradigm model . In this model, mode of entry is dependent on the ownership benefits (O), location benefits (L) and internalisation benefits (I) of each option. Applied to the various options available to internationalising firms, a preferred mode of entry may indeed be identified. For instance, businesses that are less able to transfer their ownership benefits (such as their brand name) to the host nation would do well to choose a joint venture over an acquisitional strategy, while businesses that appraise few advantages to locating overseas are likely to opt for distal strategies, such as exporting, or licensing.
References
- Argawal, S. and Ramaswami, S. (2002). Choice of Foreign Market Entry Mode. Impact of Ownership, Location and Internalization Factors. Journal of International Business Studies 23 (1), pp. 1-15 Buckley, P.J. (2009).
- Internationalization thinking: From the multinational enterprise to the global factory. International Business Review 18 (3), pp. 224-235 Cantwell, J. (1992).
- A Survey of Theories of International Production. In Pitelis, C. and R. Sugden. The Nature of the Transnational Firm. London: Routledge Chang, S. J. (1995).
- International Expansion Strategy of Japanese Firms: Capability Building Through Sequential Entry. Academy of Management Journal, 38(2), pp. 383-407 Coviello, N. E., & McAuley, A. (1999).
- Internationalisation and The Smaller Firm: A Review Of Contemporary Empirical Research. Management International Review 39(3), pp. 223-256 DePamphilis, D.D. (2009).
- Mergers, Acquisitions and Other Restructuring Activities. Burlington, MA: The Academic Press Doherty, A. M. (2007).
- The Internationalization of Retailing: Factors Influencing the Choice of Franchising as a Market Entry Strategy. International Journal of Service Industry Management, 18(2), pp. 184-205 Hennart, J-F. (2001).
- Theories of the Multinational Enterprise. In Rugman A. M. and T. L. Brewer (eds.) (2001)
- The Oxford Handbook of International Business. Oxford: Oxford University Press Hamel, G., Doz, Y.L. and Prajala, C.K. (1989).
- Collaborate with your competitors and win. Harvard Business Review, pp. 133-139 Hill, C.W.L. (2010).
- International Business: Competing in the Global Marketplace. London: McGraw-Hill Lu, J. W., & Beamish, P. W. (2006).
- SME Internationalization And Performance: Growth vs. Profitability. Journal of International Entrepreneurship, 4(1), pp. 27-48 Mankiw, N.G. (2011). Principles of Economics. Mason, Ohio: Thomson South-Western Sitkin, A. and Bowen, N. (2010).
- International Business: Challenges and Choices. Oxford: Oxford University Press Swan, K. (2012). Interdisciplinary Approaches to Product Design, Innovation, and Branding in International Marketing. London: Emerald Welch, L. Benito, G. and Petersen, B. (2007)
- Foreign Operation Methods: Theory, Analysis, Strategy. Cheltenham: Edward Elgar Wernerfelt, B. (1984).
- The Resource Based View of the Firm. Strategic Management Journal 5(2), pp. 171-180
Cite this page
Stock Market Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Free PESTLE Essays and Papers Pdf
Introduction
A PESTLE analysis provides and analysis of six of the key macro level factors which affect a business and the decision which it makes (Grant, 2008). This assignment will apply the relevant factors within the PESTLE framework to the international clothing retailer Next and its subsidiaries. Data upon which the assignment is based comes from a variety of sources including the company's annual report (Next, 2012) and released and well as information from the academic and business press. In order to give the assignment a greater level of focus, the report will be limited to an analysis of the external environment in the UK.Political
There are a wide range of political factors which affect Next at present but also factors which may have an impact upon the company in the future. One key political decision which affects Next in the UK is the rate of tax levied by the government. This has the ability to affect both the bottom line of the company in the form of corporation tax but also the ability of customers to spend with next, linked to income tax. At present, levels of corporation tax in the UK have been lowered in order to attempt to stimulate economic activity (Telegraph, 2012). However, given the continuing deficit, there is no guarantee that governments in the future will maintain the rate of corporation tax at its current level. Other key political decisions consider interest rates. At present, UK interest rates stand at an all-time low of 0.5% (BoE, 2010). This may be seen as a positive factor for firms such as Next who are effectively able to borrow large amounts of money for the purposes of capital expansion at much lower rates than have been previously seen. Such borrowing may take place in the form of long term borrowings from banks and financial institutions, alternatively the company may choose to issue corporate bonds (Arnold, 2008). Other political issues relate to the governments relatively "arm's length" approach to Europe and remaining outside of the single currency area (FT, 2012). For a UK based business such as Next that has international operations in the Euro Zone, this could be seen as negative with the prospect of foreign exchange rate risks being felt and the introduction of additional transaction costs which would be eliminated if the government decided to join the Euro Zone. From a more general perspective, the UK political system based upon parliamentary democracy may be seen as providing Next with a relatively low risk political environment in which to operate within (CIA, 2013). This may be seen as an advantage in comparison some of Next's ventures into potentially less stable political nations such as Russia and those of the Middle East. As such, this makes the UK a relatively safe market for Next to make further long term capital investments in where the company may think twice in the case of less stable political environments.Economic
A critical factor which may have an impact upon Next in the UK is the current state of the economic environment. As a business which makes use of a premium based differentiated strategy, as opposed to being a cost leader, it may be seen that swings within the economic environment have the ability to impact the fortunes of the company to a greater degree than those operating in the necessity and budget sector of the market (Johnson et al, 2008). From a purely statistical perspective, the years since 2007 have been an economic rollercoaster for the UK. Following the onset of the global financial crisis in 2007, the subsequent year saw GDP growth revert to negative figures with -1% contraction in the economy. This was followed by even worse performance in 2009 with a -4% contraction. Low levels of growth have been seen since in 2010 and 2011 with GDP growth of 1.8% and 0.8% respectively (World Bank, 2013). However, while the statistics show a slight recovery in 2010 and 2011, others within the business press (BBC News, 2012) indicate that the UK economy could continue to flat line or worse result in a "double dip" recession. These headline figures may seem to paint quite a negative picture for retailers such as Next which are highly reliant on the UK economy as a source of revenue. However, an analysis of more detailed economic data may highlight a different perspective. Tutt (2012) presents data which looks at the level of unemployment and household disposable incomes in the UK. In this case an alarming pattern is seen. On the one hand, levels of unemployment have been increasing in recent years with a rise from 0.86m in 2007 to 1.53m in 2011. However, conversely, the levels of disposable income of individual households during the period has consistently risen from A£14,308 per household in 2007 to A£16,042 per household in 2011 (Tutt, 2012). For Next and other premium end retailers this may have a key impact upon strategy. While there may be few customers able to by the products and services of Next due to rising unemployment, those who have remained in employment have generally become wealthier. As a result it is likely that such economic patterns may help Next to improve its average spend per customer, even if the total number of customers falls.Social-Cultural
There are many social and cultural changes taking place in the UK at present which may have a high level of impact upon the performance of fashion retailers such as Next. In many cases, as representatives of an essentially socio-cultural industry, the fashion industry itself may be seen as an industry which is affected by such trends to a greater degree than other industries (Curtis et al, 2007). One of the key issues in the UK market, but also seen across Next's wider European markets is the general aging of the population (Parliament UK, 2012). This may be seen as both problematic but also an opportunity for Next. One the one hand, an ageing population may see Next having to adapt its product portfolio in an attempt to ensure that the products supplied by company appeal to this aging demographic of the population. In addition, the prospect of an aging population may also see that competition for the increasingly smaller younger demographics of the market becomes more intense for Next as time progresses. Despite these drawbacks, there are also advantages linked to the issue. On consideration is that ageing populations tend to be less mobile than younger demographics, this may be a key advantage for Next given that its home delivery and online business model offer a convenient solution to the problem. Other socio-cultural factors include the consideration that the UK has since World War Two become an increasingly culturally diverse nation with an influx of diverse cultures, races and ethnicities all contributing towards the socio-cultural backdrop of the UK social system (Shepherd, 2010). For Next, this has not only external implications such as those linked to aligning product ranges to specific cultural segments, in attrition, the company musty also ensure that it deals with issues such as managing diversity in the context of its own organisation. In this case, increased cultural diversity can be seen as both a source of a competitive advantage yet also a potential source of conflict (Liff, 1997, Ivancevich et al, 2010). As EU expansion takes place and the new member states become further integrated into the EU, there is a distinct possibility that the trends for increased diversity in the UK's labour and consumer markets will increase rather than decrease.Technological
There is little doubt that new technological developments have transformed the UK business environment, especially those operating in the retail sector. Key developments may be seen as those technologies which are internet or communications based in nature, such as the wide spread diffusion of broad band (Jobber, 2007). Key technological developments such as the internet have allowed firms such as Next to develop online business models which complement traditional bricks and mortar retail establishments. Empirical evidence from the ONS (2009) on the subject shows that the growth has been almost exponential with a rapid acceptance on the behalf of customers of online shopping in both retail and other markets. Yet communications technologies have not only been used by the sector to facilitate online sales and shift away from the traditional high street "place." Other aspects of new technological development have seen a range of new marketing options opened up to retailers such as Next. Most important amongst these are developments which have allowed retailers to interact with customers using online social networking sites such as Facebook, YouTube and Twitter. These are now seen as key ingredients in the development of a successful marketing strategy (Zarrella, 2010), largely the product of technological changes in the sector. Other technologies have simply allowed businesses to develop better relationships with their consumers and communicate in a more effective way. Take for instance the technological developments of smartphones and "apps." Such technology has allowed companies to develop apps which allow consumers to find their nearest branch or check the facilities and product availability at a branch before making a visit. This allows an effective bridge to be built between the purely online business model such as those operated by a company like Amazon and those falling into the "bricks and clicks" category (McGoldrick, 2002) such as Next who must seek to leverage the benefits of both arms of the business. While technology in this section has largely been presented as an opportunity, there is of course a risk factor. Many have expressed concerns over the abandoning of the high street as consumers flock to online business models. The case is illustrated only too recently with the example of Jessops going into administration, a business which may be seen as falling victim to technological developments (Goodley, 2013).Legal
Like all businesses, Next must conform to the legal minimum standards which are enforceable in a jurisdiction. The case of Next's UK operations legal elements may be seen as more complex given that the company must comply with both UK law and EU law. Some of the key legal regulations which affect Next in the UK are considered below: Minimum wage legislation - A key piece of legislation in the UK which affects organisations such as Next with a large number of low paid workers is that of various minimum wage regulations. In this case, the legislation requires UK employers to pay their employees a minimum of A£6.19 per hour for those aged over 21 (Gov UK). Given the large number of employees of firms such as Next which are affected by the National Minimum Wage, temporary shifts in legislative policy can have a high impact upon the sector. Other key legislative issues include equal opportunities legislation and various other acts of parliament designed to ensure equality both in the work place and in the recruitment and selection process (Pilbeam and Corbridge, 2010). In this case, such legislation has a direct impact upon the processes and practises of an organisation such as Next who are required not only to design corporate polices which facilitate equality but also to record activities related to recruitment and selection should an employee call foul at a later date. The issue here for businesses such as Next is that the legislative environment often places the burden of proof on the defendant rather than the claimant in such cases. As such, the development of detailed HR processes and practises is critical (Bratton and Gold, 2007). Further issues relate to potential moves on the behalf of legislators to become tougher in relation to issues of tax avoidance. While Next has to date not been implicated in any of the tax avoidance scandals, there is a consideration that the actions of other retailers such as Starbucks and Amazon (Syal, 2012) may have provoked the onset of a tougher legislative environment in the future which may have an impact upon innocent parties such as Next.Environmental
The physical environment is also a key issue for firms operating in any given national market and consideration should be considered two how firms treat the physical environment and the impact this has on the business, but also the impact the physical environment generally has upon a business. In general terms, the physical environment which Next operates within in the UK may be seen as relatively benign in comparison to other parts of the world which suffer from high intensity natural disasters such as earthquakes, hurricanes and forest fires. Despite such an environment there have been a number of environmental issues recently in the UK which have affected the retail sector. These have included increasing more frequent floods (Retail Bulletin, 2013) and poor sales due to snow storms and the failure of local authorities to prepare for periods of inclement weather (Hall, 2011). Other aspects of the environmental analysis require firms to consider their own impact upon the environment. In general terms, the literature (Parsons and MacLaran, 2009) considers that consumers are becoming increasing aware of the impact of businesses upon their environment. As such, if businesses are to maintain customer loyalty and avoid negative backlashes, then they must seek to minimise their impact upon the environment. In the retail sector, this may include reducing waste, running more efficient transport operations and implementing ethical sourcing policies. While failure to comply with such consumer demands may result in a negative consumer backlash, with the adoption of the right approach, high environmental credentials can be used to add value to a product or service. Such an example is seen in the Marks and Spencer (2013) and Body Shop business models in the retail sector.Conclusion
Having reviewed the key factors within the macro level environment as presented in the PESTLE framework, it is possible to come to a number of conclusions in relating the model to Next and its UK operations. On the one hand, it would appear that the external environment is a significantly challenging one for Next with the prospect of further poor economic performance and a requirement to comply with what may be seen as a relatively tough legislative environment. However, the PESTLE factors would also seem to indicate that there are some large opportunities for Next in the UK. Such opportunities include the ability to borrow at low interest rates to fund capital expansion and increased opportunities to link technological developments to changes in the social fabric of society in order to drive more sales through web based platforms. Other factors such as changing technologies and increases in diversity may be seen as neither positive or negative intrinsically but still require some change on the behalf of Next. Having reached these conclusions, the final opinion of the writer is that the external environment is essentially neutral for Next at the moment and that the success of the business will be largely dependent upon whether managers of the business capitalise upon the stated opportunities or allow the challenges to see Next becoming another "casualty of the death of the high street."Bibliography
- Arnold, G. (2008). Corporate financial management. 4th ed. Harlow: FT Prentice Hall.
- BBC News. (2012). UK economy in double dip recession. Available online at: https://www.bbc.co.uk/news/business-17836624 [Accessed on 18/01/13].
- BoE. (2010). Bank of England maintains bank rate at 0.5% and the size of the asset purchase program at A£200 billion. Available online at: https://www.bankofengland.co.uk/publications/news/2010/084.htm [Accessed on 18/01/13].
- Bratton, J, Gold, J. (2007). Human resource management theory and practise. 4th ed. Basingstoke: Palgrave Macmillan.
- CIA. (2013). World fact book UK. Available online at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html [Accessed on 18/01/13].
- Pilbeam, S, Corbridge, M. (2010). People resourcing and talent planning. 4th ed. Harlow: FT Prentice Hall.
- Curtis, E, Watson, H, Sephton, L. (2007). Fashion retail. 2nd ed. New York: John Wiley and Sons.
- FT. (2012). UK's Euro trade supremacy under attack. Available online at: https://www.ft.com/cms/s/0/736bd72a-3c9a-11e2-a6b2-00144feabdc0.html [Accessed on 18/01/13].
- Goodley, S. (2013). Jessops goes into administration, putting 2,000 jobs at risk. Available online at: https://www.guardian.co.uk/business/2013/jan/09/jessops-verge-administration-jobs-risk [Accessed on 18/01/13].
- Gov UK. (2013). National minimum wage rates. Available online at: https://www.gov.uk/national-minimum-wage-rates [Accessed on 18/01/13].
- Grant, R, M. (2008). Contemporary strategy analysis. 6th ed. Oxford: Blackwell Publishing.
- Hall, J. (2011). Snow costs Next and HMV A£42m in lost Christmas sales. Available online at: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8240799/Snow-costs-Next-and-HMV-42m-in-lost-Christmas-sales.html [Accessed on 18/01/13].
- Ivancevich, J, M, Konopaske, R, Matteson, M, T. (2010). Organisational behaviour and management. 9th ed. New York: McGraw Hill Irwin.
- Liff, S. (1997). Two routes to managing diversity: individual differences or social group characteristics. Employee relations. Vol. 19. No. 1. pp11-26.
- Marks and Spencer. (2013). Plan A Doing the right thing. Available online at: https://plana.marksandspencer.com/we-are-doing/sustainable-raw-materials/stories/6/ [Accessed on 14/01/12].
- Next. (2012). Annual report 2012. Available online at: https://ir2.flife.de/data/next/igb_html/index.php?bericht_id=1000007&index=&lang=ENG [Accessed on 18/01/13].
- Parliament UK. (2012). Aging population. Available online at: https://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/value-for-money-in-public-services/the-ageing-population/ [Accessed in 13/01/13].
- Retail Bulletin. (2013). It's time for retailers to prepare for the worst and adapt to climate extremes. Available online at: https://www.theretailbulletin.com/news/its_time_for_retailers_to_prepare_for_the_worst_and_adapt_to_climate_extremes_07-01-13/ [Accessed on 18/01/13].
- Shepherd, J. (2010). England's schools are becoming more diverse. Available online at: https://www.guardian.co.uk/education/2010/jan/20/schools-more-diverse [Accessed on 18/01/13].
- Syal, R. (2012). Amazon, Google and Starbucks accused of diverting UK profits. The Guardian Newspaper. Available online at: https://www.guardian.co.uk/business/2012/nov/12/amazon-google-starbucks-diverting-uk-profits [Accessed on 18/01/13].
- Telegraph. (2012). Budget 2012: Corporation tax cut will boost UK - but not enough. Available online at: https://www.telegraph.co.uk/finance/budget/9158950/Budget-2012-Corporation-tax-cut-will-boost-UK-but-not-enough.html [Accessed on 24/11/12].
- Tutt, L. (2012). Market report 2012 Gambling and betting. Key Note. Oct 2012.
- World Bank. (2012). GDP annual growth %. Available online at: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG [Accessed on 12/01/13].
- Zarrella, D. (2010). The social media marketing book. California: O'Reilly Media.
Cite this page
Free PESTLE Essays and Papers Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Core Competencie Essay Example Pdf
Introduction
This essay starts by briefly describing how the term core competencies was established before looking at why it is necessary to identify core competencies within an organisation. The four criteria used to identify core competencies is discussed with an analysis of each followed by an overview of strategy. This provides the pretext to discuss the role of correctly identifying core competencies and why leveraging them in strategy development is important.Core competencies
Formulating strategies is a cyclical process in which an internal analysis of an organisation plays a crucial part (Introduction: What is strategy? 2006:1). This analytical process involves taking a theoretical approach known as a resource-based view (Unit 3: 5) in which an organisation objectively looks at all its resources and capabilities to see how best they can give an organisation competitive advantage. Grant has established that an organisation's resources can be tangible, intangible or human and that these can be matched to its capabilities to eventually provide competitive advantage (Grant, 2008: 131). This process of exploiting the unique combination of resources and capabilities has given rise to the term of core competencies which have been defined by Prahalad and Hamel (1990: 78-90) as the ability of an organisation to coordinate all its technologies and production skills in order to deliver its strategy. Identifying core competencies Core competencies are the building blocks on which organisations are able to strategise so it is vital to identify them correctly using four specific criteria (Segal-Horn, 2009: 169): 1) Does it provide significant value? 2) Does it allow to increase or dominate market share? 3) Is it difficult for competitors to imitate? 4) Does it provide competitive advantage? It is important to understand that these are not mutually exclusive categories therefore it is essential to meet all criteria in order to establish a core competency. Usually it is not possible for an organisation to have more than a handful of core competencies (Segal-Horn, 2008: 170). Value in this scenario is in terms of ‘perceived' benefit to the end user of the product or service (Segal-Horn, 2009: 169). For instance, Vodafone became a leader in the world of mobile communications in the late nineties by providing value-adding services such as short message services and voicemail (Unit 1: 10) to their existing portfolio. The concept of value is equally applicable in not-for-profit organisations such as Crisis, a charity for single homeless individuals. One of its core competencies is achieved through its long establishment of over 40 years and its ability to provide services at a national level and this level of dedication is seen as a valuable asset. Organisations which have value-creating resources are at an advantage to those who do not, for example Vodafone who made heavy investments in their research and development to stay ahead of their competitors (Unit 1:9). It is important to understand that value is not always represented by revenue, as in the example of the charity Crisis; the value of such a service to a needy individual is priceless hence this is a context-specific measure. Markets are becoming increasingly complex and with the advent of globalisation and the internet they are not restricted by geographical boundaries so identifying competencies which can help to increase market share are exceptionally valuable. An example of this would be the ability of an organisation to provide a service in several different languages simultaneously. Organisations whose infrastructure is such that it allows simultaneous function across continents are clearly at an advantage to those who have a lesser ability to do so. Markets are dynamic so the ability to adapt to changes in the environment due to specific capabilities can be regarded as a core competency. The third test is to see whether it can easily be replicated by another organisation; the more difficult it is to imitate, again the more value it holds as a core competence. A competitor might be able to obtain identical technology on how to build a TV but the core competence might lie in the ability to have a more efficient production line. Apple Inc. for example use an operating system which is unique to their products and sometimes reputation, an intangible resource, can be seen to be difficult to imitate especially in organisations which have been established for a significant length of time such as certain retailers. If a particular asset, (or combination of assets) has the potential to provide competitive advantage that is extremely useful in identifying a core competence. Competitive advantage is the ultimate goal of an organisation's strategy (Grant, 2008: 131). Organisations with unique assets such as a patented technology immediately translate into a competitive advantage, however in many industries, competitive advantage is achieved through extremely precise combinations of resources and capabilities and the method by which an organisation exploits these assets is a core competence.Strategy development
Strategy allows an organisation to deliver its vision. To develop a deliberate strategy which could potentially increase the sustainability of an organisation clearly requires the identification of core competencies but often a single strategy is not the answer. Organisations require a headline strategy to fit a brief which resonates the vision but several strategies are required over many departments such as research and development, production and marketing to deliver the main strategy. The process of strategy development is complex and methodology depends on several factors including the availability of resources and the external environment. The second step in strategy development following identification of core competencies is the process of leveraging resources so they can be exploited for maximum benefit. Strategy development is a crucial step in attaining competitive advantage but a strategy is only as successful as its implementation. The process of leveraging core competencies therefore is vital and requires careful consideration since it forms the basis of implementation. Leveraging core competencies This is the process of exploiting core competencies in the most appropriate manner for effective strategy development because not all core competencies need to be used all the time and some may be more beneficial than others in any given scenario. Prahalad and Hamel (in Segal-Horn, 2009: 33-40) have highlighted five broad ways by which core competencies can be leveraged: 1. Concentrating core competencies effectively, 2. Efficiently accumulating core competencies, 3. Creating value through complementing core competencies with each other, 4. Conserving core competencies through contingency plans and 5. Recovering core competencies in a timely manner. Concentrating core competencies is a method which has two facets; one being convergence which reflects the overall vision most closely so all the resources ‘converge over time' (Segal-Horn, 2009: 33) and the second being focus. By focussing the most appropriate core competencies on key aspects only it allows an organisation to meet significant short-term goals most effectively. This is most useful in situations where some departments require more development than others for example the production team may be meeting the targets set for them but the marketing department might not be on par so although all departments are working towards one goal, one or more of the core competencies are being focussed on the under-performing department. The process of accumulating core competencies refers to both organisation-specific core competencies as well as those of other organisations. Having a bank of information which has not been developed by an organisation themselves but is easily accessible can be extremely beneficial since it reduces time spent carrying out menial tasks as well as allowing the organisation to continue their learning and development by borrowing resources through mergers, acquisitions, joint ventures and so on. Knowledge through experience and the continual process of an organisation to learn and unlearn in order to ‘apply lessons' is known as extraction. Some core competencies are stand alone resources, one example being the open culture exhibited at Apple Inc. where creative individuals are given appropriate space to develop their ideas. More often than not, organisations find that the cumulative effect of core competencies is far greater than that of exploiting them individually and this method is known as blending. An extension of this idea is balancing core competencies which ensures that different operational areas within an organisation work together in harmony and do not overshadow or undermine each other. When applying these methods to leverage core competencies it should be noted that adjustments to re-balance the status quo may need to be made periodically. Conserving core competencies is a methodology which can be divided up into three areas. Shielding which involves protecting an organisation's resources to reduce risk to a minimum while simultaneously increasing risk for competitors, co-option which is a collaboration that often results in increased market share for stronger party in the collaboration and the final methodology is recycling whereby core competencies which have a proven track record in significantly contributing to maximising profits are used time and time again. The final method which is used to leverage core competencies is recovery. The faster the speed of recovery, the time taken to turn around a product from development to market saturation and back to new product development, the greater the chances of recovering investment quicker. This leverage method is particularly noticeable in the technology industry where soon as a product garners popularity, its successor is already ready to be launched.Conclusion
The brief analysis above has discussed that in an attempt to develop successful strategies, the first step is an internal analysis to identify available resources and capabilities. The next stage is to identify the core competencies of an organisation using criteria to test whether they add value, increase market share, are difficult to imitate and together do they possess the potential to serve as competitive advantage. In doing so it is evident that an organisation may be capable of drawing up a list of several resources and capabilities but only a handful of core competencies will result in any one organisation. Whilst several organisations may have similar resources in terms of tangible resources, it is the existence of intangible and human resources and the capabilities to combine them which create opportunities to develop core competencies. Once correctly identified, it is vital that core competencies are leveraged most effectively to maximise their potential in attempting to deliver an organisation's strategy. Core competencies can be leveraged in one of several ways depending on the nature of the brief. In some rare instances all of the core competencies may be used all of the time but more often than not the combination used is context-specific. The specific nature of the task will determine whether core competencies need to be reserved, extracted, borrowed, converged, recycled, shielded, blended, balanced, focussed or co-opted. Whilst the work on core competencies carried out by Prahalad and Hamel has been cited extensively and used by organisations globally, it is worth noting that the research is almost 25 years old and the longevity of theory may be questionable. With markets becoming more complex and consumer behaviour changing rapidly perhaps not all of the existing methods of leverage may be completely relevant.References
1. Segal-Horn,S. (2009) The Strategy Reader, Oxford: Blackwell 2. Grant,R. (2008) Contemporary Strategy Analysis, Oxford: Blackwell 3. Segal-Horn,S. and Boojihawan,D. (2006) B820 Unit 1 Introduction: What Is Strategy?, Milton Keynes: Open University 4. Gleadle, P. and Bakhru, A. (2007) B820 Unit 3 Competing With Capabilities, Milton Keynes: Open University 5. Crisis (2014) The national charity for single homeless people, [Online], Available: https://www.crisis.org.uk [29.08.14] 6. Prahalad, C.K. Hamel, G. (1990) ‘The core competence of the corporation', Harvard Business Review, May/June, pp.78-90Cite this page
Core Competencie Essay Example Pdf. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
Coles Supermarket Essay Online for Free
Analyse the business environment for Coles supermarket chain.
1.0 Introduction
1.1 Background
Coles is a national supermarket chain; liquor, fuel and convenience retailer in Australia. It was acquired in 2007 by Wesfarmers, “a diversified Australian company with strong, established market positions and recognised brands with the objective of delivering satisfactory returns to shareholders” (Wesfarmers, 2013, p.4).. According to Wesfarmers (2013), Cole’s sole purpose has been to give the Australian people a shop they can trust, to deliver quality, value and service. The main sources of business include the following:
- 756 full service supermarkets
- 810 liquor outlets fewer than three brand and 92 hotels
- 636 fuel and convenience stores
- More than 99,000 team members
As of 2013, according to Wesfarmers (2013), Coles operating results and drivers were:
- Revenue of $35.8 billion, up 4.9 per cent
- EBIT of $1,533 million, up 13.1 per cent
- Return on capital of 9.5 per cent, up from 8.7 per cent
- Total food and liquor sales growth of 5.5 per cent and comparative store sales growth of 4.3 per cent
- Over four years of industry outperformance
- Continued investment in customer value funded from cost reductions and business efficiencies
- Continued investment in product quality particularly fresh categories
- Ongoing transformation of the supply chain
- Launch of 90 more stores in renewal format and opening of 6 larger format stores and net space growth of 1.6 per cent
- Good progress on multi-channel initiatives including trials of new Coles Online website
- Growth in financial services including Coles Insurance and flybuys loyalty program
- Strong customer response to fuel offers and better range and value in the convenience store network
1.2 Scope and Approach
This essay takes a critical look at the company, its current position, the internal capabilities, and its external environment, and considers strategic changes necessary to ensure Coles maintains its traditional offering of long term value creation. In developing this Business Analysis for Coles, the following tools have been used to assess present and future performance of the company:
- Situational Analysis,
- PEST Analysis,
- SWOT Analysis,
- 5 Forces Analysis
Furthermore, this essay gives consideration to the current growth strategies adopted by the company and questions if these practices are the best options going forward, for delivering sustainability of the group’s strategic framework.
2.0 Situational Analysis
2.1 Internal Market Audit
According to its 2013 sustainability report, Coles’ business focused on six key areas to improve its sustainability:
- Training and development of its team
- Customer trust in the produce range, value and quality
- Water savings and energy efficiency of the stores
- Workplace safety
- Supporting the local communities in which we operate
- Working with suppliers to further develop strong sustainable relationships.
2.1.1 Present Business Review
Wesfarmers’ “operating model is focused on ensuring each of its Group’s divisions has a very strong management capability and day-to-day operational autonomy, overseen by divisional boards and a well-established Group-wide framework where governance processes are coordinated over a 12-month operating cycle. This approach encourages strong accountability for operating results and assurance in areas such as:
- Strategic planning,
- Budgeting and monitoring of performance;
- Risk management, including internal audit and insurance protection;
- Group-wide human resource management systems such as executive remuneration and share schemes, talent development and key role succession planning;
- Centralised statutory accounting, tax, treasury and legal support.” (Wesfarmers 2013, p. 6)
Coles’ revenue in 2013 was $35.8billion, an increase of 4.9 per cent from the previous year. Its five year financial history report (See Appendix1) shows a steady growth in revenue generation. “Coles delivered earnings growth of 13.1 per cent to $1,533 million, building on the 16.3 per cent and 21.2 per cent earnings growth in the 2012 and 2011 financial years respectively” (Wesfarmers 2013, p. 3). Figure 1: Five year Revenue Increase Source: Adopted from Wesfarmers 2013, Annual reports. Coles’ proposed strategies and prospects are to: Embark on second wave of transformation with a focus on quality, service and value. And take advantage of further store renewal opportunities, supply chain transformation and operating efficiencies; as well as investment in category innovation, Coles brand and development, multi-channel integration and a tailored loyalty offer and a culture of continuous improvement. “In 2013, the Coles turnaround strategy produced strong trading results by improving quality, service and value. The business continued to out-perform the industry and successfully completed the final year of a five-year turnaround plan” (Wesfamers, 2013, p.25)
2.1.2 Customer Analysis
From its various outlets nationally Coles handles more than 19 million customer transactions a week. Coles claims its customer-focused strategy continues to improve in efficiency and productivity, while investing in lower prices, delivering better quality through its ‘Australian First’ sourcing policy and developing a stronger store base through new store openings and renewing existing stores contributed to it steady revenue growth as the financial indicators have shown. “The transformation of Coles since its acquisition has progressed with operational efficiencies and continued fund reinvestment in price. As well as a sustained turnaround of the business, providing benefits for consumers, suppliers and employees for the past five years thus, delivering a much stronger platform for future growth” (Wesfarmers 2013, p.25).
2.1.3 Financial Analysis
As of the last 2012/2013 financial year, Coles was able to generate earnings before interest and Tax (EBIT) of $1,533m as can be seen in figure 2 below. Figure 2: EBIT Source: Adopted from Wesfarmers 2013 Financial Reports. Tables 1 & 2 below show the key financial indicators and Coles’ performance over the past few years. Table 1: Key Financial data
| Coles | 2012 | 2013 |
| Revenue $m | 35,780 | 34,117 |
| Earnings before interest and tax $m | 1,533 | 1,356 |
| Segment assets $m | 20,367 | 19,940 |
| Segment liabilities $m | 4,145 | 3,676 |
| Capital employed $m | 16,114 | 15,572 |
| Return on capital employed % | 9.5 | 8.7 |
Source: Adopted from Wesfarmers 2013 Financial Reports Table 2: Key Financial Indicators
| For the year ended 30 June | 2009 | 2010 | 2011 | 2012 | 2013 |
| Revenue ($m) | 28,799 | 30,002 | 32,073 | 34,117 | 35,780 |
| Earnings before interest and tax ($m) | 831 | 962 | 1,166 | 1,356 | 1,533 |
| Capital employed (R12) ($m) | 15,140 | 14,886 | 15,018 | 15,572 | 16,114 |
| Return on capital employed (%) | 5.5 | 6.5 | 7.8 | 8.7 | 9.5 |
| Capital expenditure ($m) | 606 | 683 | 840 | 1,218 | 1,181 |
Source: Adopted from Wesfarmers 2013 Financial Reports. As reported in the Wesfarmers 2013 Financial Reports and shown in table1 above it can be observed that, for year 2012/2013, Coles has generated a healthy return on capital employed (ROE) of 9.5%, and improvement from 8.7% for the previous year. An increase in capital expenditure and liabilities has been due to the company’s support for net capital investments across the Group. This is up to an increase of $1.5 billion to $1.9 billion in 2014. “The group also managed strong credit ratings with Moody’s Investor Service upgrading Wesfarmers’ issuer and senior unsecured long-term debt rating from Baa1 (positive) to A3 (stable) consistent with the Group’s credit rating from Standard and Poor’s of A- (stable)… It settled all outstanding debt in the name of the Coles group and continued to neutralise the dilution that would otherwise have occurred from the Dividend Investment Plan and Employee Share plans”(Wesfarmers 2013, p. 13). Interests, income and expenditure are however not allocated to operating segments at Wesfarmers. This type of activity is managed on a group basis. Revenue and earnings of various divisions are also affected by the effect of high seasonality such as, for the retail divisions like Coles, earnings are typically greater in the December half of the financial year due to the impact of the Christmas holiday shopping period on the retail business.
2.2 External Market Audit
Given the nature and scale of Coles’ business, the impact of macro and micro forces on its operations is considered to be relatively large compared to the standard in the industry. The external market has been assessed based on PEST analysis and Competitor analysis.
2.2.1 PEST Analysis
To explore how the macro environment has impacted the supermarket chain industry and Coles specifically, a PEST analysis has been used, which consists of Political, Economic, Social and Technology factors as shown below. Figure 3: PEST ANALYSIS – Coles Group Ltd Source: Author.
i. Political Factors
The supermarket chain industry attracts a great deal of attention from the government, non-governmental organizations and even advocacy groups. Due to the size of the industry and how significant a component of the economy and social welfare of countries it is, it has trigged debates on the future and current state of the industry on a global basis. The industry is mature in many countries and in Australia, it is considered a ‘duopoly’, which is a market situation where “two companies own all or nearly all of the market for a similar product or service” (Kumar & Sharma 1998, p.229). With regards to Coles and the supermarket chain industry in Australia, the political situation as described in the preceding paragraph holds true. According to the Australian Competition and Consumer Commission, Australia is one of the largest importers of grocery products and it's a key contributor to the economy of neighbouring countries. Coles is also an equal opportunities employer which provides equal employment opportunities nationwide. Coles also sources products responsibly and contribute positively to the communities in which it operates. Other political factors that have an impact can include:
- Government initiatives and subsidies for local produce and foreign export policies
- Legislation for local farmers’ protection
- Market deregulation for foreign groceries to compete
ii. Economic Factors
The Supermarket chain industry is a high-risk industry, which requires a substantial strategic planning process, customer satisfaction and significant investment. To compete many companies have pursued alliances and joint ventures with shared facilities and outright buy outs to maintain the cost. The global recession of the past years has also had a significant impact on smaller retailers and the supermarket industry as a whole. Other economic factors that have had an impact include:
- Rise in currency rates
- Competition from developing countries
- Competitor rivalry
- Mergers and Acquisitions of big players
- Market seasonality and trade cyclesSupplier and customer drivers
iii. Social Factors
Aging populations and longer life expectancies, changing taste, healthy living styles and specific dietary requirements have increased demand for more organic food, and have been an important factor in the growth of new brands. In the US and UK, greater life expectancy will depend on diet, exercise and a positive attitude to life and increasing knowledge, according to Newell et al (2006). The Australian government’s plays an important role in promoting exercise, healthy living and a positive culture, which in effect can reduce consumption of certain brands and product demographics for Coles.
iv. Technological Factors
Increased use of the Internet has helped to reduce media costs and also made room for increase innovation in the supermarket chain industry. Coles has capitalised on the internet to continue to develop its online sales platform which has thus managed to attract interest from younger audiences and increased sales significantly.
2.2.2 Competitor Analysis 5 Forces
The Five Forces model developed by Michael Porter provides a frame work to identify the competitive nature of an industry. Even though extremely subjective, a broad Five Forces analysis indicates that competitive rivalry within the supermarket chain industry is medium in Australia. Figure 4: Porter’s Five Forces Model Source: Author Based on the research and competitive analysis carried out and relative to Porter’s five analyses as shown in figure4, it can be observed that: As a known fact that, “Australia’s grocery markets is one of the most concentrated in the world, Woolworths and Wesfarmers (owner of Coles) account for almost 80% of supermarket sales, 60% of alcohol retail, 50% of petrol retail and 40% of all retail in Australia” (Ethical Consumer Group 2014). With their large market share they have and continue to exert considerable influence over suppliers and make the playing field extremely tough for much smaller independent retailers such as IGA, Foodland, 7-Eleven, Lucky 7, BP and several other liquor retailers. See figure 5 below. Figure 5: Australian Grocery Market Share Source: Ferrier Hodgson - Ferrier’s Focus May 2011 from Wesfarmers and Woolworths annual reports 2010, NARGA November 2010 Report, Master Grocers Australia December 2010 Thus, Coles has only one major competitor – Woolworths; and a few direct competitors such as Aldi and Metcash. These four, Coles inclusive make up the big players in the industry. With each of them having a different and unique operating model, competitor rivalry is therefore high to medium. The market concentration of private label brands from these giants have been blamed for Australia having the fastest rising grocery prices in the developed world. Threat of substitution is therefore also high to medium because there are only four main competitors with similar prices. This is the same reason why customer bargaining power is medium to low, and threat of market entry to compete with the big four is very low. Other competition therefore can only come from local harvests, independent grocers and small supermarkets and recently Costco.
3.0 SWOT Analysis
As a result of the internal and external market audits undertaken, a complementing SWOT analysis for Coles’ group will help to evaluate areas of strength, weaknesses, growth opportunities and threats for the company. Results are shown in figure 5 below: Figure 6: SWOT Analysis for Coles Group Source: Author
4.0 Conclusion
In conclusion, there are no real threats or key issues for Coles presently except for the recurrent price wars with its major competitor and concerns about the sustainability of these battles. With continuous market dominance however, leading to Australia's powerful supermarket duopoly, this could be termed as inhospitable and leaving consumers to revel in cheaper staples. A key to survival of any business is the need to increase revenue and reduce dependence upon financing via debt bearing instruments. Coles, in respect to these strategic options is already in the process of developing new initiatives by reducing its debts and focusing on quality, service and value. Coles is in the forefront of innovation by taking advantage of further store renewal opportunities, supply chain transformation and a strategic approach to improved operational efficiencies and continued fund reinvestment in price.
Reference List
Ethical Consumer Group 2014, viewed 08 May 2014, <www.ethical.org.au/get-informed/issues/supermarkets-in-australia/> Kumar, R & Sharma, R 1998, Managerial Economics, New Delhi: India Atlantic Publishers & Distributors Newell, RG, Jaffe, AB & Stavins RN 2006, ‘The effects of economic and policy incentives on carbon mitigation technologies’, Energy Economics, vol. 28, p. 563 – 578. Wesfarmers, 2013, Wesfarmers Annual Report 2013. viewed 08 May 2014, https://media.corporate-ir.net/media_files/IROL/14/144042/wes/WESFARMERS%20ANNUAL%20REPORT%202013.pdf
Bibliography
Brownlee II, ER, Ferris KR & Haskins ME 1990, Corporate Financial Reporting: Text and Cases, Boston: BPI/Irwin, Grant, RM 2010, Contemporary Strategy Analysis, 7th edn, West Sussex, UK.: John Wiley & Sons Ltd, Johnson, G, Scholes, K & Whittington, R 2009, Fundamentals of Strategy, Essex, England: Pearson Education Kruger, C, Greenblat E & Butler, B 2012, ‘It's all shelf interest in a price war’, Sidney Morning Herald, 21 April, viewed 08 May 2014, <https://www.smh.com.au/business/its-all-shelf-interest-in-a-price-war-20120420-1xcms.html#ixzz31Bc7Z5gu> Mableson, T & Stewart, J 2011, Supermarket shootout: Will the independents survive?, Ferriers Focus, p.2. Porter, ME 2004, Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press,. Slack, N, Chambers, S, Johnston, R & Betts, A 2009, Operations and Process Management: Principles and Practice for Strategic Impact, 2nd edn, Pearson Education, Essex, England. Stuart Alexander 2014, viewed 09 May 2014, <https://www.stuartalexander.com.au/aust_grocery_market_woolworths_coles_wholesale.php> Wickham, PA 2004, Management Consulting - Delivering an Effective Project, 2nd edn, Essex, England : Pearson Education Zehner, D & Sanders, M 2012, The new reality for grocery suppliers in Australia, Bain & Company, viewed 14 May 2014, <https://www.bain.com/offices/australia/en_us/publications/new-reality-for-grocery-suppliers-in-australia.aspx>
Appendix : 5 year financial History
| All figures in $m unless shown otherwise | 2013 | 2012 | 2011 | 2010 | 2009 |
| Summarised Income Statement | |||||
| Sales revenue | 59,422 | 57,685 | 54,513 | 51,485 | 50,641 |
| Other operating revenue | 410 | 395 | 362 | 342 | 341 |
| Operating revenue | 59,832 | 58,080 | 54,875 | 51,827 | 50,982 |
| Operating profit before depreciation and amortisation, finance costs and income tax | 4,729 | 4,544 | 4,155 | 3,786 | 3,803 |
| Depreciation and amortisation | (1,071) | (995) | (923) | (917) | (856) |
| EBIT | 3,658 | 3,549 | 3,232 | 2,869 | 2,947 |
| Finance costs | (432) | (505) | (526) | (654) | (951) |
| Income tax expense | (965) | (918) | (784) | (650) | (474) |
| Operating profit after income tax attributable to members of Wesfarmers Limited | 2,261 | 2,126 | 1,922 | 1,565 | 1,522 |
| Capital And Dividends | |||||
| Ordinary shares on issue (number) '000s as at 30 June | 1,157,194 | 1,157,072 | 1,157,072 | 1,157,072 | 1,157,072 |
| Paid up ordinary capital as at 30 June | 23,290 | 23,286 | 23,286 | 23,286 | 23,286 |
| Fully-franked dividend per ordinary share (declared) (cents) | 180 | 165 | 150 | 125 | 110 |
| Financial Performance | |||||
| Earnings per share (weighted average) (cents) | 195.9 | 184.2 | 166.7 | 135.7 | 158.5 |
| Earnings per share growth | 6.4% | 10.5% | 22.8% | (14.4%) | (9.0%) |
| Return on average ordinary shareholders' equity (R12) | 8.9% | 8.4% | 7.7% | 6.4% | 7.3% |
| Fixed charges cover (R12) (times) | 3.0 | 2.9 | 2.8 | 2.5 | 2.2 |
| Net interest cover - cash basis (R12) (times) | 12.2 | 10.8 | 9.5 | 6.8 | 5.0 |
| Financial Position As At 30 June | |||||
| Total assets | 43,155 | 42,312 | 40,814 | 39,236 | 39,062 |
| Total liabilities | 17,133 | 16,685 | 15,485 | 14,542 | 14,814 |
| Net assets | 26,022 | 25,627 | 25,329 | 24,694 | 24,248 |
| Net tangible asset backing per ordinary share | $4.69 | $4.45 | $4.12 | $3.61 | $3.13 |
| Net debt to equity | 20.2% | 19.1% | 17.1% | 16.3% | 18.3% |
| Total liabilities/total assets | 39.7% | 39.4% | 37.9% | 37.1% | 37.9% |
| STOCK MARKET CAPITALISATION AS AT 30 JUNE | 45,936 | 34,846 | 36,913 | 33,171 | 26,337 |
Source: Adopted from West farmers 2013 Annual Report
Cite this page
Coles supermarket Essay Online For Free. (2017, Jun 26).
Retrieved November 4, 2025 , from
https://studydriver.com/2017/06/page/8/
