-KB5- Business Value Creations

-KB5- Business Value Creations
With Trevin Hannibal ACMA-UK, CGMA, Pg.Dip.BA, MBA (Cardiff Metropolitan University), BSc (Hons). BVC with Trevin Hannibal

Facilitators profile Name : Trevin Hannibal Lecturing profile Contact
Completing 5 years of CIMA lecturing Subjects : ( Foundation Economics, MA and Operational Level P1) Lecturer in Principles of Accounting for the UOL program Lecturer in Finance for the Cardiff metropolitan degree program MBA at Cardiff Metropolitan University and CIMA passed finalist Consultant for MA packages Contact - Contact No : BVC with Trevin Hannibal

Exam Techniques to please the examiner
BVC with Trevin Hannibal

In the Exam, Students Normally:
Read the question Understand the question Answer the question BVC with Trevin Hannibal

What students ought to do in the exam hall?
Read Understand Plan Answer  BVC with Trevin Hannibal

How to please the examiner
Read the question: The examiners say…… “ Two of the main reasons why candidates lose marks are by answering only part of the question, and by answering the question they hoped for rather than the question asked.” This is one of the areas that really annoys examiners and markers, because they know that students often deserve far better marks than they actually earn in the examination. But why does this happen? Answering part of the question There are two main reasons for this: Only attempting (for example) part (a) of a multi-part question, due to lack of knowledge relating to the other parts, or perhaps due to poor time management ignoring multi-task requirements (look out for “and”, a comma, or a full stop in the requirement. Answering a slightly different question on the same topic This commonly happens when students “interpret” a question to suit themselves. Remember, you should answer the question set, not the one you hoped for! Rewriting the textbook Examiners do not want to know how much you have learned. They want you to use your knowledge to answer the question. It is very common for students to use a question as an excuse to write pages about the topic (or even a different topic) as an attempt to impress the examiner with their knowledge. It gets no marks, so don’t do it. Answering a previous question You cannot prepare answers in advance. Examiners do not ask the same question twice, so there is no point revising a past examination question and then writing the answer you have learnt in the examination. Even one word different, or a slightly different scenario, changes the question totally. YOU MUST ANSWER PRECISELY THE QUESTION ASKED IN THE EXAMINATION - THERE ARE NO SHORT-CUTS. BVC with Trevin Hannibal

How to please the examiner?
Read the question Explain how an understanding of Porter's three generic competitive strategies could help the team design a successful wedding package strategy for the Futurist hotel. Common Mistakes: Mis-read question Brain dump on a key word / phrase in the question Fail to address the verb Answer only the first task of the question BVC with Trevin Hannibal

Understand the question Plan the answer Explain how an understanding of Porter's three generic competitive strategies could help the team design a successful wedding package strategy for the Futurist hotel. (10 marks) BVC with Trevin Hannibal

First, Structure planning Topic (knowledge) Verb (nature & level of skills) Marks allocation (time and length of the answer) Then, Content planning Scenario information or Data (to add value to the answer) BVC with Trevin Hannibal

Yours Answer Plan Can afford to spend 1/3 of time Do it on the question paper or answer booklet You don’t want the marker to read it, then ? No marks for your answer plan, but it increases your marks potential Remember, if you fail to plan – you plan to fail! BVC with Trevin Hannibal

Answer the question You never lose marks, only collect them. BVC with Trevin Hannibal

Reward worthy writing Short sentences with clear & precise points and less punctuation (20 words) Build your argument step by step into small paragraphs (3-4) sentences What / Why / However approach BVC with Trevin Hannibal

Answer layout is as equally important as answer content. Heading / sub-heading Paragraphing White space Selective underlining Impress the marker and make the life of the marker easier. BVC with Trevin Hannibal

How to please the examiner
Effective reading: The examiners say…… “ There is little evidence that students are optimising the reading time in order to score more marks” Before you attempt each question, or even before you decide which questions to attempt, you should ….. stop and think ……. ……. why has the examiner asked this specific question about this topic? Is it just a straightforward question on a recognisable syllabus area? It might be just this topic’s “turn” to have a question asked about it. Is this an unusual question about a commonly-examined topic? Does this question relate to some issue that is topical at the moment? In a question with a scenario - does this question relate to an issue (or issues) that is particularly relevant to the situation described? Does the scenario make a “standard” answer to this question invalid? Understanding why the question was set, and why it it phrased in precisely the way it is, will improve your answer. Brief answer plans (in your answer booklet where the marker can see that you have done them) are good. They show the marker that you have thought before writing the answer, and they give you a chance to decide the best way to answer the whole question before starting. Think carefully before starting to write your answer. You must get the right balance between facts, theory or technique, examples (if appropriate) and opinions. A good answer should not be all common sense, but nor should it be all learned material. If your answer looks like what it says in the textbook, there is a high risk that it will not earn good marks. Check the question again and make sure you are answering precisely the question set, not some “version” of it that fits your knowledge. BVC with Trevin Hannibal

Scheme of Work Question based theory discussions Analysis of questions
Advice on answer planning Discussion of model questions BVC with Trevin Hannibal

Product life cycle BVC with Trevin Hannibal

Common Product Life Curves
Sales Profits Loss Introduction Growth Maturity Decline Time (d) Classical Life Cycle Pattern BVC with Trevin Hannibal

Introduction Stage of the PLC
Product Life-Cycle Strategies This CTR relates to the material on pp. 289 and 293. Introduction Stage of the PLC Sales Low sales Product Life Cycle Strategies Costs High cost per customer Introduction. In this stage marketers spend heavily on promotions to inform the target market about the new product's benefits. Low or negative profits may encourage the company to price the product high to help offset expenses. companies can concentrate on skimming strategies to generate high profits now or on penetration strategies to build market share and dominant the market for larger profits once the market stabilizes. Profits Negative Marketing Objectives Create product awareness and trial Product Offer a basic product Price Use cost-plus Distribution Build selective distribution Advertising Build product awareness among early adopters and dealers BVC with Trevin Hannibal

Growth Stage of the PLC Sales Costs Profits Product Price Distribution
Product Life-Cycle Strategies This CTR relates to the material on pp and 293. Growth Stage of the PLC Sales Rapidly rising sales Product Life-Cycle Strategies Growth. In this stage the company experiences both increasing sales and competition. Promotion costs are spread over larger volume and strategic decisions focus on growth strategies. Strategies include adding new features, improving quality, increasing distribution, and entering new market segments. Costs Average cost per customer Profits Rising profits Marketing Objectives Maximize market share Product Offer product extensions, service, warranty Price Price to penetrate market Distribution Build intensive distribution Advertising Build awareness and interest in the mass market BVC with Trevin Hannibal

Maturity Stage of the PLC
Product Life-Cycle Strategies This CTR relates to the material on pp and 293. Peak sales Sales Low cost per customer Costs Product Life Cycle Strategies Maturity. In this stage the company must manage slower growth over a longer period of time. Strategic decisions made in the growth stage may limit choices now. Marketing managers must proactively seek advantage by either market modification to increase consumption, product modification to attract new users (quality, feature, and style improvements), or marketing mix modification in an attempt to improve competitive position. Profits Maximize profit while defending market share High profits Marketing Objectives Product Diversify brand and models Price to match or best competitors Price Distribution Build more intensive distribution Advertising Stress brand differences and benefits BVC with Trevin Hannibal

Decline Stage of the PLC
Product Life-Cycle Strategies This CTR relates to the material on pp Declining sales Sales Low cost per customer Costs Product Life Cycle Strategies Decline. In this stage the costs of managing the product may eventually exceed profits. Rate of decline is a major factor in setting strategy. Management may maintain the brand as competitors drop out, harvest the brand by reducing costs of support for short term profit increases, or drop the product (divest) altogether. Declining profits Profits Reduce expenditure and milk the brand Marketing Objectives Phase out weak items Product Cut price Price Go selective: phase out unprofitable outlets Distribution Reduce to level needed to retain hard-core loyal customers Advertising BVC with Trevin Hannibal

Question 1 (a) Briefly explain how the product life cycle model can be used to analyse the current product portfolio of 3C (that is, BEFORE the planned investment). BVC with Trevin Hannibal

Answer plan The product life cycle breaks the life of a product down into five phases; development, introduction, growth, maturity and decline. balanced portfolio of products is one that has products in all stages of the life cycle, and overall generates sufficient profit and cash to meet the organisation’s objectives. This means that, as one product enters decline, another is emerging from growth to replace it. BVC with Trevin Hannibal

For 3C, the current product portfolio
Development – 240 drugs Introduction/early growth – Beta Early maturity – Epsilon Late maturity – Alpha BVC with Trevin Hannibal

BVC with Trevin Hannibal

Answer plan The product portfolio of 3C appears, at first sight, to be fairly well balanced. In order to make a definitive judgement, it would be necessary to have further information about the likely success rate of development projects and the relative sales and profit/cash profiles of Beta, Epsilon and Alpha. BVC with Trevin Hannibal

Question 1 b) b) Evaluate the potential impact of each of the three investment options (Alpha2, Beta and Gamma) on the product portfolio of 3C, referring to your answer to part (a) above BVC with Trevin Hannibal

Requirement b) The three investments can be evaluated as follows:
Alpha Beta Gamma BVC with Trevin Hannibal

Alpha Investing in Alpha2 will allow 3C to reposition Alpha to the early maturity stage of the product life cycle. As the new product has completed clinical trials, this investment is likely to be low risk. This will have a positive effect on the product portfolio, as it will allow Alpha to continue to generate significant cash flows for a further five years, unless a superior rival product is launched. However, the imminent launch of generic copies of the original Alpha may threaten this drug’s market leading position. BVC with Trevin Hannibal

Beta Beta – An investment in marketing for Beta should lead to sales growth and therefore take the product from the introduction stage to early maturity. However, there are two major risks. Firstly, the marketing programme may not succeed, and sales revenues may not be significant enough to pay back the investment. Secondly, any investment may be wasted if a rival product is subsequently launched BVC with Trevin Hannibal

Gamma This drug represents the highest risk investment. Even with the investment, there is no certainty that Gamma will successfully complete its final stage of clinical trials, and reach product launch. However, the returns from any breakthrough drug are likely to be very significant. 3C may also consider the relationship between Gamma and Beta – if Beta is not successful, the portfolio will lack an introduction stage product, thus making an investment in Gamma more important. BVC with Trevin Hannibal

Market Segmentation, Targeting and Positioning

Benefits of Segmentation
Effective use of resources Gain a focus Create Value for a target market Positioning BVC with Trevin Hannibal

Steps in Market Segmentation, Targeting, and Positioning
1. Identify bases for segmenting the market 2. Develop segment profiles Market Targeting 3. Develop measure of segment attractiveness 4. Select target segments Market Positioning 5. Develop positioning for target segments 6. Develop a marketing mix for each segment BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Step 1. Market Segmentation Levels of Market Segmentation
Mass Marketing Same product to all consumers (no segmentation, i. e. a commodity) Segment Marketing Different products to one or more segments (some segmentation, i.e. Marriott) Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs. BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Step 1. Market Segmentation Geographic Segmentation
International National Regional/City BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Step 1. Market Segmentation Demographic Segmentation
Dividing the market into groups based on variables such as: Age Gender Family size or life cycle Income Occupation Education Religion Race Generation Nationality Most Popular Bases & Easiest to Measure BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Step 1. Market Segmentation Psychographic Segmentation
Divides Buyers Into Different Groups Based on: Social Class Lifestyle Personality BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Step 1. Market Segmentation Behavioral Segmentation
Dividing the market into groups based on variables such as: Occasions Benefits User status Usage rate Loyalty status Readiness stage Attitude toward product BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Step 1. Market Segmentation Segments must respond differently to different marketing mix elements & programs Requirements for effective segmentation Measurable Accessible Substantial Size, purchasing power, profiles of segments can be measured. Actionable Segments can be effectively reached and served. Segments are large or profitable enough to serve. Effective programs can be designed to attract and serve the segments. BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Evaluating Market Segments
Segment size and growth Segment structural attractiveness Company objectives and resources BVC with Trevin Hannibal

Step 2. Market Targeting Market Coverage Strategies
Company Marketing Mix Market A. Undifferentiated Marketing Company Marketing Mix 1 Segment 1 Company Marketing Mix 2 Segment 2 B. Differentiated Marketing Company Marketing Mix 3 Segment 3 Segment 1 Company Marketing Mix Segment 2 Segment 3 C. Concentrated Marketing BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Choosing a market-coverage strategy
Company resources Degree of product homogeneity Market homogeneity Competitors’ strategies BVC with Trevin Hannibal

Step 3: Positioning for Competitive Advantage
Product’s Position - the way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products. Marketers must: Plan positions to give their products the greatest advantage in selected target markets BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Positioning Strategies
Positioning by specific product attributes Positioning by benefits Positioning for user category Positioning for usage occasion Positioning against another competitors Positioning against another product class BVC with Trevin Hannibal

Steps to Choosing and Implementing a Positioning Strategy
Step 1. Identifying Possible Competitive Advantages: Competitive Differentiation. Step 2. Selecting the Right Competitive Advantage: Unique Selling Proposition (USP). Step 3. Communicating and Delivering the Chosen Position. BVC with Trevin Hannibal Marketing Segmentation HOA Chapter 9

Product Differentiation
Physical attributes Service differentiation Personnel differentiation Location Image differentiation BVC with Trevin Hannibal

Question 2 (a) Describe the advantages of market segmentation to BC4. (10 marks) BVC with Trevin Hannibal

Develop appropriate marketing mix
The idea of dividing a market into segments is to identify groups of potential consumers who have similar needs and will respond to a particular marketing mix in broadly similar ways. Unsurprisingly, the management consultant has identified this approach. Segmentation will allow BC4 to concentrate on the right blend of the elements of the marketing mix that best meets the particular needs of its segment BVC with Trevin Hannibal

More focused promotion of BC4’s products
BC4 currently uses an undifferentiated (mass) marketing approach whereby it makes a product offering to the market as a whole This approach is inefficient in many ways because much of the marketing effort is wasted on consumers who have no interest in purchasing the product and are unlikely to do so whatever the efforts put into promoting it. Instead the company can develop more efficient and effective methods of promoting existing products. BVC with Trevin Hannibal

Easier analysis of customers
Segmentation allows a company to gain a better understanding of customer needs, wants and other characteristics. A sharper focus allows the personal, situational and behavioural factors that characterise customers in a particular market segment to be better understood. This detailed knowledge will, in future, allow BC4 to respond quickly to any changes in what the target customers want and need. BVC with Trevin Hannibal

Simplified operations
BC4 currently tries to sell its product range to all potential customers, even though it is geographically difficult to fulfill obligations to customers in the north of the country It may be that serving these customers is unprofitable and runs the risk of failing to meet customer requirements so damaging its reputation. Effective segmentation should lead BC4 to improve its operating efficiency, simplify what it does and avoid possibly unprofitable markets BVC with Trevin Hannibal

Better understanding of the competition
By building a detailed knowledge of a single market segment BC4 will also develop an improved understanding of its competitors which serves this same segment group BVC with Trevin Hannibal

Better understanding of market
Market segmentation means that sales potential can be more clearly understood and market potential more accurately estimated. Finding, understanding and focusing on the needs of customers can mean that BC4 has the opportunity to become a market leader within a carefully chosen segment. BVC with Trevin Hannibal

Improved product design
Segmentation offers the opportunity to design new products or redesign existing ones and work with customers within the chosen segment to reflect the design features they are looking for. In this way it may be possible to make product improvements, increase brand loyalty and decrease brand switching BVC with Trevin Hannibal

TQM Customer focus First in class in quantity (Get it right the first time) Continuous improvement Competitive benchmarking Employee empowerment and team approach Supplier quality BVC with Trevin Hannibal

Quality cost Appraisal cost Prevention cost Salaries paid
Other expenses of the quality control department Prevention cost Training costs Upgrade costs Process improvement costs BVC with Trevin Hannibal

Quality cost Internal failure cost External failure cost
Scrap and rework cost Stoppage costs External failure cost Loss of goodwill Loss of demand Liability costs (including guarantee/ warranty costs, and legal cost) BVC with Trevin Hannibal

KAIZEN BVC with Trevin Hannibal

3 Main Principles of KAIZEN
Consider the process and the results. The need to look at the entire process of the job at hand and to evaluate the job as to the best way to get the job done. Kaizen must be approached in such a way that no one is blamed and that best process is put into place. BVC with Trevin Hannibal

Features Of Kaizen Widely applicable.
Highly effective and result oriented. A learning experience. Team based and cross-functional. BVC with Trevin Hannibal

Phases in Kaizen Select an event. Plan an event. Implement an event.
Follow-up an event. BVC with Trevin Hannibal

Kaizen Elements BVC with Trevin Hannibal

5’S’ in KAIZEN Sorting. Simplifying. Sweeping. Standardizing
Sustaining. BVC with Trevin Hannibal

Benefits Of Kaizen Kaizen reduces waste - like inventory waste, time waste and workers motion. Kaizen improves space utilization and product quality. Results in higher employee moral and job satisfaction. Teaches workers how to solve everyday problems. BVC with Trevin Hannibal

An Example Toyota production system is know for kaizen, where all line personnel are expected to stop their moving production line in case 0f any abnormality and, along with their supervisor, suggest an improvement to resolve the abnormality which may initiate a kaizen. BVC with Trevin Hannibal

Pit Falls in Kaizen Resistance to change.
Lack of proper procedure to implement. Too much suggestion may lead to confusion and time wastage. Difficult to implement in large scale process, where analyzing requires a lot of time. BVC with Trevin Hannibal

Question 2 (b) Describe the advantages of quality standard ISO 9000 certification to BC4. (10 marks) BVC with Trevin Hannibal

Answer plan The Managing Director feels that significant benefits to BC4 might arise through gaining the quality standard ISO 9000 certification. The International Standards Organisation (ISO) issues standards that are globally recognised, and that include the ISO 9000 series. ISO provides a systematic approach to managing business processes to produce products that conform to customer expectations. BVC with Trevin Hannibal

Improved efficiency through standardized practices
The management consultant has identified differing operating efficiencies both within and between BC4’s factories. By gaining ISO 9000 certification, BC4 will develop a system that should lead to standardised practices, greater productivity and the maintenance of consistently dependable processes. BVC with Trevin Hannibal

A consistent approach to policy documentation is a requirement including systems for control of products that do not conform to the agreed standard. The standardisation that BC4 will gain through certification will improve the efficiency of business processes and should reduce expenditure BVC with Trevin Hannibal

Elimination of inefficiencies
The need to agree upon common modes of operating and standards to be achieved will allow BC4 to identify the most efficient processes so driving out bad practice and inefficient operations. BVC with Trevin Hannibal

Mechanisms for Quality Control
The need for control of quality records (according to the standard 'at all locations where operations essential to the effective functioning of the quality systems are performed') means that once a recognised mechanism is in place an effective Quality Control (QC) mechanism can be established. Compliance can readily be assessed by conformance of a particular operation to the agreed standard. BVC with Trevin Hannibal

Customer satisfaction
The management consultant has identified a trend of increasing returned goods which require replacement or reworking and significant numbers of products returned as part of extended guarantee arrangements This means that customers are not currently receiving products of the quality they expect. The standardised practices guaranteed by a company complying with ISO 9000 will mean that consistently dependable processes and products will help reverse this situation. BVC with Trevin Hannibal

Improved employee morale
As BC4’s external reputation grows employees will be proud to be associated with the company. The fact that the standard implies a need for the workforce to take control of its processes and document its work processes will mean that it will feel valued A key message for BC4 to emphasise is that quality is not the responsibility of one person; it is everyone’s responsibility This shared responsibility should provoke a positive attitude throughout the organisation. Such an attitude should lead to an increase in employee morale and a positive organisational culture BVC with Trevin Hannibal

Enhanced company reputation: improved employer branding
In addition, in a battle for talented workers, BC4 will be a more attractive organisation to join. So the accreditation could effectively improve employer branding BVC with Trevin Hannibal

Question 2 (c) Discuss briefly how the Production Manager's suggestion could benefit BC4 as part of an alternative Quality Control (QC) system BVC with Trevin Hannibal

Answer plan The MD appears to favour ISO accreditation but his production manager has advised him to employ dedicated Quality Control (QC) staff. The use of Quality Control (QC) inspectors in itself would only be effective as part of a full Quality Control (QC) system BVC with Trevin Hannibal

Potential for QC and subsequent ISO accreditation
The use of dedicated QC inspectors is an example of a QC mechanism traditionally found in technical production processes The QC inspectors’ task would be to compare the actual quality of the products produced with the expected or previously planned quality standard. Such QC mechanisms could form the basis of a later adoption of ISO 9000 BVC with Trevin Hannibal

Sufficient for BC4’s needs
ISO accreditation (like Total Quality Management and The European Quality Foundation model) is a Quality Assurance (QA) system. It should, however, be acknowledged that QA systems are in certain ways superior to quality control systems in that they attempt to create rather than control quality. However, the use of QC inspectors and QC systems generally may suit BC4’s immediate needs more readily BVC with Trevin Hannibal

Reduce external failure costs
Taking remedial action where quality does not meet standard followed by immediate action to remedy any breach of the tolerance would reduce BC4's external failure costs BVC with Trevin Hannibal

Direct address of an organisational weakness
The management consultant has confirmed that no systematic QC exists and differing operating efficiencies exist both within and between BC4’s factories. This should be seen as a strategic weakness of the organisation. The Production Manager’s suggestion might be seen as a directly addressing this matter BVC with Trevin Hannibal

Speed and cost Obtaining certification under international quality standard ISO 9000 may benefit BC4 but it could take a great deal of time, effort and expense to introduce and then maintain it across the whole organisation. In many ways QC would be a quicker and potentially cheaper approach for BC4 to adopt. The significant trend of increasing returned goods would be readily picked up by the inspectors and savings made could conceivable pay the inspectors’ salaries. BVC with Trevin Hannibal

Question 3- learning outcomes
PEST Analysis Porters Five Forces Porters Generic Strategy BVC with Trevin Hannibal

PEST Analysis BVC with Trevin Hannibal

What is PEST Analysis? This analysis is essential for an organization before beginning its marketing process Consists of internal environment and external environment BVC with Trevin Hannibal

Socio Cultural Factors Technological Factors
Break up of PEST Political Factors Economic Factors Socio Cultural Factors Technological Factors BVC with Trevin Hannibal

Political Factors This is the most important influence on the regulation of any business. How stable is the political environment? Influence the Government Policy / Law on your business Government’s position on Marketing Ethics Government’s policy on the economy Government’s view on culture under religion BVC with Trevin Hannibal

Political Factors - Contd.
Political System is responsible for Law Making. Immediate laws which affect any business in general are Central Excise, Sales Tax/ VAT, Corporate Income Tax, Personal Income Tax & Service Tax Environmental Protection Law Controls if any on Marketing Strategies Like Marketing / Advertising of Cigarettes, Tobacco, Alcohol etc. BVC with Trevin Hannibal

Political Factors - Contd..
Control on Pricing like sugar, drugs etc. Government Policies on the Economy Role of Public Sector Role of Private Sector Role of Joint Sector BVC with Trevin Hannibal

Economic Factors Government outlook towards Bank Financing
Interest Rates Exchange Rate Mechanism Incentives for Exports Restrictions for Imports Inflation Labour Policies BVC with Trevin Hannibal

Economic Factors - Contd.
Level of Government Spending Avenues for Capital Creation Size of the Capital Market Role of the Regulator Type of the Instruments Nature of the Investors BVC with Trevin Hannibal

Economic Factors - Contd.
Business Cycles Monsoon Energy Availability Cost of Energy BVC with Trevin Hannibal

Socio-Cultural Factors
Demographics Distribution of Income Social Mobility Life Style Changes Consumerism Educational Levels BVC with Trevin Hannibal

Socio-Cultural Factors - Contd.
Demographics & Distribution of Income Division of population - Male / Female Age Group of the Population Disposable Family Income Disposable Income in the hands of the different Age Groups Education Level of the Age Groups BVC with Trevin Hannibal

Social Cultural Factors - Contd.
Life Style Changes & Consumerism Attitude to living Different Age Groups In tune with available disposable income Thrust on taking care of present needs by spending than saving for the future. Joint living and nuclear families Availability of various media tools Reach of the media to the population BVC with Trevin Hannibal

Technological Factors
Advantage of Technology In terms of Economies of Scale New Discoveries & Innovations Speed & Cost of Technology Transfer Rate of Obsolescence BVC with Trevin Hannibal

Other Factors Judicial System Insurance System Banking System
Regulatory System Infra Structure Communication Transportation BVC with Trevin Hannibal

Role of PEST Helps Assess the market including Competitors from the stand point of a Particular Business. PEST is relevant for any type of Business large, small & medium. BVC with Trevin Hannibal

Rolls Royce BVC with Trevin Hannibal

Porter's Five Forces A MODEL FOR INDUSTRY ANALYSIS

Professors in Harvard Business School.
Michael E. Porter Born in 1947. Professors in Harvard Business School. Introduced Porter's 5 Forces Model. Written 18 books & over Articles. BVC with Trevin Hannibal

Porter’s Five Forces Chart

How to deal with competition?
Importance of The 5 Forces Measure and monitor strategy effectiveness Strategize : * Competitive advantage * Cost advantage * Market dominance * New product development * Contraction / Diversification * Price leadership * Global * Re-engineering * Downsizing * De-layering * Restructuring Industry analysis : Industry relevance Industry players Industry structure Future changes Basic knowledge of business strategy & forces that influence the decision making What strategy to use? How to deal with competition? BVC with Trevin Hannibal

Threats of New Entrants
The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new entrants are: How loyal are the end users in this industry? How troublesome or hard is it for the end users to switch and use another product? Does it require a large seed capital to enter this industry? Do entries to this industry regulated by government? How hard is it to gain access to the distribution channels? How long does it take for new staff to acquire the necessary skills to do the work? BVC with Trevin Hannibal

Threats of New Entrants : McDonald’s company analysis
The threat of new entrants in the fast food industry is high because there are no legal barriers. The economies of scale and the access of the distribution are the major barriers that firms face in the industry. Firms must spend a large amount of capital on advertising and marketing in order to enjoy successful existence and long life of a fast food outlet. Large established companies with strong brand names such as McDonald’s make it more difficult to enter the market because new entrants are faced with price competition from existing chain restaurants. Thus, it takes a pretty much time for a new business to establish in the fast food industry. BVC with Trevin Hannibal

Threat of Substitutes Threats of Substitute in the Porter’s theory actually means goods and services that does similar functions How many close substitutes are available? How pricy are the substitutes? What is the perceived quality of the substitutes? BVC with Trevin Hannibal

Threat of Substitute: Examples

Intensity of rivalry among established firms
How many close competitors exist in the industry? What are the sizes of your close competitors? What is the industry structure? Is it a fragmented, consolidated, oligopoly or monopoly industry? What is the current industry growth rate? BVC with Trevin Hannibal

How diversified are your competitors?
4. How high are the exit barriers? Do your competitors have a high committed fixed cost thus they have to operate even at a loss? How diversified are your competitors? How extensively do your direct competitors advertise? 7. Each competitors aim to serve different needs and market segment with different mixes of price products service features BVC with Trevin Hannibal

Intensity of rivalry among established firms : Examples

Bargaining power of Customers
How large are your buyers’ company? 2. How many companies are there for the buyer to choose from? 3. Are the buyers buying a huge volume? 4. Do you depend only on a few buyers to sustain your sales? BVC with Trevin Hannibal

How hard is it for the buyers to switch and use a competing product?
Are the buyers purchasing from you as well as your competitors? 7. Do the buyers have the capacity to enter your business and produce the goods themselves? BVC with Trevin Hannibal

Bargaining power of Customers: Example of Coca-Cola Company
depends on the marketing channel used. or Coca-Cola, Super Markets Convenience Stores Mass Merchandisers Soda Shop vending machine Restaurants and Food stores Bargaining power of buyer is high for fountain supermarkets and mass merchandising because of the low profitability and strong negotiation power of retail channels but for vending bargaining power is non-existing caused by high profitability. BVC with Trevin Hannibal

Bargaining power of Suppliers
Are there substitutes for your suppliers’ products? Do your suppliers serve multiple industries? Does the total industry revenue accounting for only a small portion of the supplier’s total revenue? BVC with Trevin Hannibal

Do you have high switching cost to use another supplier?
Do suppliers have the capacity to enter your business? Does your company capable to enter the supplier’s business? BVC with Trevin Hannibal

Question 3 Required (a) (i) Identify TWO models that the team could use to analyse the external environment.Briefly explain the models BVC with Trevin Hannibal

Answer plan There are two main models used to analyse the external environment: Porter’s Five Forces model which examines: 1. the rivalry among the industry’s existing firms 2. the threat of new entrants to the industry 3. the threat of substitute services and/or products 4. the bargaining power of the suppliers to the industry 5. the bargaining power of the industry's customers/buyers. BVC with Trevin Hannibal

Answer plan The other model is usually referred to by an acronym, PEST. This model analyses the external environment in terms of its: Political influences: for example, taxation policy Economic environment: for example, unemployment Social and demographic factors: for example, age structure of the population Technological factors: rate of innovation The PEST model has been supplemented by the addition of Ecological and Legal factors producing the PESTEL model. BVC with Trevin Hannibal

Question 3 a) (ii) Explain how these models could assist the team in formulating a wedding package strategy for the Futurist hotel. BVC with Trevin Hannibal

Application of Five forces
The Five Forces model can be used by the team to assess how fierce the competition is likely to be if the Futurist decides to act as a wedding venue. This will then enable the team to appreciate how profitable this new strategy is likely to be and enable it to decide whether or not it should enter this market. BVC with Trevin Hannibal

Application of Five forces
If the Futurist decides to enter the wedding business it will be competing against seven other hotels which are offering a range of different prices to different market segments. Therefore, an analysis of the industry via the Five Forces model could avoid the Futurist making a mistake with regard to its competitive position and enable it to exploit which of the five forces appear to be favourable. BVC with Trevin Hannibal

Application of PEST The PEST model should assist the team in arriving at an informed understanding of the external environment which should enable the team to devise a strategy that better fits the needs of the market. It will also assist the team to understand how the various factors within the model are changing and also the direction of future trends. For example, an understanding of the likely future popularity of marriage, a Social factor, will be very important for the team’s wedding venue strategy. BVC with Trevin Hannibal

Application of PEST The team may also find that some of the factors are inter-linked: if, for example, the popularity of marriage is linked to levels of income streams. The team could refine its PEST analysis to identify key drivers for change these are the factors which are likely to have a direct important bearing on whether the strategy will prove successful. An example would be trends in disposable income for people aged If incomes are rising customers may be willing to spend more on their wedding which will influence the price the team will set for the wedding held in the Futurist BVC with Trevin Hannibal

Conclusion Both of the models can be used by the team in the initial stages of formulating its strategy when it would form part of the rational approach to strategy. The models can also be used as part of a continuous process of environmental scanning This would enable the team to be aware of opportunities and threats as they arise rather than having to wait for a formal strategic review as under the rational process. BVC with Trevin Hannibal

Porter's Generic Strategies
Strategic Management Porter's Generic Strategies BVC with Trevin Hannibal

Porter's Generic Strategies
A firm positions itself by leveraging its strengths Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus BVC with Trevin Hannibal

Cost Leadership Strategy
This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. BVC with Trevin Hannibal

Examples BVC with Trevin Hannibal

The cost leadership strategy always targets a broad market.
In the event of a price war, the firm can maintain some profitability while the competition suffers losses Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time The cost leadership strategy always targets a broad market. BVC with Trevin Hannibal

Differentiation Strategy
A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. BVC with Trevin Hannibal

Examples BVC with Trevin Hannibal

Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. BVC with Trevin Hannibal

Question 3 (b) (i) Explain how an understanding of Porter's three generic competitive strategies could help the team design a successful wedding package strategy for the Futurist hotel. BVC with Trevin Hannibal

Answer plan Porter’s model of three generic strategic approaches comprises the following: 1. Overall cost leadership 2. Differentiation 3. Focus BVC with Trevin Hannibal

Application of cost leadership
To achieve overall cost leadership the Futurist would have to be able to be the lowest cost producer in its market. In order to do this it would require some resource, competence or advantage not possessed by its competitors. It is a new hotel and so its equipment and layout should be modern. However, it is unlikely that this will give the Futurist a sustainable competitive advantage. In the absence of any other unique advantage a strategy of overall cost leadership will not be applicable for the Futurist. BVC with Trevin Hannibal

Application of differentiation strategy
A policy of differentiation should be based on providing a wedding package that its potential customers will perceive as being unique. This would mean that the customers would perceive that they are receiving premium value and so enable the Futurist to charge a premium price. This appears to be the strategy being following by the De Luxe hotel which is situated in a castle in a beautiful rural setting. This hotel has also won many international awards for its food and its rooms. These attributes of the De Luxe hotel, particularly its location, have enabled it to charge a premium price per wedding guest. BVC with Trevin Hannibal

Application of focus strategy
If the team wanted to follow a Focus or Niche strategy then it will have to follow a strategy which concentrates on one or more particular segments of its market rather than try to meet the needs of the entire market with a single service or product. As it seems unlikely that the Futurist will be the overall cost leader in its market, it could apply a Focus strategy to some sort of differentiated offering BVC with Trevin Hannibal

Application of focus strategy
This suggests that it has targeted a market segment of people whom have low incomes or are very prudent with their money or do not like lavish wedding celebrations. However, depending on this hotel’s capacity to cater for weddings, its margins and the number of weddings it attracts each year, it could be as profitable as the De Luxe which is serving a completely different market segment. BVC with Trevin Hannibal

Question 3 (ii) Advise the team how information systems strategies could support the three generic competitive strategies. BVC with Trevin Hannibal

Introduction Information systems can contribute to a generic competitive strategy by means of strategies for: Information Systems, Information Management, and Information Technology. The information strategies required to support the wedding venue strategy will be a sub-set of the hotel’s information strategy. It may also be the case that if the hotel is part of a group its information strategy is a sub-set of a larger group information strategy BVC with Trevin Hannibal

Information systems strategy
this strategy is concerned with how the Futurist can use information to support its wedding package strategy. This strategy should describe the information needed to formulate the strategy and to maintain it The Futurist would require regular management information reporting on the profitability of whichever wedding package strategy it decided to implement. This reporting should include internal information, for example, performance against budget, turnover and margins achieved. BVC with Trevin Hannibal

Information management strategy:
the Futurist will require this strategy to describe how the data and information relating to wedding business should be stored and accessed. As the hotel will have other strategies and information systems, the information management strategy should describe how these relate to the strategy for the wedding package BVC with Trevin Hannibal

Information management strategy
For example, there will be a requirement to calculate costs and margins for weddings. The hotel will also be calculating these for other aspects of its business. Therefore, the information management strategy should state whether there needs to be a separate system for calculating these for wedding business or whether the hotel’s other systems can be used for this purpose. BVC with Trevin Hannibal

Information management strategy
The project team designing the wedding package strategy consists of CB the accountant, the hotel’s General Manager and the Restaurants Manager. Once their strategy is being implemented they will have different levels of involvement and responsibility for it. With regards to the data and information associated with the strategy, their roles will need to be demarcated. This would be described in the information management strategy BVC with Trevin Hannibal

Information technology strategy:
this strategy will specify the hardware and software required for the wedding package strategy. The wedding package strategy may not need a separate strategy for its technology as its needs are unlikely to be different from the needs elsewhere in the hotel, which will have been specified in an overall information technology strategy. However, it may require some specialist software in which case this would be stated in this strategy. BVC with Trevin Hannibal

Conclusion The management information should also take a strategic focus in placing the Futurist’s performance in an external context. Thus, it should report on market growth and share and comparative information about competitors' performance. As well as the regular reporting there will be a need for ‘ad hoc’ reports, for example, when environmental scanning detects random events outside the internal environment of the Futurist. BVC with Trevin Hannibal

The Balanced Scorecard Approach

What is a Balanced Scorecard?
The Balanced Scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization by monitoring performance against strategic goals. BVC with Trevin Hannibal

Balanced Scorecard Concept
Was first published in 1992 by Kaplan and Norton, a book followed in 1996. Traditional performance measurement that only focus on external accounting data are obsolete. The approach is to provide 'balance' to the financial perspective. BVC with Trevin Hannibal

Why Use a Balanced Scorecard?
Improve organizational performance by measuring what matters Increase focus on strategy and results Align organization strategy with workers on a day-to-day basis Focus on the drivers key to future performance Improve communication of the organization’s Vision and Strategy Prioritize Projects / Initiatives BVC with Trevin Hannibal

4 Original Business Perspectives
The Balanced Scorecard model suggests that we view the organization from 4 perspectives. Then Develop metrics, collect data and analyze it relative to each of these perspectives BVC with Trevin Hannibal Adapted from The Balanced Scorecard by Kaplan & Norton

4 Business Perspectives Questions
Financial What must we do to create sustainable economic value? Internal Business Process To satisfy our stakeholders, what must be our levels of productivity, efficiency, and quality? Learning and Growth How does our employee performance management system, including feedback to employees, support high performance? Customer What do our customers require from us and how are we doing according to those requirements? BVC with Trevin Hannibal

Balanced Scorecard Measurements

Balanced Scorecard Strategy Map

Question 4 (a) Evaluate the strengths and weaknesses of SAH's current control system. BVC with Trevin Hannibal

Answer plan (a) Strengths
SAH has a control system based on standard costing. The control system covers manufacturing cost which is 60% of a yacht’s total cost. The managing director, N, is familiar with the control system. BVC with Trevin Hannibal

Answer plan (a) Weaknesses.
N has experienced difficulty in his role because the control system only reports financial results. Although the current system endeavours to control the majority of manufacturing cost this leaves some significant gaps: namely the other 40% of a yacht’s total manufacturing cost and also all other costs, for example, marketing and finance BVC with Trevin Hannibal

Answer plan (a) The control system is now 26 years old. Although it was effective in 1985, changes since may have impaired its effectiveness. It seems that it would benefit from a review N, the managing director of SAH, would like a system that gives him ‘integrated control over all aspects of the business’. The current system does not do this. BVC with Trevin Hannibal

Answer plan (a) SAH’s customers value quality, reliability and performance. The current control system does not explicitly report on any of these attributes SAH has been criticised by its customers for late delivery and by potential customers because its yachts look ‘old-fashioned’ and are ‘too slow’. N has stated that the current Return on Capital Employed (ROCE) of 3% is unacceptable. SAH’s cash flow is under pressure. All these, although not due exclusively to the control system, nevertheless suggest that it is not adequate for SAH’s current needs. BVC with Trevin Hannibal

Requirement (b)(i) The Balanced Scorecard is designed to ‘translate mission and strategy into measures and objectives’. Its purpose is to inform employees about the drivers of success and direct their attention towards actions that will help to deliver the organisation’s Vision and Strategy. The Vision and Strategy should be made explicit within the Balanced Scorecard BVC with Trevin Hannibal

Financial perspective: Proposed measures
• Aggregate contribution margin: An improvement in this measure should improve ROCE which is currently unacceptably low. • Receivables: Cash flow is very important for SAH and it has been under pressure recently. A reduction in receivables will improve SAH's cash flow. BVC with Trevin Hannibal

Customer perspective: Proposed measures
Performance against delivery dates: This was a weak area for SAH. SAH would want to improve its performance here and so improve its image to its customers and potential customers. • Order book: As each yacht is built to order and takes at least a year to build, it is important that SAH knows it has continuity of demand. SAH can gauge the popularity of its yachts by the number of people who have placed an order for one. BVC with Trevin Hannibal

Internal business perspective: Proposed measures
• Materials price variance: This would focus attention on a current area of difficulty for SAH, which is having to deal with increasing material prices. • Build time per yacht: If SAH could reduce its build time it might be able to avoid late deliveries, sell more yachts and use its working capital more efficiently. This could improve its profitability. BVC with Trevin Hannibal

Requirement (b)(ii) Gaining management commitment to the concept of the Balanced Scorecard Kaplan suggest that some managers prefer to be measured solely by financial measures because these are inaccurate and obscure individual's responsibility for performance. As the Balanced Scorecard does not link directly to profit, some managers believe it not to be relevant to them. BVC with Trevin Hannibal

Requirement (b)(ii) Congruency of measures
Although the measures proposed for the Balanced Scorecard are supposed to be congruent, i.e. mutually reinforcing, they may not be. Thus, for example, an initiative to improve the customer experience may adversely affect a financial measure, for example, Return on Capital Employed. BVC with Trevin Hannibal

Requirement (b)(ii) Measuring only the things that are easy to measure
Balanced Scorecard measures need to reflect aspects of the business operations that contribute towards the achievement of its vision. Such aspects may not previously have been measured and the formulation of new measures may be difficult, for example, measuring quality. This may lead managers to ignore these aspects and concentrate their attention on measurable but less important aspects of the business operations. BVC with Trevin Hannibal

Requirement (b)(ii) Allocating responsibility for developing the measures. The measures should be developed by staff with an all-round understanding of the business. These will not necessarily be from within the finance function. If the measures are developed within the different functions there is likely to be a variable degree of expertise available to perform this task. If the measures are developed centrally, they may be resisted by managers if they have not been consulted in the process BVC with Trevin Hannibal

VALUE CHAIN ANALYSIS : BVC with Trevin Hannibal

What is the value chain? Porter’s definition includes all activities to design, produce, market, deliver, and support the product/service. The value chain is concentrating on the activities starting with raw materials till the conversion into final goods or services. Two categories: Primary Activities (operations, distribution, sales) Support Activities (R&D, Human Resources) BVC with Trevin Hannibal

TYPES OF VALUE CHAIN: Value Chain is categorized into types based on the type of organizations. Manufacturing based. Service based. Both manufacturing and service based. BVC with Trevin Hannibal

What is value chain analysis?
Used to identify sources of competitive advantage Specifically: Opportunities to secure cost advantages Opportunities to create product/service differentiation Includes the value-creating activities of all industry participants BVC with Trevin Hannibal

Value Chain Model (FISH BONE DIAGRAM)
SUPPORT ACTIVITIES Firm Infrastructure (General Management) Human Resource Management Customer Value Technology Development Margin Procurement Inbound Logistics Outbound Logistics Sales & Marketing Service and Support Ops. Margin Customer Value PRIMARY ACTIVITIES BVC with Trevin Hannibal

TYPES OF FIRM ACTIVITIES
Primary activities: Those that are involved in the creation, sale and transfer of products (including after-sales service) Inbound logistics Operations Outbound logistics Sales and marketing Service and support Support Activities: Those that merely support the primary activities Human resources (general and admin.) Tech. development Procurement BVC with Trevin Hannibal

PRIMARY ACTIVITIES BVC with Trevin Hannibal

Value Chain Model from Michael E. Porter’s Competitive Advantage
Firm Infrastructure (General Management) SUPPORT ACTIVITIES Human Resource Management Customer Value Technology Development Margin Procurement Inbound Logistics Operations Outbound Logistics Sales & Marketing Service and Support Margin Customer Value PRIMARY ACTIVITIES BVC with Trevin Hannibal

PRIMARY ACTIVITIES 1.INBOUND LOGISTICS
- CONCERNED WITH RECEIVING, STORING, DISTRIBUTING INPUTS (e.g. HANDLING OF RAW MATERIALS, WAREHOUSING, INVENTORY CONTROL) 2. OPERATIONS - COMPRISE THE TRANSFORMATION OF THE INPUTS INTO THE FINAL PRODUCT FORM (E.G. PRODUCTION, ASSEMBLY, AND PACKAGING) 3. OUTBOUND LOGISTICS -INVOLVE THE COLLECTING, STORING, AND DISTRI BUTING THE PRODUCT TO THE BUYERS (e.g. PROCESSING OF ORDERS, WAREHOUSING OF FINISHED GOODS, AND DELIVERY) BVC with Trevin Hannibal

PRIMARY ACTIVITIES 4. MARKETING AND SALES -Identification of customer needs and generation of sales. (e.g. ADVERTISING, PROMOTION, DISTRIBUTION) 5. SERVICE -INVOLVES HOW TO MAINTAIN THE VALUE OF THE PRODUCT AFTER IT IS PURCHASED.(e.g. INSTALLATION, REPAIR, MAINTENANCE, AND TRAINING) BVC with Trevin Hannibal

SUPPORT ACTIVITIES BVC with Trevin Hannibal

Value Chain Model from Michael E. Porter’s Competitive Advantage
SUPPORT ACTIVITIES Firm Infrastructure (General Management) Human Resource Management Customer Value Technology Development Margin Procurement Inbound Logistics Outbound Logistics Sales & Marketing Service and Support Ops. Margin Customer Value PRIMARY ACTIVITIES BVC with Trevin Hannibal

SUPPORT ACTIVITIES 1.FIRM INFRASTRUCTURE The activities such as Organization structure, control system, company culture are categorized under firm infrastructure. 2.HUMAN RESOURCE MANAGEMENT Involved in recruiting, hiring, training, development and compensation. 3.TECHNOLOGY DEVELOPMENT These activities are intended to improve the product and the process, can occur in many parts of the firm. 4.PROCUREMENT Concerned with the tasks of purchasing inputs such as raw materials, equipment, and even labor. BVC with Trevin Hannibal

USES OF VALUE CHAIN ANALYSIS:
A firm gains a competitive advantage by performing these activities better or at lower cost than competitors. Helps you to stay out of the “No Profit Zone” Presents opportunities for integration Aligns spending with value processes BVC with Trevin Hannibal

Question 5 (a) Analyse the strengths and weaknesses of JGS using the value chain model. Note: You are not required to draw a value chain diagram in any part of your answer to this question. (8 marks) BVC with Trevin Hannibal

Primary activities Inbound logistics
:No information given, so unable to classify this. Operations The business has outgrown the need for shop premises. The owners are unable to attend antiques fairs which have very good business potential. WEAKNESS. BVC with Trevin Hannibal

Primary activities Outbound logistics
The assumption is that storage and distribution is carried out at the shop premises. Mention was made in the case of the increasing cost of security, as the antiques require protection from theft. It could be that the shop premises are no longer the best place to store and distribute antiques. Possible WEAKNESS. BVC with Trevin Hannibal

Primary activities Marketing & Sales
The owners used to gain their business because of their location, but this is no longer as important. Latterly, they have built up a reputation and have many repeat customers. However, their use of the Internet is primitive and does not contribute to their business. This was a strength now turning into a WEAKNESS BVC with Trevin Hannibal

Primary activities Service
As the owners have a national reputation and many repeat customers, this is classified as a STRENGTH. BVC with Trevin Hannibal

Support Activities Firm infrastructure
The owners have had a long history of profitable trading. However, recently they have made losses. WEAKNESS The owners’ premises, if sold, would enable them to realise ‘a substantial capital gain’. STRENGTH BVC with Trevin Hannibal

Support Activities Human Resource Management
The owners work in the business and there are no employees. Their long survival in the business and their reputation as experts are STRENGTHS. However, the people are the business and there is little possibility of succession. Further if the owners have been in business since 1980 they may be approaching retirement age. WEAKNESS. BVC with Trevin Hannibal

Support Activities Technology development
This seems to have been neglected. See Marketing & Sales BVC with Trevin Hannibal

Support Activities Procurement
No direct evidence of this but longevity of business suggest that this has been a STRENGTH. BVC with Trevin Hannibal

Question 5 (b) The owners propose to convert their website to facilitate e-commerce in order to increase turnover and profit. Advise the owners of JGS what they will have to do immediately, and also on a continuing basis, to carry out this e- commerce solution. (8 marks) BVC with Trevin Hannibal

Exiting situation The owners have recently set up a website but this only has some basic information about their business. Although the website has received many hits, it hasn’t led to any increase in business. This suggests there is a wide degree of interest in their business but the website does not enable anyone who is remote from the town where JGS is based to do any business with the owners. BVC with Trevin Hannibal

Action plan The obvious inference is that if they converted their website to facilitate e-commerce their business would increase in both turnover and profit. Initial steps to take in the introduction of e- commerce would include preparing a project plan and also identifying the level and source of funds which would be required. If the owners are to set up a website with e-commerce capability they will need to catalogue, photograph and enter their stock onto the web site BVC with Trevin Hannibal

Action plan The website would need continual up-dating as stock is sold and new stock acquired. They would have to ensure that their server had adequate capacity to cope with the forecast level of traffic. The website would need to have good security to protect against viruses and fraud, and the owners would need to have a secure method of receiving payments to facilitate their customers’ transactions BVC with Trevin Hannibal

Action plan If the owners do not have the requisite expertise, they will need to employ a consultant to help them establish the website, to give them some training and to be available to help with website modifications and emergencies. BVC with Trevin Hannibal

Question 5 (c) Evaluate how the introduction of e- commerce could affect JGS’s value chain. (9 marks) BVC with Trevin Hannibal

Answer plan A move to e-commerce for the owners would affect the value chain of the owners in the following ways. If trading via the website takes off, the owners do not need to keep their shop. They will no longer be tied to a specific location and they could move their business. They will also save money on the shop’s fixed costs if they relocate to a cheaper area. Thus, their Operations will have altered. BVC with Trevin Hannibal

Marketing & Sales e-commerce represents a new way of doing business. It should lead to increased business as the owners are no longer subject to geographical boundaries and their antiques will be displayed on the web BVC with Trevin Hannibal

Firm infrastructure the change to e-commerce could mean that the owners could return to profitability. They will also be able to realise their inherent capital gain on disposal of the shop and should benefit from an injection of cash. BVC with Trevin Hannibal

Human Resource Management
e-commerce implies a new way of working for the owners. They can now attend fairs and travel which they have not been able to do previously as they will no longer be tied to their shop. BVC with Trevin Hannibal

Technology development
with the adaption of e-commerce this aspect of the value chain will now be an important part of the business BVC with Trevin Hannibal

Procurement: The owner’s new website will put them in touch with a greater number of customers. This could give them access to new sources of supply of antiques. BVC with Trevin Hannibal

Q6-Learning outcomes tested
Knowledge on change management Balanced Score-card model BVC with Trevin Hannibal

RESISTANCE TO CHANGE BVC with Trevin Hannibal

Why Resistance To Change???
Fear of the unknown. Lack of good information. Fear for loss of security. No reason to change. Fear for loss of power. Lack of resources. BVC with Trevin Hannibal

Factors Effecting Change
Advocates of Change Degree of Change Time Frame Impact on Culture Evaluation of Change BVC with Trevin Hannibal

Flow Of Change Change Readiness Assessment Change Agents & Sponsors
Communication &Feedback Transition To New Workplace Skills Resistance Management BVC with Trevin Hannibal

Overcoming Resistance To Change

Education & Communication
Advantage: Creates willingness to help with the change Disadvantage: can be time consuming. BVC with Trevin Hannibal

Participation & Involvement
Advantage: Adds information to change. Disadvantage: Can be very time consuming. BVC with Trevin Hannibal

Support Directly satisfies specific resource or adjustment needs.
Advantage: Directly satisfies specific resource or adjustment needs. Disadvantage: can be time consuming; can be expensive BVC with Trevin Hannibal

Negotiation Helps avoid major resistance.
Advantage: Helps avoid major resistance. Disadvantage: Can be expensive; can cause others to seek similar deals. BVC with Trevin Hannibal

Manipulation Quick and inexpensive
Advantage: Quick and inexpensive Disadvantage: Can create future problems if people sense manipulation. BVC with Trevin Hannibal

Question 6 Required (a) Advise the management of JALL:
(i) Why it might encounter resistance to the change in ownership. (6 marks) (ii) How it could overcome this resistance to change. (7 marks) BVC with Trevin Hannibal

Answer plan -Requirement (a)(i)
A number of reasons for people resisting change have been identified by researchers. One source of resistance could be that JALL did not properly prepare for the change in ownership. If the staff of JALL do not understand the reasons for the change in ownership and these have not been explained to them it is likely that they will resist the change. The idea of resistance to change is central to the approach of Lewin to change management and his idea of ‘Forcefield Analysis’. BVC with Trevin Hannibal

Answer plan Requirement (a)(i)
Fear of the unknown There has not been a definitive announcement about the change of ownership of JALL nor the reasons for it. Some of JALL’s stakeholders, its staff, customers and suppliers may suffer from fear of the unknown which could lead them to resist the change. In the case of the suppliers and customers this could lead them to take their business elsewhere BVC with Trevin Hannibal

Answer plan Requirement (a)(i)
Dislike of uncertainty To the extent that JALL’s stakeholders dislike uncertainty; they are likely to resist the change. BVC with Trevin Hannibal

Requirement (a)(i) Potential loss of power
The staff are most likely to be faced with a loss of power in that they may lose their jobs as a result of the changes. The suppliers and customers have more autonomy as there are other retailers of office products BVC with Trevin Hannibal

Requirement (a)(i) Potential loss of rewards
For the staff, this factor is similar to the potential loss of power BVC with Trevin Hannibal

Requirement (a)(i) Potential lack of or loss of skills.
This is most likely to affect the staff and the suppliers. If the new owners of JALL intend to carry out the business differently to how JALL did business in the past, this may require new skills. For example, under its new owners, JALL may carry out its business using the Internet and this would require IT skills from both JALL’s staff and suppliers which they may not possess. This could inspire resistance to the change from both the staff and suppliers: in the case of the suppliers they may choose not to do business with JALL in the future. BVC with Trevin Hannibal

Requirement (a)(ii) Kotter and Schlesinger (1979) identified the following ways to reduce resistance to change which occupy a continuum ranging from the persuasive to the highly authoritarian: Education and communication Participation and involvement Facilitation and support Negotiation and agreement Manipulation and 'co-optation' Explicit and implicit coercion BVC with Trevin Hannibal

Education and communication
If the resistance has been caused by a lack of understanding of the reasons for the changes, JALL could communicate the reasons for the change of ownership to its stakeholders. BVC with Trevin Hannibal

Facilitation and support
JALL could offer training and counselling to support its staff in their new roles. JALL could also prepare staff for their life outside the organisation if they are to be made redundant, by providing help with CV preparation, job searching and tax advice if redundancy pay is to be offered BVC with Trevin Hannibal

Participation and involvement
This approach could gain the co-operation of staff involved in the change. However, not everyone wants to be participative. JALL could offer its stakeholders the opportunity to influence the change, for example, its staff could suggest a timetable for integrating JALL into the national chain. BVC with Trevin Hannibal

Negotiation and agreement
This is an alternative to imposing change upon a workforce. If JALL's workforce is given the opportunity to express its concerns and this is met by a genuine response to resolve these by management, it is likely that resistance will be reduced. JALL could assist this process on an ‘ad hoc’ basis. Alternatively, JALL could use the services of a third party, for example, a trade union or a mediator to help it manage the process BVC with Trevin Hannibal

Manipulation and 'co-optation'
This is an ethically questionable approach as resistance is reduced by means such as presenting misleading or incomplete information. It is likely that such an approach would infringe Code of Ethics and, therefore, could not be recommended. Some of the people resisting the change could be persuaded to support it by being offered inducements such as promotion BVC with Trevin Hannibal

Explicit and implicit coercion
This last approach is the most brutal as it involves actual or implied threats: for example, the management might threaten to close part of its business and to sack employees if the proposed changes are resisted. Many enlightened managers would not employ this approach or only use it as a last resort BVC with Trevin Hannibal

Question 6 b) Advise the management of LNR:
(i) How it could use the Balanced Scorecard to manage its strategic performance. (6 marks) (ii) How it could construct targets for JALL's staff within an incentive scheme and use these targets to support the Balanced Scorecard. BVC with Trevin Hannibal

Answer plan Requirement (b)(i)
The new management of JALL also has to ensure its continued success within the national chain. As success for any organisation is a multi-dimensional concept, JALL’s performance needs to be measured by a multi- dimensional model and the Balanced Scorecard enables this. Central to the Balanced Scorecard is the organisation’s vision and strategy and this would probably be formulated for JALL by its new owners. Allied to the vision and strategy are four perspectives designed to support the organisation’s vision and strategy. The perspectives are: BVC with Trevin Hannibal

• Financial • Customer • Learning and growth • Internal business All of the four perspectives could include both qualitative and quantitative measures which could be reported upon periodically. The measures chosen for the reporting would be those most crucial for the delivery of JALL’s vision and strategy. These should be reviewed regularly and other ones substituted if they have more relevance BVC with Trevin Hannibal

The Balanced Scorecard would, therefore, become a part of JALL’s normal periodic reporting system. A summative integrated report reflecting the performance of JALL regarding all four of the Balanced Scorecard’s perspectives could be prepared and this would give senior management the opportunity of tracking the achievement of JALL against the overall vision and strategy. BVC with Trevin Hannibal

Requirement (b)(i) More detailed reports on each of the four perspectives should be prepared for operational managers so they would be made aware of the degree to which the area for which they are responsible is contributing to overall success BVC with Trevin Hannibal

Question 6 b) Advise the management of LNR:
(ii) How it could construct targets for JALL's staff within an incentive scheme and use these targets to support the Balanced Scorecard. BVC with Trevin Hannibal

Requirement (b)(ii) Within the Balanced Scorecard a variety of control measures can be identified. If JALL is operating a participative management culture, these measures and targets would be the result of discussion and negotiation with those staff that are being held responsible for JALL’s performance. If the culture is ‘top-down’ (autocratic) the measures and targets would be imposed upon those who are held responsible for their achievement BVC with Trevin Hannibal

Requirement (b)(ii) Whatever the process by which the targets have been established, these could then be integrated into a reward system for staff. This could be done by means of performance related pay. A manager could agree (in a participative organisation) or be told (in an autocratic one) targets or objectives for a future period. If the manager achieves these objectives he/she would be rewarded. Usually this would be with extra pay but the reward can take other forms: for example, promotion and fringe benefits BVC with Trevin Hannibal

Requirement (b)(ii) Similarly, staff could be given (autocratic) or agree (participative) targets for the future which, if met, would help JALL achieve its vision and strategy. Performance against these targets could be rewarded in a way similar to those for the managers. BVC with Trevin Hannibal

Requirement (b)(ii) The important link with the Balanced Scorecard is that the manager’s objectives should reflect the control measures that have been identified within the Balanced Scorecard to help achieve the organisation's vision and strategy. An example of how an individual manager and her/his performance related pay is integrated with the Balanced Scorecard is shown below BVC with Trevin Hannibal

Requirement (b)(ii) Vision and Strategy: To be the region's leading retailer of office products Customer perspective: Capture new markets Marketing manager: Personal objective Carry out market research to identify new market segments capable of delivering Rs.300,000 additional sales per year. BVC with Trevin Hannibal

Q7-Learning outcomes tested
Critical success factors and control systems BVC with Trevin Hannibal

Critical Success Factors
“Things that must go right If the objectives ad goals are to be achieved” A CSF is measured by a Key Performance Indicator (KPI) BVC with Trevin Hannibal

Example 1 Vision Statement Goal
To be known for our superior customer service and satisfaction Goal To reduce the number of dissatisfied customers by 25% in one year BVC with Trevin Hannibal

Application KPI Team Members of the firm
90% customer complaint resolution 75% customer complaint resolution with satisfied customer Team Members of the firm The weekly percentage difference in complaints handled that result in satisfied customers versus unsatisfied customers BVC with Trevin Hannibal

Example 2 Vision Statement Mission
To become number one coffee chain in Colombo by 2020 in terms of market share Mission Introducing new product lines and coffee beverages every 3 months Securing finance for expansion Coming up with online booking systems and making coffee a worth to remember experience for customers BVC with Trevin Hannibal

Application CSFs KPI Successful relationship with suppliers
Attracting and satisfying new customers Securing finance for introducing new product line KPI Gain in market share by 1% every month Sustain 98% customer satisfaction rate Ensure the capacity is utilized by an average of 90% BVC with Trevin Hannibal

Question 7 Required (a) Evaluate the appropriateness of JIK's current control system. BVC with Trevin Hannibal

JIK’s control system This is ‘focused exclusively’ on the manufacturing process even though JIK is also a retailer and installer of domestic kitchens. It is appropriate for the control system to monitor manufacturing efficiency by means of the three variances: Materials price, Materials usage and Manufacturing labour efficiency. No rationale has been given for concentrating on these three variances and there may be other variances which could provide useful control information which are not currently computed, for example, material yield and labour rate. BVC with Trevin Hannibal

JIK’s control system Variance analysis should not be used in isolation but a holistic view needs to be taken about JIK’s operations and the current control system may not lead to this. JIK is not currently monitoring and controlling aspects which are vital for competitive success. It has not identified its Critical Success Factors There is weekly reporting of the variances and implicit is that there should be follow-up actions resulting from these reports. However, a week is not necessarily the appropriate reporting period for all aspects of JIK’s business. BVC with Trevin Hannibal

JIK’s control system Although JIK uses standard costing it is not clear that it computes product costs. A lack of product costs may be the reason it was ‘surprised’ about its 2015 profit margin. Standard costing could be criticised for misdirecting management’s attention. Thus, in the case of a ‘Lux-Style’ kitchen where the highest standards of materials are used it is important that the quality of the finished product is not compromised. Therefore, it might be appropriate to accept an unfavourable material price variance in order to maintain the product’s standards. BVC with Trevin Hannibal

JIK’s control system If there is a production problem leading to excessive materials waste a week is too long a time to wait before remedial action can be taken. Therefore, real-time or contemporaneous reporting may be more appropriate for manufacturing operations A major deficiency of JIK’s control systems is that they do not extend to retailing and installation activities. The Value installation teams are incentivised to complete kitchens which could be good for their productivity. However, there is a high level of complaints associated with their work. As there is no evident means of monitoring the installation teams’ work, the causes of the complaints cannot be identified. BVC with Trevin Hannibal

Question 7 (b) Recommend TWO Critical Success Factors (CSFs) which could assist JIK achieve future success. You must justify your recommendations. BVC with Trevin Hannibal

Answer plan The management schoolf of thought has defined Critical Success Factors (CSF) as ‘An element of the organisational activity which is critical to its future success. Critical success factors may change over time, and may include items such as product quality, employee attitudes, manufacturing flexibility and brand awareness’.* BVC with Trevin Hannibal

CSF’s Quality of installations
There are different quality expectations for the two kitchens and there has been different levels of quality achieved implicit in the historic pattern of complaints. This strongly implies that the quality of installation should be tracked as a separate CSF for each kitchen. This CSF is important for JIK because of the cost implications of rectifications and guarantee claims. It is also important because of the effect that poor quality will have on JIK’s future business. BVC with Trevin Hannibal

CSF’s Customer satisfaction
Like quality, this CSF will need to be monitored separately for each kitchen. Customer satisfaction covers the entire life of a transaction starting with the initial enquiry about a purchase and continuing after installation for the life of the kitchen. Customer satisfaction will have an influence on JIK’s future business which is dependent, in part, on repeat orders and recommendations. This CSF will also reflect the market’s perception of JIK’s brand. BVC with Trevin Hannibal

CSF’s Brand performance
JIK has two distinct brands. They are directed at different market segments and have different associated attributes. ‘Value’ kitchens offer limited choice to the customer and retail, on average, for Rs.100,000. JIK needs to identify where this brand is situated in its life-cycle and what marketing activities may be required to support it. BVC with Trevin Hannibal

CSF’s The ‘Lux-Style’ brand is aimed at a different market segment and JIK would like to grow this aspect of its business. The same considerations apply to this brand as to ‘Value’. The success of both brands is vital for the continued success of JIK and this CSF gives a holistic view of performance BVC with Trevin Hannibal

CSF’s Manufacturing excellence
JIK manufactures all the kitchens which it sells and installs. Manufacturing will be a significant aspect of JIK’s total costs and an important contributor to profitability. Currently, JIK monitors some limited aspects of manufacturing through its control system. However, there are many other aspects which are not reported upon: for example, manufacturing flexibility, innovation, abseentism and investment in technology. This CSF has a much wider scope than the current control system and should assist in the quest for competitiveness BVC with Trevin Hannibal

Question 7 (c) Advise JIK of the changes it will need to make: (i) To its current control system following the introduction of the CSFs recommended in part (b) of your answer; BVC with Trevin Hannibal

Answer plan JIK’s current control system is one dimensional focusing on the efficiency of its manufacturing process. The introduction of Critical Success Factors means that the control system will have to become multi-dimensional as CSFs are by their nature holistic. BVC with Trevin Hannibal

Answer plan They are not confined to financial data arising from the accounting system. Therefore, the introduction of CSF’s will necessitate the synthesis of quantitative and qualitative information. As the CSFs are broad in scope, for example, Brand performance, there will be a need to incorporate and report upon external information such as market share BVC with Trevin Hannibal

Answer plan In order to implement, or operationalise, the CSFs JIK will need to introduce supporting Key Performance Indicators (KPIs). For example, for the CSF Manufacturing performance, JIK will need to establish and report on a range of KPI’s which inform on the extent to which excellence has been achieved: wastage, downtime, set-ups, stock- outs, cycle time BVC with Trevin Hannibal

Question 7 (c) Advise JIK of the changes it will need to make:
(ii) To its standard costing system, reporting frequency and information requirements to achieve improved control. BVC with Trevin Hannibal

Answer plan Standard Costing
JIK may have to abandon or modify its standard costing and reporting system. This is because the current system could lead to an inappropriate emphasis being placed on certain aspects of performance, for example, labour efficiency to the detriment of the achievement of a CSF, for example, customer satisfaction. It is remarkable that the installations for Value kitchens generate a substantial level of complaints whereas there has never been a complaint made about a Lux-Style kitchen. BVC with Trevin Hannibal

Answer plan It could be that the different remuneration arrangements for the installation teams have led to this and as the complaint level will be an important aspect of the CSF, Customer Satisfaction, JIK may need to change its remuneration arrangements. It should also consider whether it would benefit from a wider range of variance reporting: for example it may find it useful to report on material yield and labour rates. BVC with Trevin Hannibal

Answer plan Reporting frequency
For all CSFs JIK will need to decide upon appropriate reporting intervals. Although it is convenient to synchronise this with the accounting reporting cycle, CSFs and KPIs do not necessarily coincide with accounting period ends. Some KPI’s may need to be reported in real-time, for example, material wastage, others may be of a much longer duration such as Customer Satisfaction. There is a strong argument for de-coupling the reporting of CSFs from the financial reporting cycles BVC with Trevin Hannibal

Answer plan Information requirements
The introduction of CSFs and KPIs will require collection of a new range of information. Although some of this will be internally generated, for example, labour abseentism, others will be external, for example, market share. JIK will be able to collect some of this new information from external sources and databases. These external sources could enrich the quality of JIK’s decision- making and strategy formation. For example, the Internet could assist JIK in its understanding of social trends required for a PEST analysis BVC with Trevin Hannibal

Answer plan It may also be appropriate to allow JIK’s internal information systems to interface with external users. JIK could solicit customer feedback which the customers could enter directly into JIK’s system, for example, by means of an on-line survey. BVC with Trevin Hannibal

Stakeholder Analysis BVC with Trevin Hannibal

A ‘Stakeholder’ is: Any person or organisation who can be positively or negatively impacted by, or cause an impact on the actions of a company. (Freeman, 1984) The individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and are therefore its potential beneficiaries and / or risk bearers. (Post, Preston & Sachs, 2002) BVC with Trevin Hannibal

Who are the Stakeholders?

A typical list of Stakeholders would include:
Owners, stockholders & investors Banks and creditors Partners & suppliers Buyers, customers & prospects Management Employees, unions, works councils Competitors Government & regulators: local, national, international Professional and industry associations Media: local, national, trade, financial NGOs Communities & other interest groups BVC with Trevin Hannibal

Stakeholder Mapping Several techniques for categorising stakeholders
Helps identify which stakeholders may support or oppose change / organisation’s actions Which stakeholders are the most powerful, have most influence Help decision makers formalise / prioritise strategies BVC with Trevin Hannibal

The Power / Interest Matrix
Classifies stakeholders in relation to their power and the extent to which they are likely to show interest in the actions of the organisation. Can be used to indicate the nature of the relationship which should be adopted with each group BVC with Trevin Hannibal

Power / Interest Matrix:
Stakeholders in group A: Need only minimum effort an monitoring Stakeholders in group B: Should be kept informed as they may be able to influence more powerful stakeholders Stakeholders in group C: Are powerful, but level of interest is low. Generally expected to be passive, but may move into group D on an issue of particular interest Stakeholders in group D: Are both powerful and interested. Their co-operation is of key importance for new strategies BVC with Trevin Hannibal

Question 8 (a) Produce a stakeholder analysis for E in country Y

Answer plan The most important stakeholders of the company E in respect of the situation within country Y can be described as follows Powerful and interested Low power but high interest Low power and low interest BVC with Trevin Hannibal

Powerful and interested
The government of the country Y is powerful in that it is able to enact legislation within the country that will affect business and also, specifically in the case of E, because it is one of the main customers for the product supplied. E is supplying educational establishments, many of which will be government funded. BVC with Trevin Hannibal

As such, part of the government will want to ensure continuity of supply but the treasury function will wish to see the revenue from taxation maximised. Politically, the fact that business is owned by local companies will be popular with some of the voters Overall, the government may be interested in a compromise solution and may not want to progress beyond the 25% local ownership currently proposed. In summary, the government should be considered as powerful and hostile to the company to some extent BVC with Trevin Hannibal

The unions also appear to be powerful because of the apparent agreement of their views with those of the new government. In fact it would appear that their views are more extreme than those of the government since they have suggested that the conversion to local ownership should proceed faster than has been proposed by the government. The unions are powerful and should be considered as hostile to the foreign firms in general. BVC with Trevin Hannibal

Low power but high interest
The other foreign companies operating within country Y are as powerful as E itself. Unfortunately, they are not particularly powerful but are as interested in the outcome of the present situation as is E, since all foreign companies will be affected equally. The other foreign companies could be useful allies in terms of lobbying the government for a reduction in the terms, or pace, of the proposed localisation programme. BVC with Trevin Hannibal

The employees of E have low power but have high interest in the outcome. They have said that they do not welcome the changes and feel that the changes will affect their employment in the future BVC with Trevin Hannibal

The board of management of E has relatively little power to influence the situation but, naturally, has high interest in the outcome. There may well be employment issues for some of it since, if the localisation proposal is carried out, this may be seen as a failure on its part by the head office of the company. Additionally, its personal pride and prestige may suffer as a result of the reduction in the size of the business for which it is responsible BVC with Trevin Hannibal

The private education buyers will have relatively little power to influence the situation but will be interested in the outcome since they will be concerned about security of supply and also about how their relationship with E will change as the new proposals are implemented. BVC with Trevin Hannibal

Low power and low interest
The shareholders have relatively litte power and will be relatively uninterested in the outcome since the business in Y is only part of the overall global business of E. As such, the loss of turnover and profit may be insignificant compared to the totality of the business BVC with Trevin Hannibal

Requirement (b) (b) Evaluate the three suggestions that the Board of Directors is considering in response to the proposals of the government of Y. BVC with Trevin Hannibal

Withdraw from country Y
In the event that E was to sell all of the company now, it is unlikely that it would find a buyer who would pay a price which represented the true value of the business. If, as the managing director has suggested, the proposals will have a negative impact upon the economy it is likely that business confidence is relatively low. It has already been noted that the reason for the government’s action is a declining local economy and tax revenues and it seems that they are seeking a ‘populist’ action to demonstrate that it is in control of the situation BVC with Trevin Hannibal

At present the company has the supply chain and infrastructure in place to satisfy the local demand for scientific equipment in education establishments. Although some of the staff are local, a number will not be and, in the event of the company changing ownership, that supply chain and the expatriate staff will not be available. This will have an effect on the price that E is able to charge for the sale of the business. BVC with Trevin Hannibal

Comply with the government proposal
If E chooses to stay in the country and ensure that 50% of the workforce is from the local population, this may not present too much of a problem. It has stated that there is already a large proportion of employees who are from the local population and it could be that this element of the change will not be too disruptive. BVC with Trevin Hannibal

If the costs of running the operation are not to rise and damage the profitability of E, the management will need to ensure that only those expatriates who are really necessary to the smooth running of the company are kept in the country. It may be necessary to look more carefully at the performance and control systems in place to ensure that the division in Y continues to comply fully with all necessary corporate standards BVC with Trevin Hannibal

As regards the enforced sale of 25% of the business to a local partner, this might be more problematic. In the event that the management of E are able to select the right partner, then there need not be too much disruption to the business. Possibly E could persuade a consortium of its customers from the private education sector to become its local partner. BVC with Trevin Hannibal

This would satisfy the government’s requirement and might actually make the sales to the market easier in that there the private market would become captive. In the event that E chooses to take this option it will need to lobby strongly for a realistic price to be paid by the local partner, but there is nothing to stop it making it financially easier for an ‘ideal’ buyer such as the consortium mentioned. BVC with Trevin Hannibal

Seek legal advice and argue
In the event that the management chooses to fight the proposals of the government, it may force the government into more extreme action and, supported by the unions and quite possibly public opinion, the proposals may be enacted on less favourable terms It has to be remembered that the government, in the form of the school system, is a customer of E. Whilst it is enforcing the sale of 25% of the business, it may also choose not to trade with the business and damage its profitability and ultimately the sales value achieved for the 25%. BVC with Trevin Hannibal

It will be difficult to prove the assertion that the proposals will, ultimately, damage the economy of Y. In the event that the legal advice does support it and it is able to overturn the government’s proposals in their entirety, then the relationship with one its major customers going forward will have been severely damaged BVC with Trevin Hannibal

Question 8 c) Based on your evaluation in part (b) recommend, with justification, the most appropriate course of action for E. BVC with Trevin Hannibal

Requirement (c) In the light of the analysis in part (b), the wisest course of action would be for E to seek a local partner who will be supportive and who will help E continue to conduct business within the country. A consortium of education establishments may be the best way forward particularly if the majority of E’s existing customers can be persuaded to join that consortium. BVC with Trevin Hannibal

Requirement (c) Hopefully by doing so, in the event that full ownership must be transferred to local companies, that consortium will take up the 100% and would continue to import equipment from E which would allow it to make a profit, albeit a reduced one, from the country. BVC with Trevin Hannibal

MARKETING MIX BVC with Trevin Hannibal

History The term marketing mix was coined in an article written by Neil Borden called “The Concept of the Marketing Mix.” The marketer, E. Jerome McCarthy, proposed a four Ps classification in 1960 Robert F. Lauterborn proposed a four Cs classification in 1993 BVC with Trevin Hannibal

Marketing Mix -Four P’s BVC with Trevin Hannibal

4P’s & 4C’s Product- Customer /Consumer Price- Customer cost
Place- Convenience Promotion- Communication BVC with Trevin Hannibal

Extended- Marketing Mix

7Ps & 7Cs The 7 Ps The 7 Cs Organisation Facing Customer Facing
Product = Customer/ Consumer Price Cost Place Convenience Promotion Communication People Caring Processes Co-ordinated Physical Evidence Confirmation BVC with Trevin Hannibal

Marketing Scenario BVC with Trevin Hannibal

Barista – Corporate Profile
• Has opened 100 outlets countrywide over last 2 yrs • Marked its presence in Sri Lanka and Dubai Too • Now targeting 22 international outlets including Bangladesh, Bahrain, Qatar, Oman and Kuwait BVC with Trevin Hannibal

Marketing Mix • Positioning – 10% higher than Competitors
• Pricing – 10% higher than Competitors – High COGS because of Import duties • Process – Self Service • Positioning – Where the world meets BVC with Trevin Hannibal

– Well trained employees – to be polite pleasant and positive
• People – Well trained employees – to be polite pleasant and positive – Consistent service at every outlet –Average age – 22yrs – Ensure to have quiet, uninterrupted visit – Uniforms are in sober shades of brown and orange • Promotion – Sales Promotion BVC with Trevin Hannibal

Physical Evidence • Place – Logo, colors and images
– Décor and architecture – Literature • Place – Outlets located in strategic locations – Generally located at High Street/Family entertainment centers', in and around malls and cinemas and offices BVC with Trevin Hannibal

Creative Strategy BVC with Trevin Hannibal

Question 9 (a) Discuss how 5NX's marketing mix might contribute to its marketing plan. (10 marks) BVC with Trevin Hannibal

The business advisor has suggested that 5NX’s owner may wish to capture the elements of the company’s marketing mix. The marketing mix can be used as a structure for identifying the main marketing issues which will need to be addressed in the final marketing plan itself The term 'marketing mix' was first applied at the Harvard Business School, USA to explain the range of marketing decisions and elements that must be balanced to achieve maximum impact BVC with Trevin Hannibal

The marketing mix represents a tool kit for marketing practitioners to blend the component 'Ps' of marketing. The apportionment of effort, the precise combination, and the integration of all elements to achieve organisational objectives represent an organisation’s own marketing programme or 'mix BVC with Trevin Hannibal

The marketer therefore is a mixer of these ingredients of procedures and policies to produce a profitable outcome. Kotler and Lane Keller (2006) define the marketing mix as: '… the set of controllable variables and their levels that the firm uses to influence the target market.' BVC with Trevin Hannibal

Product There do not appear to be any plans for 5NX to expand its product range. (Currently the range is fresh sandwiches, home baked snacks, 'real' coffee and freshly squeezed fruit juices). This will however need to be articulated in the plan. A further key product issue is the maintenance of quality, which is vital to the company’s reputation BVC with Trevin Hannibal

The new technology proposed in preparing and packaging may be a timesaver but this should not be at the expense of quality of the finished product. (The technology is likely to help achieve consistency of standard but this should be of a high quality standard). It might be helpful in the marketing plan to identify the need for product standards and procedures to be established and a need for reliability of suppliers of raw ingredients BVC with Trevin Hannibal

Place Petrol filling stations apparently represent 5NX’s sole distribution outlets at the moment. The notion that there is potential for product sales in newspaper shops and railway stations represents a form of market developmen However, the method proposed of extending 'place' in this way is rather more questionable. Much depends on the effectiveness of drivers, and a reliance on them to perform this task is perhaps ambitious BVC with Trevin Hannibal

Nevertheless, the marketing plan will need to identify precise targets and commit training resources towards this aim. Additional time will need to be allocated to drivers rounds in order to perform their expanded duties and projected additional new locations will need to be factored into revised driving rounds. If this necessitates the use of extra vehicles then this should also be articulated in the plan BVC with Trevin Hannibal

Promotion Local radio advertising appears to be a successful medium in expanding 5NX’s operations so far. The growth strategy up until now has been based on 'more of the same' and repeat purchases The use of drivers to cement existing sales relationships is a sensible policy but the effectiveness of using 'cold call' selling is (according to conventional wisdom) questionable BVC with Trevin Hannibal

The plan will need to attach SMART (specific, measurable, appropriate, realistic, time bound) targets to these aspirations and quantify the amounts that will be spent on radio advertising as well as the time to be allocated to 'cold calling' by drivers. Again this is a matter for the marketing plan. BVC with Trevin Hannibal

Price 5NX’s current pricing strategy could be said to be both market sensitive (based on the value of the product in the perception of the customer) and premium (achieving a 'high' price due to differentiation of the product) Pricing includes basic price levels, payment terms and credit policy, discounts and allowances, etc. Of all the elements comprising the marketing mix, price is the one most directly linked to revenue levels BVC with Trevin Hannibal

The need to recover total costs plus levels of desired profit is a powerful and legitimate consideration. At the same time, customers need to see price as 'fair' commensurate with the quality of the product. Pricing, therefore, goes to the heart of 5NX’s financial and marketing aspirations and should feature prominently in the plan. Customers’ feelings about a product are reflected in what they are prepared to pay, so getting pricing right is crucial BVC with Trevin Hannibal

5NX appeals to discerning customers who are prepared to pay a little extra for fresh, traditionally made 'quality' sandwiches, home baked snacks, fine coffee and freshly squeezed fruit juices. Existing customers are generally less price sensitive than new ones For prospective new customers price can imply quality. Pricing that is too low can have a detrimental effect on purchasing decisions and overall sales levels. Conversely, the higher the price, the more customers will expect in terms of the product. BVC with Trevin Hannibal

People The co-ordination of the four elements of the basic marketing mix identified above is crucial to the success of the overall marketing plan Some thinkers believe that other factors could also usefully be considered including people. An organisation’s people come into contact with customers and can have a huge impact on customer satisfaction levels BVC with Trevin Hannibal

In the customers’ eyes, an organisation's workforce is generally inseparable from the total service they receive. This implies the need for welltrained, motivated workforce mindful of the adage 'the customer is always right 5NX’s owner is considering redefining the job role so that drivers will also get direct feedback from customers, persuade petrol stations to take new product lines and provide intelligence on competitor’s products. If this idea is progressed then 5NX’s plan should recognise an investment in training its drivers and other employees BVC with Trevin Hannibal

The Marketing Concept The key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets. Slogans: 麥當勞都是為您, 以客為尊, 顧客永遠是對的, We do it all for you (Toyota). Four pillars: target market, customer needs, integrated marketing and profitability. BVC with Trevin Hannibal

Question 9 (b) From the information that is given, illustrate the extent to which 5NX is following the marketing concept. (10 marks) BVC with Trevin Hannibal

The marketing concept Marketing is defined as 'the management process responsible for identifying, anticipating and satisfying customer requirements profitably It follows that marketing-orientated organisations have a main focus whereby the services and products they offer are determined by consumer preferences. To be marketing (or market) orientated is in effect a way of implementing this marketing concept by putting customer needs first. BVC with Trevin Hannibal

5NX’s operating philosophy
Although the scenario mentions the possibility of an investment in technology to improve production processes in 5NX there is no evidence to suggest that the firm is production-orientated Similarly, although sales are important to 5NX, it could not fairly be described as a sales- orientated organisation as its main aim is not simply selling the goods that are produced BVC with Trevin Hannibal

A concentration on the customer
Adopting the marketing concept involves an organisational focus on the perceptions and needs of its customers. In short: what customers think is important 5NX’s owner is concerned that a poor image may be presented to customers because of the unreliability of some of the drivers. Her determination to overcome these difficulties is one sign at least of being customer focused BVC with Trevin Hannibal

She evidently believes the role of the driver as the company’s interface with the customer to be significant.The critical people in the customer led organisation are the front-line staff because it is they who the customer comes into direct contact with. 5NX’s drivers need to be trained to be responsive to customers and to provide the best possible service and image for the company BVC with Trevin Hannibal

Planning to meet customer requirements
For companies adhering to the marketing concept there will be an understanding that the satisfaction of customer requirements is paramount to the achievement of organisational goals. CIM stresses the importance of getting the right product or service to the customer at the right price, in the right place, at the right time, and that 'business history and current practice both remind us that without proper marketing, companies cannot get close to customers and satisfy their needs BVC with Trevin Hannibal

And if they don’t, a competitor surely will'
And if they don’t, a competitor surely will'. To do this an organisation needs to plan carefully so that it can succeed. The involvement of a business advisor and formal planning processes could be interpreted as signs of 5NX leaning towards a marketing philosophy. 5NX is said to be undertaking a full strategic marketing planning process 'for the first time' BVC with Trevin Hannibal

Question 9 (c) Describe other ways in which Information Systems (IS) and Information Technology (IT) might assist 5NX's marketing operations in the future. Your answer should not include reference to food preparation and packaging equipment. BVC with Trevin Hannibal

Answer plan 5NX’s owner is interested in the opportunities to use time saving food preparation and packaging equipment. There are a number of other ways in which IS and IT might assist 5NX’s marketing and other operations in the future A 5NX website 5NX could develop a website which could potentially be useful in a number of ways BVC with Trevin Hannibal

Allowing interactive marketing
Deighton (1996) defines interactive marketing as 'the ability to address the customer, remember what the customer says and address the customer again in a way that illustrates that we remember what the customer has told us To remember' and then 'communicate' with existing customers could also assist 5NX. Such a development would enable the details of those making enquiries to be captured BVC with Trevin Hannibal

Online orders could be placed and delivery arranged through links from 5NX’s web pages. With unique customer log-ins and passwords the process could be streamlined, and delivery details once input could be 'remembered' for future reference. This could be attractive to both existing and potential customers BVC with Trevin Hannibal

This would then allow 5NX to communicate by email to follow up business leads, etc.
Customers (managers of garage shops) could also be addressed personally so building relationships, and previous orders made by customers might lead to suggestions being made for future purchases BVC with Trevin Hannibal

Online advertising could usefully supplement existing radio advertising as part of 5NX’s promotional mix, with the aim of encouraging garage shops and other outlets to take their products. BVC with Trevin Hannibal

Direct online payment could be made through a secure 5NX facility. At the moment orders are received from drivers and so require later invoicing and paperwork to be raised. Online payment could speed up the process and save administrative costs and improve company cash flow BVC with Trevin Hannibal

IS assisted market and competitor research
As indicated in earlier answers, 5NX is moving towards becoming a marketing orientated organisation. This implies a need for the company to 'know' its customers better through market research. The internet could be a powerful source of information in this respect. Details of customer activities, market trends BVC with Trevin Hannibal

Telephone technology Currently 5NX drivers bring back order sheets at the end of a shift for the next day’s deliveries. As an alternative, customers could telephone orders through directly - an option that customers themselves may prefer. Advances in key pad technology mean that unique customer references and credit card details can be input directly. This would expedite delivery and payment procedures BVC with Trevin Hannibal

Customer analysis Off-the-shelf, inexpensive spread sheet and database packages can help 5NX analyse sales to (for instance) identify purchasing trends, repeat purchases, etc. and enable a better targeting of products. BVC with Trevin Hannibal

customer relationship management

Definition of CRM: CRM is a business strategy directed to understand, anticipate and respond to the needs of an enterprise's current and potential customers in order to grow the relationship value. This definition can be defined by five views. BVC with Trevin Hannibal

TYPES OF CRM Types of CRM are: Analytical CRM Collaborative CRM
Operational CRM Geographic CRM Sales Intelligence CRM ANALYTICAL CRM:- Analytical CRM is designed to analyze deeply the customer’s information and data and unwrap or disclose the essential convention and intension of behaviour of customers on which capitalization can be done by the organization BVC with Trevin Hannibal

. COLLABORATIVE CRM:- Collaborative CRM deals with synchronization and integration of customer interaction and channels of communications like phone, , fax, web etc. with the intent of referencing the customers a consistent and systematic way. OPERATIONAL CRM:- Operational CRM is mainly focused on automation, improvement and enhancement of business processes which are based on customer- facing or customer supporting. GEOGRAPHICAL CRM:- Geographic CRM (GCRM) combines geographic information system and traditional CRM. Geographic data can be analyzed to provide a snapshot of potential customers in a region or to plan routes for customer visits. BVC with Trevin Hannibal

SALES INTELLIGENCE CRM:-Top-performing sales organizations are meeting the challenges of identifying the most likely buyers of their products and services through the deployment of sales intelligence solutions that introduce a wide variety of data streams to their front-line staff. By empowering their sellers with better information about their prospect companies, markets and individuals, these firms are able to maximize their chances of hitting quota, and at the same time create efficiencies within the sales operations environment BVC with Trevin Hannibal

The purpose of CRM : The focus of CRM is on creating value for the customer and the company over the longer term. When customers value the customer service that they receive from suppliers, they are less likely to look to alternative suppliers for their needs . CRM enables organisations to gain ‘competitive advantage’ over competitors that supply similar products or services . BVC with Trevin Hannibal

Why is CRM important? Today’s businesses compete with multi-product offerings created and delivered by networks, alliances and partnerships of many kinds. Both retaining customers and building relationships with other value-adding allies is critical to corporate performance. The adoption of C.R.M. is being fuelled by a recognition that long-term relationships with customers are one of the most important assets of an organisation. BVC with Trevin Hannibal

What does CRM involve ? CRM involves the following:
Organisations must become customer focused Organisations must be prepared to adapt so that it take customer needs into account and delivers them Market research must be undertaken to assess customer needs and satisfaction BVC with Trevin Hannibal

Implementing CRM: When introducing or developing CRM, a strategic review of the organisation’s current position should be undertaken Organisations need to address four issues : What is our core business and how will it evolve in the future? What form of CRM is appropriate for our business now and in the future? What IT infrastructure do we have and what do we need to support the future organisation needs? What vendors and partners do we need to choose? BVC with Trevin Hannibal

Process to implement CRM :

Information Technology and CRM :
Technology plays a pivotal role in CRM . Technological approaches involving the use of databases, data mining and one-to-one marketing can assist organisations to increase customer value and their own profitability. This type of technology can be used to keep a record of customers names and contact details in addition to their history of buying products or using services. This information can be used to target customers in a personalised way and offer them services to meet their specific needs. This personalised communication provides value for the customer and increases customers loyalty to the provider. BVC with Trevin Hannibal

Information Technology and CRM: Examples
Loyalty cards The primary role of a retailer loyalty card is to gather data about customers. This in turn leads to customer comprehension and cost insights (e.g. customer retention rates at different spending levels, response rates to offers, new customer conversion rates, and where money is being wasted on circulars), followed by appropriate marketing action and follow-up analysis. BVC with Trevin Hannibal

CRM software- “Front office” solutions :
Many call centres use CRM software to store all of their customer's details. When a customer calls, the system can be used to retrieve and store information relevant to the customer. By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, a company aims to make cost savings, and also encourage new customers . BVC with Trevin Hannibal

Benefits of CRM : Benefits of CRM include Reduced costs, because the right things are being done (ie., effective and efficient operation) . Increased customer satisfaction, because they are getting exactly what they want (ie. meeting and exceeding expectations) . Ensuring that the focus of the organisation is external . Growth in numbers of customers . BVC with Trevin Hannibal

Latest student feedback

Question 10 (a) The new Managing Director wants RU2 to have more of a marketing focus and become more customer-led. Describe the impact on RU2 of such a development BVC with Trevin Hannibal

Answer plan RU2 recognises that as a company it is undergoing significant change and apparently is looking to develop a more customer-led approach. If the company does succeed in becoming more customerled then it will exhibit a number of distinctive features BVC with Trevin Hannibal

An adoption of the marketing concept
An organisation that is customer-led would need to adopt the marketing concept. This may involve several key changes to the way in which it conducts its business. The most important requirement is for RU2 to focus on the need of its customers This shift in orientation will require RU2 to change the way it defines and investigates its markets, prices its products and communicates with its customers. BVC with Trevin Hannibal

The appointment of a new Marketing Manager to replace the outgoing Senior Sales Manager (possibly heralding an emphasis away from sales to the wider notion of marketing) is a promising early sign BVC with Trevin Hannibal

Inclusion and involvement
Being customer-led and market orientated will involve a need to involve the whole organisation in the marketing effort. The new Marketing Manager has already invited a number of senior colleagues across the organisation to help contribute to the marketing planning process BVC with Trevin Hannibal

A shared understanding
Being customer-led, involves more than changes within the marketing department: it also involves the adoption of a new way of thinking by the whole organisation. This will take effective communication and an internal marketing effort. It is apparent from YY’s comments that the Marketing Manager would do well to “concentrate on the basic job of selling” that there is still some way for RU2 to go BVC with Trevin Hannibal

Equipping its people The critical people in a customer-led organisation (that RU2 is aspiring to be) are the front line staff because it is they who come into direct contact with the customer. Staff need to be trained to be responsive to customer needs and to provide the best possible service and image for the company BVC with Trevin Hannibal

Redefining the management role
In a company that adopts a marketing approach, it is the task of middle and senior managers to help front line staff meet customer needs by providing necessary support and by removing obstacles. The replacement of many senior managers by younger managers with different ideas and approaches and the establishment of the post of Marketing Manager are positive signs that RU2 could be moving in this direction) BVC with Trevin Hannibal

Sharing the same philosophy
More than representing a range of techniques marketing should instead be a shared business ethos. Employees outside RU2’s marketing department or sales force can play an important role in making the company truly customer-led. The marketing concept is a philosophy that places customers central to all organisational activities. This customer-led focus should, in fact, permeate every department through production, packaging and merchandising so that the needs of the customer are kept in focus by all RU2 employees at all times BVC with Trevin Hannibal

Question 10 (b) Explain the benefits of developing a marketing plan for RU2. (10 marks) BVC with Trevin Hannibal

Answer plan The new Marketing Manager is for the first time developing a comprehensive marketing plan for RU2. Despite YY’s criticism of this initiative there are a number of benefits for RU2 developing such a plan. BVC with Trevin Hannibal

Support RU2’s longer-term aspirations
A benefit of developing a robust marketing plan is that it can support the long-term strategies of RU2 whether centred on profit maximisation, market share growth, or growth in real terms. None of these things can be achieved without satisfying customers- without customers there would be no business. If the marketing plan helps the organisation become more customer-led then this will significantly enhance RU2 achieving its corporate aspirations. BVC with Trevin Hannibal

Informed decision making
The new Marketing Manger is for the first time developing a comprehensive marketing plan. As part of a planning exercise a considerable amount of data, both internal and external, must be collected and analysed. The plan will provide RU2 with a framework for research- informed, rather than 'ad hoc' decision making. BVC with Trevin Hannibal

Motivation and team working
The inclusive nature of the planning process will offer RU2’s managers an opportunity to share responsibility and make a real contribution. This can act as a powerful source of motivation. In addition the interaction of interdisciplinary teams working on a shared task can help break down harmful departmentalism and foster cooperation and teamwork BVC with Trevin Hannibal

Provide direction The plan will give direction to both RU2’s managers and its workforce. When everyone in the organisation understands where the organisation is going and what their individual contribution is then objectives can be established and a clear sense of direction will be shared. This should prevent effort going into unproductive activities. Far from being pointless (as YY contends), the plan will reduce misdirected effort and rather than waste time will actually save time. BVC with Trevin Hannibal

Question 10 (c) Identify the range of possible costs associated with a Customer Relationship Management (CRM) system. (5 marks) BVC with Trevin Hannibal

Answer plan RU2’s Managing Director has approved the purchase of a Customer Relationship Management (CRM) system and this could help support the company’s stated aim to become more customer-led. There has however been some criticism of the purchase of the system by YY and it is true that the decision is not cost neutral. BVC with Trevin Hannibal

Associated costs RU2 will also need to consider related costs such as new hardware required as a result of CRM, and running costs associated with maintaining the new system. It is also conceivable that certain marketing, sales and invoicing systems are computerised at the moment but may need scrapping. This will have cost implications. BVC with Trevin Hannibal

Cost of staff training and cost of disruption
New systems involve employees undergoing training in their use. This may involve the cost of hiring external consultants and the ‘cost’ of the participants’ time away from activities such as dealing with customer enquiries. (It could be argued that this is a price well worth paying as it will help reorientation of RU2 towards a customer-led philosophy). BVC with Trevin Hannibal

Opportunity costs When making a decision to implement CRM, RU2 will need to carefully consider the objectives of the system and set out a clear specification for what is required, balanced against the budget available. What is important is to articulate how CRM will support and add value to existing operations, specifically how to help the company become customer-led and the costs involved BVC with Trevin Hannibal

Adjustment of business processes to fit software
There may be a need to adjust existing business processes, work flows and responsibilities to fit the software, including possibly production. This will need negotiation with, and cooperation of YY. BVC with Trevin Hannibal

Human Resource Management and Motivation

AGENDA 1 Explain the importance of human resource management. Describe how recruitment and selection contribute to placing the right person in a job. Explain how training programs and performance appraisals help employees grow and develop. Outline the methods employers use to compensate employees. Discuss employee separation and the impact of downsizing and outsourcing. Explain how Maslow’s hierarchy- of-needs theory, goal setting, job design, and managers’ attitudes relate to employee motivation. 5 2 6 3 4 BVC with Trevin Hannibal

Vital to All Organizations
Human resource management - function of attracting, developing, and retaining enough qualified employees to perform the activities necessary to accomplish organizational objectives. Three main objectives: Providing qualified, well-trained employees for the organization. Maximizing employee effectiveness in the organization. Satisfying individual employee needs through monetary compensation, benefits, opportunities to advance, and job satisfaction. BVC with Trevin Hannibal

Human Resource Responsibilities

Recruitment & Selection
35% of human resource professionals report a shortage of job candidates with degrees related field. HR must be creative in searching for qualified employees. Businesses look both internally and externally. BVC with Trevin Hannibal

Selecting and Hiring Employees
Must follow legal requirements. Equal Employment Opportunity Commission programs Failure to follow these exposes company to risk of litigation. Hiring is a costly process for employers. Some employers require employment tests. BVC with Trevin Hannibal

Orientation and Training
Newly hired employee often completes an orientation program Inform employees about company policies Employee manuals Describe benefits/programs Training Training Programs On-the-job Training Classroom and Computer-based Training Management Development BVC with Trevin Hannibal

Performance Appraisals
Performance appraisal - evaluation of an employee’s job performance Some firms conduct peer reviews while other firms allow employees to review their supervisors and managers. May conduct a 360-degree performance review, a process that gathers feedback from a review panel that includes co-workers, supervisors, team members, subordinates, and sometimes customers. BVC with Trevin Hannibal

Compensation Wages - compensation based on an hourly pay rate or the amount of output produced. Salary - compensation calculated on a periodic basis, such as weekly or monthly. Most firms base compensation decisions on five factors: Salaries and wages paid by other companies that compete for the same people Government legislation, including the federal or local minimum wage The cost of living The firm’s ability to pay Worker productivity BVC with Trevin Hannibal

Incentive Compensation

Employee Benefits Employee Benefits - Rewards such as retirement plans, health insurance, vacation, and tuition reimbursement provided for employees either entirely or in part at the company’s expense EOBI, medical leaves, increments, etc Costs of health care are increasingly being shifted to workers. Retirement plans have become a big area of concern for businesses. BVC with Trevin Hannibal

Flexible Benefits Employees are provided a range of options from which they can choose. Medical, dental, vision, life and disability insurance Many companies also offer flexible time off policies instead of establishing a set number of holidays, vacations days and sick days. Companies sometimes provide paid time off (PTO) programs. BVC with Trevin Hannibal

Flexible Work Allow employees to adjust their working hours and places of work to accommodate their personal needs. Flextime allows employees to set their own work hours within constraints specified by the firm. A compressed workweek allows employees to work the regular number of weekly hours in fewer than the typical five days. A job sharing program allows two or more employees to divide the tasks of one job. A home-based work program allows employees, or telecommuters, to perform their jobs from home instead of at the workplace BVC with Trevin Hannibal

Motivating Employees Motivation starts with good employee morale, the mental attitude of employees toward their employer and jobs. High morale = sign of a well-managed organization Poor morale shows up through absenteeism, employee turnover, strikes, falling productivity, and rising employee grievances BVC with Trevin Hannibal

Maslow’s Hierarchy of Needs Theory
Maslow’s hierarchy of needs: people have five levels of needs that they seek to satisfy. A satisfied need is not a motivator; only needs that remain unsatisfied can influence behavior. People’s needs are arranged in a hierarchy of importance; once they satisfy one need, at least partially, another emerges and demands satisfaction. Physiological needs Safety needs Social (belongingness) needs Esteem needs Self-actualization needs BVC with Trevin Hannibal

Herzberg’s Two-Factor Theory
Hygiene Factors Job Environment Salary Job Security Personal Life Working Conditions Status Interpersonal Relations Supervision Company Policies Motivator Factors Achievement Recognition Advancement The job itself Growth Opportunities Responsibility BVC with Trevin Hannibal

Managers’ Attitudes and Motivation
Two assumptions manager make about employees, according to psychologist Douglas McGregor: Theory X: employees dislike work and try to avoid it whenever possible; managers must coerce or control them or threaten punishment to achieve the organization’s goals. Theory Y: typical person likes work and learns to accept and seek responsibilities; managers assume creative people solve work-related problems. A third theory from management professor William Ouchi: Theory Z: worker involvement is key to increased productivity for the company and improved quality of work life for employees. BVC with Trevin Hannibal

Question 11 Required: (a) Describe the potential benefits of quality standard ISO 9000 certification to 2TW. (10 marks) BVC with Trevin Hannibal

Answer plan The International Standards Organisation (ISO) issues standards that are globally recognised, and include the ISO 9000 series. ISO provides a systematic approach to managing business processes to manufacture products that conform to customer expectations. The Chief Executive believes that significant benefits to 2TW might arise through gaining the quality standard ISO 9000 certification. BVC with Trevin Hannibal

Overcoming internal weaknesses
Currently 2TW has inadequate quality control systems which have led to differing operating efficiencies between SBUs and there are significant numbers of returned goods which require replacement or reworking. ISO 9000 accreditation should help in overcoming these weaknesses as it is based on product standardisation and quality control. BVC with Trevin Hannibal

Customer satisfaction
The significant numbers of returned goods mean that customers are not currently receiving products of the quality they expect. The standardised practices guaranteed by a company complying with ISO 9000 will mean that consistently dependable processes and products will reverse this situation. Fewer returns should result in improved customer satisfaction. BVC with Trevin Hannibal

Elimination of inefficiencies
Adoption of the most efficient processes will allow SBUs to discuss and consider mutual learning and best practice. SBUs will need to agree upon common modes of operating and standards to be achieved and will allow 2TW to identify the most efficient processes. This should drive out bad practice and inefficient operations. BVC with Trevin Hannibal

Enhanced company reputation
If 2TW customers are not currently receiving products of the quality they expect then this can be very damaging to the company's reputation. The outcomes arising from achieving ISO will improve customer satisfaction and customer loyalty, leading to repeat purchasing and an enhanced company reputation. BVC with Trevin Hannibal

Improved employee morale
As 2TW's external reputation grows through rigorous quality standards, employees will be proud to be associated with the company. The fact that the standard implies a need for the workforce to take control of its processes and document its work processes will mean that it will feel valued. BVC with Trevin Hannibal

Question 11 (b) Discuss the factors that should be taken into account by the HR department when redesigning the remuneration and reward package for SBU managers. (10 marks) BVC with Trevin Hannibal

Appropriateness of basic pay as part of the remuneration and reward package
Redesign of the package will need to balance basic and performance related pay in an appropriate way. The basic pay element should recognise factors such as: • the size of the SBU, • the relative contribution of the SBU to the company as a whole, and • the responsibility, past experience and specific skills and competences demanded of the individual manager by the nature of the SBU. BVC with Trevin Hannibal

A need to address recruitment and retention
The overall reward package will need to address not only internal targets of quality and profitability but also marketplace levels of reward for similar work. If not, there may be problems of both recruitment and retention of good managers. As 2TW operates across the continent, local pay rates may vary enormously between countries in which the SBUs are situated, meaning that basic pay levels will need to be varied to reflect these conditions. BVC with Trevin Hannibal

Ability of package to influence behaviour
The entire employment relationship is built on a 'wage-effort bargain'. Rewards must be commensurate with effort and attainment. Consistent with expectancy motivation theory, if bonuses are relatively small they may not change behaviour. Similarly, if they are difficult to achieve, they may not motivate managers BVC with Trevin Hannibal

Levels of performance related pay
Performance related pay represents an attempt to establish closer links between results (improved quality and profitability) and rewards. The success of the scheme is dependent upon SBU managers behaving in the ways in which the Chief Executive would wish and incentives should be directed towards those who adopt the behaviours required. BVC with Trevin Hannibal

Non-financial incentives
A belief that money alone can encourage the enhancement of individual management performance is incorrect. Other forms of incentive should also be considered including promotion, training and career development opportunities. The reward system could therefore also involve adjustment to issues such as succession planning and career progression or promotion using developmental pathways and career ladders, etc. BVC with Trevin Hannibal

Potential corruption of existing systems
The Chief Executive has announced that the new performance targets system will be linked to the appraisal process. This means that performance appraisals involving SBU managers (presumably conducted by regional directors) may cease to be positive developmental processes and become more defensive and even confrontational. BVC with Trevin Hannibal

A need for consultation
Consultation with SBU managers, trade unions and other relevant groups is necessary. The Chief Executive appears not to have consulted with SBU managers before making the announcement. If the revised scheme is to be accepted by SBU managers, there needs to be wide consultation in order that there is universal 'buy in'. BVC with Trevin Hannibal

Question 11 (c) Suitable measures of performance for SBU managers will be designed as part of the redesigned remuneration and rewards package. Describe the desirable features of such measures. (5 marks) BVC with Trevin Hannibal

Answer plan 2TW's HR department will redesign the remuneration and reward package for SBU managers including the existing bonus scheme. SBU managers need to be aware of the levels of performance they need to attain with absolute certainty. Indicators that are not SMART (specific, measurable, achievable, realistic and time bound) may invalidate the whole scheme BVC with Trevin Hannibal

Specific So far, the Chief Executive has announced the initiative in an open letter to all SBU managers Although SBU managers will need to agree precise targets as part of the normal appraisal processes, measures need to be readily available. Any measures devised would need to be agreed by SBU manager groups (and possible relevant trade union groups if they exist within 2TW) as being appropriate and fair. If no such agreement is reached then the whole scheme is discredited BVC with Trevin Hannibal

Measurable Rewards for SBU managers will need to encourage profitability and quality. Precise quantifiable measures are readily available in respect of net profit. Appropriate metrics and evaluation criteria need to be agreed upon and put in place presumably aligned to ISO 9000 standards and levels, cost of returns and reworking. BVC with Trevin Hannibal

For a scheme to be viewed as fair and workable, as much subjectivity as possible should be eliminated. Profitability is subject to decisions as to what might be charged against it. However, returns, reworks and ISO metrics might possibly be seen as more precise. BVC with Trevin Hannibal

Such measures should be immune from potential manipulation by SBU managers anxious to gain performance related payments. Avoidance of undesirable behavior (such as a slackening of safety standards, mistreatment of subordinates, or a lack of cooperation with other SBU managers, etc.) in order to hit targets should also be avoided. BVC with Trevin Hannibal

Achievable 2TW's HR department must recognise that individual managers need to have control over reaching performance targets. If hitting a target is primarily the result of events outside of their control there will be difficulties. Under these conditions individuals may become frustrated and demotivated because, irrespective of their effort, the targets may remain elusive BVC with Trevin Hannibal

Realistic 2TW's HR department needs to translate scheme aims into realistic targets which are recorded accurately and reliably. Otley's work (1987) into behaviour and accounting control indicated that if targets are unrealistic or are not met, a demoralising effect might occur whereby there is a dramatic fall-off in performance. The scheme may be counter-productive if this happens and may cause a worsening rather than an improvement in profit and quality BVC with Trevin Hannibal

Time-bound Pre-set dates should be established when 'snapshots' of performance over a period are taken and awards paid (this might be annually or bi-annually). Issues of who collects the data and the recording mechanisms used will need to be addressed. The HR department should ensure that a mechanism is in place to deal with instances where managers dispute attainment against targets within a pre-determined time frame BVC with Trevin Hannibal

Transparency of targets and awards given
It would be counter-productive to keep awards secret and a lack of transparency could lead to suspicion and lack of trust. The publication of all awards should act as a stimulus to improved performance and encourage an open, sharing organisational culture BVC with Trevin Hannibal

TQM Customer focus First in class in quantity (Get it right the first time) Continuous improvement Competitive benchmarking Employee empowerment Supplier quality "Excellence of Execution”

Memory techniques Speaking out loud while reading
Using a variety of study resources Preparing Mind Maps Watching videos related to the topic Teaching topics to your peers BVC with Trevin Hannibal

Question 12 (a) Explain the requirements for achieving a Total Quality Management (TQM) approach within 2JN. (10 marks) BVC with Trevin Hannibal

Effective Communication
The importance of quality must be effectively communicated throughout the organisation in order to improve understanding of its purpose and benefits. At the recent senior management meeting the MD announced the establishment of a Quality Committee and Quality Circles to underpin the initiative. 2JN now needs to develop an effective communication strategy that includes briefings, written reminders and visible symbols. There needs to be a clear willingness to discuss and measure quality BVC with Trevin Hannibal

Leadership: Senior management commitment
Commitment from the top is crucial. If management is not fully committed, it is unlikely that customer requirements of quality will be met. (In 2JN’s case the commitment is not guaranteed at this stage. Clearly the MD believes in TQM and although he announced the initiative at a recent senior management meeting their commitment still needs to be assured). BVC with Trevin Hannibal

Workforce commitment Commitment from the workforce is also vital and might be achieved by management support for quality rather than dictat to get quality right. A philosophy of self-checking and preventing quality failures (Quality Assurance) rather than correction of quality following independent quality control (QC) are important. BVC with Trevin Hannibal

Funds for skills and competence development
Quality is achieved through competence in whatever activity is undertaken. Competence can only be gained through continuous training, skill development and experience. The MD has identified training in TQM for all staff as a priority. He will, however, need to commit funds to training, recruitment and people development, etc. Training will be needed in areas where the company is felt to be weak and the TQM programme should identify these. Resources will need to be committed by 2JN to make this possible BVC with Trevin Hannibal

Continuous improvement
Continuous improvement (Kaizen) underpins TQM. This involves the constant analysis of work processes and practices to allow continued improvement in performance and quality. In the past, 2JN has implemented a series of initiatives aimed at reducing product defects and the number of customer complaints JN needs to concentrate more on continuous improvement with a valuing of small improvements rather than instigating new practices as if they were one-off events. Improvements need to be aimed at all areas including production flow, product specification and manufacturing methods. BVC with Trevin Hannibal

Positive culture of quality improvement
Quality is increasingly being recognised as the critical issue for modern organisations operating in sometimes hostile environments with intense competition and demanding customers. Ultimately, 2JN’s objective must be complete customer satisfaction through quality. This renewed focus needs to be accepted and then reinforced throughout the organisation. 2JN will need to develop a nonthreatening culture to achieve this and the commitment to Quality Circles and training will be crucial in breeding the Kaizen philosophy. BVC with Trevin Hannibal

Developing team working
TQM is about designing quality into the product and production processes. This means there needs to be a close working relationship between sales, production, distribution and research. The establishment of Quality Circles within 2JN should help break down departmentalism and help with this process. BVC with Trevin Hannibal

Alignment of reward systems
Reward systems need to be revised to encourage a new quality orientation. Incentive reward and remuneration schemes based on (for instance) improvement suggestions and attaining quality targets would be a very rapid way of improving quality and changing working attitudes and behaviour. BVC with Trevin Hannibal

Question 12 (b) Identify the important issues and work groups that need to be considered when organising the TQM training in 2JN. (10 marks) BVC with Trevin Hannibal

Answer plan 2JN’s Managing Director has rightly identified training in TQM for all staff as a priority. This training should be organised in a coherent fashion. BVC with Trevin Hannibal

Agree key elements of TQM for 2JN
For successful implementation of TQM, an organisation must concentrate on the several key elements such as: shared values (including ethics, integrity, trust), • skills (including teamwork and leadership), • effective communication. BVC with Trevin Hannibal

Identify different training needs
A range of TQM training will be necessary within 2JN. The differing needs of distinct groups of workers might be identified and a programme for each drawn up and agreed. These groups might for instance include Senior managers • The workforce as a whole • Supervisors • Members of the Quality Committee • Quality Circle members BVC with Trevin Hannibal

Training facilitators and venue(s)
One issue to be addressed is who should provide the training and where it should take place. Analysis of organisations that have successfully introduced TQM suggests that it is preferable for an external consultant with TQM experience to conduct this training. If this is the decision of 2JN, then a suitable budget will need to be established for the purpose. BVC with Trevin Hannibal

Training senior managers
It is a good idea to start training with senior managers as they operate at a strategic level within the organisation. It is they that will need to display leadership and drive the quality agenda, so their commitment is crucial. It is likely that consultancy led executive style training (possibly off site) will be the most effective form of training for this group. BVC with Trevin Hannibal

Training the workforce
So far the workforce has received no briefing on the initiative, its aims and why it is important. This needs to be done as some priority, and this basic message needs to be reinforced on a regular basis. Meaningful training is needed so that the workforce understands the processes and benefits arising from the TQM approach. BVC with Trevin Hannibal

Training quality circle participants
2JN’s MD obviously sees a value in the use of quality circles and has identified these as a necessary part of TQM. Quality circles are small groups of staff (typically eight to ten) drawn from all work areas which meet on a regular basis to identify quality issues and attempt to formulate solutions. One of the outcomes of quality circles is that it enables a devolution of authority and responsibility for quality down to a practical working level. BVC with Trevin Hannibal

Training supervisors Under most TQM schemes, supervisors and first line managers assume responsibility for implementing TQM within their departments, sections and work teams. It is important therefore that supervisors get effective training and support in order to perform their vital role. BVC with Trevin Hannibal

Material delivery and content
2JN will need to consider issues such as the robust design of appropriate training materials and their subsequent updating of content. In addition, issues of delivery and measurements of effectiveness will also be necessary. BVC with Trevin Hannibal

Question 12 (c) Discuss the claim that high quality 'will both put costs down and revenue up'. (5 marks) BVC with Trevin Hannibal

Answer plan At a recent senior management meeting the MD made clear that TQM is vital to 2JN and that high quality 'will put costs down and revenue up' BVC with Trevin Hannibal

High quality may bring costs down in a number of ways:
Quality is orientated towards the elimination or errors and, if successful, reworking costs and scrapped items will be reduced. This will help drive down unit costs of products. Under TQM internal inspection costs will be reduced. With an improvement in quality inspection and testing, costs may be reduced or eliminated completely leading to reduced operating costs BVC with Trevin Hannibal

Own inspector and quality assurance replaces quality control
Own inspector and quality assurance replaces quality control. • External quality costs will be reduced. Complaints from customers and warranty costs will be reduced as the number of products not meeting the appropriate standards will not be incurred. It is possible that, with the emphasis on continuous improvement as part of TQM, ways of improving processing time will be found so contributing to reducing costs overall. BVC with Trevin Hannibal

High quality may lead to a growth in revenue in a number of ways:
Cost savings can be passed on to customers in the form of lower prices to generate additional sales and revenue. • It is true to say that it is far more effective to retain existing customers rather than to attract new ones. High quality is a good route to retention of existing customers and therefore repeat sales and revenue growth BVC with Trevin Hannibal

As quality improves 2JN’s image within the market place will be enhanced, so strengthening 2JN’s brand and position within the market which should translate into improved revenue. • With an improved reputation 2JN’s sales volumes may increase; not only will existing customers be retained but new customers will be attracted through word of mouth. BVC with Trevin Hannibal

Despite past attempts product defects and customer complaints have harmed 2JN and it has lost some of its major customers to its competitors and profits are declining. If TQM is successful and high quality is achieved, 2JN might find itself in a better competitive position relative to its competitors and so enjoy improved revenue as a result. BVC with Trevin Hannibal

Question 13 (a) Discuss the strategic weaknesses and threats in marketing that CXC currently faces. (10 marks) BVC with Trevin Hannibal

Answer plan It is clear that CXC faces a number of challenges and must overcome its weaknesses and counter the threats it faces. The weaknesses and threats it needs to consider and address are summarised below: BVC with Trevin Hannibal

Weaknesses BVC with Trevin Hannibal

Organisational structure.
CXC has an old fashioned structure. The scenario suggests a tall hierarchical structure with a General Manager, Regional Managers, right down to the Sales Associates who interface with the customers. This can lead to poor communications and to regions and Sales Associates 'doing their own thing'. There is little evidence of team working or 'bottom-up' feedback from the Sales Associates who work within the framework of policies and procedures coming from headquarters. Undoubtedly this represents a strategic weakness. The company should review this and initiate a change to a 'lean-flat' structure based on team work. BVC with Trevin Hannibal

High overheads With many layers of management and a large office in the capital city this suggests that CXC has high central overheads and operating costs which could make it uncompetitive BVC with Trevin Hannibal

Limited market awareness
CXC appears to have limited strategic direction and market awareness. Its headquarters may appear distant to its workforce in the regions. The emphasis appears to be upon monitoring and policy making rather than strategic leadership and market acumen. The working party charged with strategy making is drawn from CXC’s Regional and Assistant Managers - all senior staff and none in touch with customers in the way that Sales Associates are. BVC with Trevin Hannibal

Lack of sales incentives
Currently there is no incentive pay for the Sales Associates who are paid a flat-rate monthly salary. The General Manager has obviously acknowledged this weakness and is considering the idea of incentivising these key workers by implementing a bonus scheme BVC with Trevin Hannibal

Reputation and repeat sales.
Customer feedback from direct telephone sales is that whilst customers felt that the service was initially “excellent” in dealing with their enquiries, after the purchase had been made there was a generally poor service. This can lead to a loss of confidence and goodwill meaning that CXC risks its reputation and is unlikely to gain repeat sales. BVC with Trevin Hannibal

Unattractive marketing mix.
It is evident that CXC has adjusted its marketing mix for the home business over the past two years. However the faltering performance indicates that the mix is still not sufficient to maintain market share and past success BVC with Trevin Hannibal

Unattractive marketing mix.
CXC needs to consider more carefully the mix of product features and fitness of products for their purpose, promotion and the way in which it communicate with its target market, place, whether on the road sales, cyberspace or the telephone line and price reflecting those costs, competition and customers’ ability to pay in a challenging market. The outcome could be a range of actions that review price, promotion and products for the market. BVC with Trevin Hannibal

Over-dependence on Sales Associates
Sales Associates deal directly with the customers and receive referrals from CXC’s headquarters. The majority of the business they generate however is down to their own endeavours whether getting further business from existing customers or developing links with local private medical companies, automobile traders, and travel companies, etc BVC with Trevin Hannibal

Threats BVC with Trevin Hannibal

Competitors in the home market
CXC's competitors clearly offer an on-going threat particularly in the home market. It is clear that CXC faces a number of challenges including declining sales market share with associated loss of business to competitors. The poor performance in the home market has been masked by its success in new ventures abroad and through phone sales BVC with Trevin Hannibal

Inexperience in telephone sales
It is encouraging that CXC has considered different ways of accessing the market for insurance. It is, however, likely to experience aggressive competition from direct telephone sales possibly by competitors who have superior after sale and follow up services. BVC with Trevin Hannibal

Ignoring the benefits of e-business
The company does not feel that online trading is the way forward but this is ignoring the potential available. It may be that the loss of home market share is because it has not embraced this modern way of trading. If it is not careful, less well established companies which have lower overheads may continue to grow at its expense as consumers become more comfortable with online trading. A second issue is that the opportunities of increasing sales in other countries could be more easily achieved through online trading. BVC with Trevin Hannibal

Question 13 (b) Describe how the working party should go about developing a new strategic marketing plan. (10 marks) BVC with Trevin Hannibal

Clarify CXC's objectives
A useful method that can be used to develop a marketing strategic plan is to articulate and capture CXC's corporate objectives which, from the scenario at the moment, do not appear clear. For instance, although it is known that two years ago CXC had 12% of the home market in insurances and this has fallen to 10%, it is unclear what market share CXC aspires to. Clearly the General Manager will need to be involved in this process BVC with Trevin Hannibal

Establish marketing targets
In the context of developing a marketing strategic plan, the working party will need to concentrate on the part that marketing can play in the implementation of CXC's corporate objectives. The plan will need to take account of and support the main corporate objectives and initiatives. Once there is agreement on new corporate objectives and manageable targets in a SMART (specific, measurable, achievable, realistic and time bound) format, their translation into marketing targets (such as sales) will be needed BVC with Trevin Hannibal

Audit of external environment
The General Manager knows that CXC faces some difficult challenges and that strategic threats must be addressed. In the same way, strategic opportunities must be seized. The working party has been examining CXC's current situation and a position statement is obviously an important part of the overall process BVC with Trevin Hannibal

Communication Communication and co-ordination of the plan is important. The new plan should be co-ordinated across the organisation and, after drafting and approval, should be communicated to all employees involved in the marketing activities of the company BVC with Trevin Hannibal

Establish a system for effective monitoring and evaluation
Establish a system for effective monitoring and evaluation By establishing a system for effective performance and attainment, monitoring and evaluation, CXC should be able to measure how successfully the company is performing against its initial objectives BVC with Trevin Hannibal

Ensuring workforce buy-in
Throughout this process it is important that the working party is mindful of the need to involve others in the strategy formulation process. In particular, sales associates will be crucial to successful implementation of the plan and their full cooperation and buy-in is vital. BVC with Trevin Hannibal

Developing an integrated planning approach
It must be acknowledged that in practice the strategic process is rarely as linear and sequential as a logical phased approach suggests and many aspects progress together. The working party should develop an integrated approach to developing the marketing strategy and be prepared to show flexibility. BVC with Trevin Hannibal

Question 13 (c) Explain the factors that CXC should take account of when devising a bonus scheme for its Sales Associates. (5 marks) BVC with Trevin Hannibal

Answer plan The working party is tasked with giving some guidance following the General Manager's idea to increase the sales by implementing a bonus scheme for CXC's sales associates. The guidance given by the Working Party might include: BVC with Trevin Hannibal

'Fit' with Corporate Goals.
The scheme should support the corporate goals of CXC and contribute to its main objectives. The scheme should be designed in such a way that there is congruence between the scheme's outcomes and the overall organisational needs. BVC with Trevin Hannibal

Reward sales associates appropriately
It is commonplace in this type of organisation to reward sales associates with a range of items including pay, payment by results, sick pay, car, pension, medical benefits, etc. Much depends on what the associates themselves value (and are likely to be seen as positive motivators). A further consideration is the industry 'norm' for this sort of reward. Investigation of systems used by competitor and comparator organisations may be helpful in this respect BVC with Trevin Hannibal

Simplicity There is a need to ensure that the bonus scheme is simple and uncomplicated. Not only will this allow for an easy means of calculation but it will also be straightforward to explain and apply and achieve transparency BVC with Trevin Hannibal

Fairness and consistency
. It is important that the workforce sees that the bonus scheme is fair, achievable and consistently applied with no suspicion of favouritism or discrimination against any individuals or groups BVC with Trevin Hannibal

Individual or team award
It is worth considering whether this bonus scheme should be based on an individual sales associate's efforts or whether it should be team based. If it is team based, this may encourage more sharing and team development. BVC with Trevin Hannibal

LEADERSHIP FOUR LEADERSHIP STYLES
Most leadership styles have two dimensions: Task: concentration on what is to be done. Social-emotional: concentration on who is doing the task.

LEADERSHIP Most leaders have more ability in one dimension than the other. Situational leadership style theory contains a range of four styles: Telling, Selling, Consulting, and Joining Telling Style – “This is how i want it done.” This style assumes low group maturity, meaning little or no background expertise in the task area.

LEADERSHIP The group has never worked together or it is an emergency situation. Leader style is high in task and low in social-emotional communication (one-way communication). It is often used by leaders who are not confident of their interpersonal skills or who do not see motivation as an issue. They do not want feedback (my way or the highway).

LEADERSHIP Selling Style – “Here’s how – and why.”
The Selling style assumes moderate group maturity, in terms of task familiarity. The group has spent a little time working together. Leader communication is high in task and low in social-emotional communication (One way communication).

LEADERSHIP This style must be used in an honest and forthright manner; the leader must be convincing or nobody will “buy” what the leader is selling. It is often used to sell policy or instructions from higher levels.

LEADERSHIP Consulting Style – “We’ll work this out together.”
The Consulting style assumes moderate group maturity in terms of task familiarity. Leader asks for an receives input from group. Leader demonstrates to subordinates that their inputs are valued.

LEADERSHIP Leader communication is low in task and high in social-emotional communications. The leader must have high level of confidence in group. The leader makes the ultimate decision on how the task is handled.

LEADERSHIP Joining Style – “Up to group to handle it.”
The Joining style assumes high group maturity in knowledge of task. The group has extensive experience working together. The task is well defined. Decision boundaries are clear and time is available for a group decision to be made.

LEADERSHIP The group has the ultimate decision on how task is handled.
Leader communication is low both in task and social-emotional communication.

LEADERSHIP STYLES

Defining a Leader… Think of a leader that you worked for or observed…
What does this person do and what qualities does this person have that make you admire him or her as a leader? This is basically a brainstorming question to allow the group to think about what makes good leaders. This allows the group to start thinking about leadership styles.

Leadership Styles Autocratic (Authoritarian) Bureaucratic Democratic
Coercive Transactional Transformational Laissez-Faire As the study of Leadership has gone through various paradigm shifts from a historical viewpoint, the study and perspectives of Leadership styles have evolved as well. The first historical style that is often referenced is Charismatic. This was most likely used because of a lack of true understanding of leadership styles. Since then, leadership has evolved to describe many, many types. These are the seven most referenced leadership styles. The first six listed are active type styles while the seventh (Laissez-Faire) is more of an inactive type. It is also important to consider when and how the styles were studies to understand how they evolved and based on what beliefs and assumptions. The study of leadership is almost as old as mankind, but only in the past couple of centuries has the study of leadership styles, traits, and behaviors really been studies, documented, and theorized. In 1939, Kurt Lewin, a renowned social scientist identified three different styles of leadership, including Authoritarian, Democratic and Laissez-Faire. His results indicated that the democratic style is superior to the other two styles. (click mouse for the three styles to be highlighted.) Daniel Goleman is also notorious for his article, “Leadership that Gets Results,” where he targets six leadership styles, including Authoritative, Democratic, and Coercive. (click mouse) Probably most recently, there has been a significant emphasis placed on examining the differences between Transactional and Transformational Leadership ideas. (click mouse) What is interesting and important to know about leadership is that paradigms continue to shift. As society changes, leadership changes, so naturally the study and theories about leadership change as well. Fifty years from now, it is likely that new leadership styles will have evolved, or society might possible return to adopting old ideas and leadership styles. Go to any bookstore and you will find numerous attempts of scholars and writers trying to capture the “essence” and “answers” to the intriguing field that has yet to be and probably never will be “nailed-down.” The following slides will attempt to capture the ideas of each of these seven recognizable leadership styles.

Autocratic (Authoritarian)
Manager retains power (classical approach) Manager is decision-making authority Manager does not consult employees for input Subordinates expected to obey orders without explanations Motivation provided through structured rewards and punishments Autocratic Leadership is often considered the “classical approach,” but this leadership style has been greatly criticized during the past 30 years. Often referred to as the Authoritative Style, or Directive Style, it relies heavily on old ideas and beliefs. Put simply, the style communications….”the leaders is the boss.” Often, people tend to think of this style as a vehicle for yelling, using demeaning language, and leading by threats and abuse of power. Those ideas are not the authoritative style, but the structure and limited follower participation leaves one not to be surprised by those accusations. The main ideas that circulate around Autocratic Leadership are: It uses the classical approach where the manager retains as much power and decision-making authority as possible. The manager does not consult employees, nor are they allowed to give any input. There is a one-way flow of communication. Subordinates are generally expected to obey orders without any explanations. The motivational environment is produced by creating a structured set of rewards and punishments. Notice that the description of Autocratic Leaders use the term, managers. Autocratic Leadership fits nicely in to the ideas of management where it is expected that subordinate obedience results from orders and expectations set by the leader. On the flip-side, the term subordinate is used—showing that the relationship between leaders and followers is strictly business. Some studies say that organizations with many autocratic leaders have higher turnover and absenteeism than other organizations. Certainly Gen X employees have proven to be highly resistant to this management style. These studies say that autocratic leaders: --Rely on threats and punishment to influence employees --Do not trust employees --Do not allow for employee input Yet, autocratic leadership is not all bad. Sometimes it is the most effective style to use.

When to use Autocratic New, untrained employees
Employees are motivated Employees do not respond to any other leadership style High-volume production needs Limited time for decision making Manager’s power is challenged by an employee In reality, the Autocratic style should normally only be used on rare occasions. Having said that, there are always situations where a quick and confident decision is needed. In other situations, there may be factors such as the follower’s development level, knowledge level, and skill level that leave leaders with few other choices than to use the style. The autocratic leadership style should NOT be used when: --Employees become tense, fearful, or resentful --Employees expect to have their opinions heard --Employees begin depending on their manager to make all their decisions --There is low employee morale, high turnover and absenteeism and work stoppage Lets look at some examples of where Autocratic Leadership might be used…

Who are Autocratic Leaders?
Can you think of some Autocratic Leaders? Schools Parents Where are some places/organizations where we might need Autocratic Leaders? Many military leaders are considered Autocratic Leaders. Why would it be advantageous to use an Autocratic Style in the military? Prison systems almost have to use an autocratic style, along with other places where it is too risky to leave anything questionable and unanswered. Factories often require high volume production on a daily basis—we often see autocratic leadership styles used to increase efficiency

Bureaucratic Manager manages “by the book¨
Everything must be done according to procedure or policy If it isn’t covered by the book, the manager refers to the next level above him or her Police officer more than leader You want your organization to keep their “nose out of trouble?”....find a Bureaucratic Leader! Bureaucratic leadership is where the manager manages “by the book.” Everything must fall according to procedure or policy. I it is not covered by the book, the manager refers to the next level above him or her. When considering leadership traits, Integrity is often listed as one of the most valuable traits a leader could possess. Bureaucratic leaders demonstrate the meaning of integrity beautifully. When do we need leaders with an abundance of integrity and when do we want Bureaucratic Leaders?....

When to use Bureaucratic
Performing routine tasks Need for standards/procedures Use of dangerous or delicate equipment Safety or security training being conducted Tasks that require handling cash The bureaucratic style is most effective when there is a need to be concerned about procedure, safety, and specific, technical tasks. This style is ineffective when: --Work habits form that are hard to break, especially if they are no longer useful. --Employees lose their interest in their jobs and in their fellow workers. --Employees do only what is expected of them and no more.

Who are Bureaucratic Leaders?
Can you think of some Bureaucratic Leaders? Police were already mentioned Administrative positions Where are some places/organizations where we might need Bureaucratic Leaders? Law enforcement absolutely needs bureaucratic leaders. In their professions, law enforcers do not have room to “wiggle their toes,” and they must be sure to dot their I’s and cross their T’s. It is important to consider how important it is for organizations that are funded by state tax dollars to have some bureaucratic leaders to monitor and lead others to be efficient and effective. Anytime there is an exchange of money, or someone is required to manage money, we hope to have bureaucratic leaders, or people with bureaucratic skills in those positions. On a side note, what kind of connections might there be between bureaucratic leadership and stress management?!

Democratic Often referred to as participative style
Keeps employees informed Shares decision making and problem solving responsibilities “Coach” who has the final say, but… Gathers information from staff members before making decisions Like the other styles, the democratic style is not always appropriate, but it has many valuable benefits. It is most successful when used with highly skilled or experienced employees or when implementing operational changes or resolving individual or group problems. Because a democratic leader welcomes team input and facilitates group discussion, it is often referred to as a participative leadership style Democratic leaders are constantly keeping employees informed about matters that affect them. They are consistently sharing plans with the group and offering multiple options for group consideration. Even though the Democratic leader still makes the final decision, they use a coaching style to encourage followers to take part in influencing and guiding decision making process. Generally before making a final decision, the leader will consult followers and gather information from them. There are so many great qualities about the democratic leadership style…that the list goes on…

Democratic Continued Help employees evaluate their own performance
Allows employees to establish goals Encourages employees to grow on the job and be promoted Recognizes and encourages achievement Can produce high quality and high quantity work for long periods of time One of the interesting ideas about Democratic Leadership is the use of a “coach” style of leadership. Not only is the leader concerned about being effective and efficient, but they are also concerned about the development of their followers through the tasks. Democratic leaders commonly works with followers to help them set goals, not only for their organization, but personal achievement goals as well. Democratic leaders encourage growth in employees/followers by encouraging them to work freely with each other and leave division of tasks to the group—allowing more sharing and collaboration among followers or group members. In order to continuously encourage growth, democratic leaders make it a point to praise and offer constructive criticism. In addition, they will join in group activities without over-participating. Let’s begin thinking about when we might value a democratic leadership style….

When to use Democratic To keep employees informed
To encourage employees to share in decision- making and problem-solving To provide opportunities for employees to develop a high sense of personal growth and job satisfaction Complex problems that require a lots of input To encourage team building and participation. A democratic leadership style allows for multiple viewpoints, inputs, and participation, while still maintaining control and the leadership role. A quality democratic leader will recognize each member’s strengths and effectively encourage the best from each member. It is important for the leader to be able to recognize those strengths and focus on the needs of the group’s members. On the other hand, it is sometimes a challenge for democratic leaders to recognize that not all tasks need to be handled by the group, and that sometimes the leader should appropriately address some issues along. Democratic leadership should not be used when: --There is not enough time to get everyone’s input. --It’s easier and more cost-effective for the manager to make the decision. --The business can’t afford mistakes. --The manager feels threatened by this type of leadership. --Employee safety is a critical concern.

Who are Democratic Leaders?
Obviously, our country was founded out of democratic ideas. Our government acts as a democracy that encourages involvement and allows every American to actively participate and voice their concerns, if they choose to do so. Does this mean that all of our political leaders are democratic leaders? A democratic leadership style is also commonly used in situation where the leader needs too and wants to encourage team building. There is no better way to encourage true team collaboration than allowing the members to be actively involved in a group processes and decisions.

The ear of the leader must ring with the voices of the people.
Woodrow Wilson

Coercive Power from a person’s authority to punish
Most obvious types of power a leader has. Good leaders use coercive power only as a last resort: In today’s sophisticated and complex workplace, excessive use of coercive power unleashes unpredictable and destabilizing forces which can ultimately undermine the leader using it. The coercive leadership style, focuses on the use, and possibly abuse of power. While coercive power can produce results in the short term, it relies on intimidation to do so and will backfire badly if used as the sole base for exerting influence. At first glance, most people incorrectly assume that a leader can only be effective if he or she has access to the formal “levers of power”: Legitimate Power, which comes from the position a person holds; Reward Power, which comes from his or her ability to give rewards; Information Power, which comes from exclusive access to information; and Coercive Power. The best leaders rely on more subtle forms of power: Expert Power: Where followers do what they’re asked because they respect the leader’s knowledge and expertise and, because of such, trust him or her to give the best guidance; and Referent Power: Where followers admire and seek to emulate the leader, and want to receive his or her approval. Good leaders use coercive power only as a last resort because coercion reduces employees’ satisfaction with their jobs, leading to lack of commitment and general employee withdrawal. Think about how you feel when you get “coerced” into doing something. How would you like to be led that way?...

When to use Coercive To meet very short term goals
When left with no other choice In times of crisis Obviously, by the shortness of the list on this slide, coercive leadership is not highly desirable, nor is it commonly used. However, there are still times when a coercive style could be valuable… In times of economic crisis or threats to the survival of the organization at large, coercion may come to the forefront. Coercive power may also materialize as organizations attempt to streamline their operations for efficiency. In those types of situations, it employees must be fired, those who fail to conform to the organizational goals for survival will be most likely candidates for termination. The threat of termination for failure to comply, in turn, is coercive power. Where might we see coercive power used today?.....

Who are Coercive Leaders?
Coercive leaders are not nearly as recognizable as others, probably because it is not the most highly desirable leadership style to exemplify. The first illustration represents chaos and crisis. We know that there have been many instances where crisis has occurred. For example, think about the New Orleans situation when Hurricane Katrina hit last summer. Considering the state of emergency those Americans were in, do you think it was valuable to have coercive leaders present? Although Donald Trump may not be a coercive leader, the phrase he is most famous for demonstrates the ideas of a coercive leader, “You’re Fired!” Unfortunately, there are times when the need to take action arise—in those times, we may need coercive leadership styles present to get it done. You’re Fired!

Transactional Motivate followers by appealing to their own self-interest Motivate by the exchange process. EX: business owners exchange status and wages for the work effort of the employee. Focuses on the accomplishment of tasks & good worker relationships in exchange for desirable rewards. Encourage leader to adapt their style and behavior to meet expectations of followers Some researchers added to Burns original theory and it is thought by many today that transactional leadership can encompass four types of behavior. 1. Contingent Reward – To influence behavior, the leader clarifies the work needed to be accomplished. The leader uses rewards or incentives to achieve results when expectations are met. 2. Passive Management by Exception - To influence behavior, the leader uses correction or punishment as a response to unacceptable performance or deviation from the accepted standards. 3. Active Management by Exception - To influence behavior, the leader actively monitors the work performed and uses corrective methods to ensure the work is completed to meet accepted standards. 4. Laissez-Faire Leadership – The leader is indifferent and has a “hands-off” approach toward the workers and their performance. This leader ignores the needs of others, does not respond to problems or does not monitor performance. Transactional leadership behavior is used to one degree or another by most leaders. However, as the old saying goes, “if the only tool in your workbox is a hammer…you will perceive every problem as a nail”. A leader should not exclusively or primarily practice transactional leadership behavior to influence others! Here are a few common problems of those who do so. Some use transactional leadership behavior as a tool to manipulate others for selfish personal gain. It can place too much emphasis on the “bottom line” and by its very nature is short-term oriented with the goal of simply maximizing efficiency and profits. The leader can pressure others to engage in unethical or amoral practices by offering strong rewards or punishments. Transactional leadership seeks to influence others by exchanging work for wages, but it does not build on the worker’s need for meaningful work or tap into their creativity. If utilized as the primary behavior by a leader it can lead to an environment permeated by position, power, perks and politics. The most effective and beneficial leadership behavior to achieve long-term success and improved performance is transformational leadership.

When to use Transactional
Leader wants to be in control When there are approaching deadlines that must be met Relationship is short term “If I do this for you…what can you do for me?” Music to your ears? Probably not!, but it is something you might hear from a Transactional Leader! So, when would we want to hear those words? Most of the consideration of when the style would be used is based on the leader themselves. Since the transactional leader views the leader-follower relationship as a process of exchange, they would choose to use it in situations where relationships are of little importance and are short-lived. You might be noticing a trend among some of the leadership styles by now. The Transactional leadership style closely parallels some of the ideas, pertaining to relationships, as the autocratic, bureaucratic, and coercive styles. Let’s look now at the other style, often studied in conjunction with Transactional Leaders…Transformational…

A Result of the Leadership We Knew...
“We made workers into robots; we made them into machines… This quote illustrates the ideas of transactional leadership and the effects it has on individuals and organizations…

Jack Smith, CEO, General Motors
...Now, we want them to become a different kind of person: to come up with new ideas.” Jack Smith, CEO, General Motors How interesting! With new expectations, new demands, and new paradigms in leadership, the next leadership style offers a lot to the current and maybe futuristic views of leadership studies….

Transformational Charismatic and visionary
Inspire followers to transcend their self- interest for the organization Appeal to followers' ideals and values Inspire followers to think about problems in new or different ways Common strategies used to influence followers include vision and framing Transformational leadership is about hearts and minds, about empowering people not controlling them. 4 theories of Transformational Leadership included: Management by Command — Unsophisticated management in which subordinates are told what to do and have little say in what and when. Management by Objectives — Process management in which subordinates are given goals and decide how to achieve them. Management by Communication — Sophisticated organizations in which skilled subordinates deduce their own goals by learning about the needs of the organization. 4. Management by Vision — In which management is about inspiring people to achieve what only they know they can achieve by concentrating on what is possible. Transformational leaders are more visionary and inspirational in approach. They tend to communicate a clear and acceptable vision and goals, with which employees can identify and tend to engender intense emotion in their followers. Rather than exchanging rewards for performance, transformational leaders attempt to build ownership on the part of group members, by involving the group in the decision process. When transformational leaders are successful, they are able to move followers from external to internal control.

Transformational cont.
Instils feelings of confidence, admiration and commitment Stimulates followers intellectually, arousing them to develop new ways to think about problems. Uses contingent rewards to positively reinforce desirable performances Flexible and innovative. While it is important to have leaders with the appropriate orientation defining tasks and managing interrelationships, it is even more important to have leaders who can bring organizations into futures they have not yet imagined. Transformational leadership is the essence of creating and sustaining competitive advantage.

When to use Transformational
When leaders want members to be an active part of the organization and have ownership to it When leaders are building a sense of purpose When the organization has a long term plan When people need to be motivated Today, the phrase, “the only constant is change,” seems truer and truer. Change is inevitable, therefore, we should seek leadership and use leadership styles that embrace change. Changing organizations to be motivational when members are resistant, to be purposeful when members are not directed, and to be visionary for long term goals. Transformational leadership can be one of the best resources for organizational change. Because it lends itself to successful change, the latest paradigm shift has directed scholars toward focusing on transformational leadership more than they ever have.

(Comment by President John Adams about George Washington)
"(He) possessed the gift of silence." (Comment by President John Adams about George Washington)

Laissez-Faire Also known as the “hands-off¨ style
Little or no direction Gives followers as much freedom as possible All authority or power is given to the followers Followers must determine goals, make decisions, and resolve problems on their own. A successful laissez-faire leader is often popular, even charismatic, and inspires people rather than directs them. They believe people know what to do and will do it without too much direction. The laissez-faire leadership style is also know as the “hands-off” style. It is one in which the manager provides little or no direction and gives employees as much freedom as possible. The authority of power is given to the employees and they must determine goals, make decisions, and resolve problems on their own.

When to use Laissez-Faire
Employees are highly skilled, experienced, and educated Employees have pride in their work and the drive to do it successfully on their own Outside experts, such as staff specialists or consultants are being used Employees are trustworthy and experienced This is an effective style to use when: --Employees are highly skilled, experienced, and educated. --Employees have pride in their work and the drive to do it successfully on their own. --Outside experts, such as staff specialists or consultants are being used --Employees are trustworthy and experienced. This style should not be used when: --It makes employees feel insecure at the unavailability of a manager. --The manager cannot provide regular feedback to let employees know how well they are doing. --Managers are unable to thank employees for their good work. --The manager doesn’t understand his or her responsibilities and is hoping the employees can cover for him or her. Some risks are involved with Laissez-Faire Leadership. Followers may like them, but some people find events around them confusing and chaotic. They also may feel that the leader does not respect their time and energy. Most importantly, they may not see where their contribution fits and slowly become less committed and enthusiastic.

Other Referenced Theories
Theory X and Theory Y Theory X and Theory Y each represent different ways in which leaders view employees. Theory X is the traditional view of direction and control by managers. Theory Y is the view that individual and organizational goals can be integrated. Douglas McGregor described Theory X and Theory Y in his book, The Human Side of Enterprise. Theory X managers believe that employees are motivated mainly by money, are lazy, uncooperative, and have poor work habits. Theory Y managers believe that subordinates work hard, are cooperative, and have positive attitudes.

Tight control, lots of rules, no freedom
Management/ Leader Tight control, lots of rules, no freedom Theory X is the traditional view of direction and control by managers. 1. The average human being has an inherent dislike of work and will avoid if he or she can. 2. Because of this human characteristic of dislike of work, most people must be controlled, directed, and threatened with punishment to get them to put forth adequate effort toward the achievement of organizational objectives. 3. The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, wants security above all. Theory X leads naturally to an emphasis on the tactics of control - to procedures and techniques for telling people what to do, for determining whether they are doing it, and for administering rewards and punishment. Theory X explains the consequences of a particular managerial strategy. Because its assumptions are so unnecessarily limiting, it prevents managers from seeing the possibilities inherent in other managerial strategies. As long as the assumptions of Theory X influence managerial strategy, organizations will fail to discover, let alone utilize, the potentialities of the average human being. Staff/ Followers Alan Chapmen

Lots of freedom, creativity & responsibility
Staff/ Followers Lots of freedom, creativity & responsibility Theory Y is the view that individual and organizational goals can be integrated. 1. The expenditures of physical and mental effort in work are as natural as play or rest. 2. External control and the threat of punishment are not the only means for bringing out effort toward organizational objectives. 3. Commitment to objectives is a function of the rewards associated with their achievement. 4. The average human being learns, under proper conditions, not only to accept but also to seek responsibility. 5. The capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the solution of organizational problems in widely, not narrowly, distributed in the population. 6. Under the condition of modern industrial life, the intellectual potentialities of the average human being are only partially utilized. Theory Y's purpose is to encourage integration, to create a situation in which an employee can achieve his or her own goals best by directing his or her efforts toward the objectives of the organization. It is a deliberate attempt to link improvement in managerial competence with the satisfaction of higher-level ego and self-actualization needs. Theory Y leads to a preoccupation with the nature of relationships, with the creation of an environment which will encourage commitment to organizational objectives and which will provide opportunities for the maximum exercise of initiative, ingenuity, and self-direction in achieving them. Management/ Leader Alan Chapmen

Other Referenced Theories
Hersey-Blanchard Situational Leadership Based on the amount of direction (task- behavior) and amount of socio-emotional support (relationship-behavior) a leader must provide given the situation and the "level of maturity" of the followers.

Hersey-Blanchard Situational Leadership
To determine the appropriate leadership style to use in a given situation, the leader must first determine the maturity level of the followers in relation to the specific task that the leader is attempting to accomplish through the effort of the followers. As the level of followers' maturity increases, the leader should begin to reduce his or her task behavior and increase relationship behavior until the followers reach a moderate level of maturity. As the followers begin to move into an above average level of maturity, the leader should decrease not only task behavior but also relationship behavior. Once the maturity level is identified, the appropriate leadership style can be determined. The four leadership styles are telling, selling, participating, and delegating. High task/low relationship behavior (S1) is referred to as "telling." The leader provides clear instructions and specific direction. Telling style is best matched with a low follower readiness level. High task/high relationship behavior (S2) is referred to as "selling." The leader encourages two-way communication and helps build confidence and motivation on the part of the employee, although the leader still has responsibility and controls decision making. Selling style is best matched with a moderate follower readiness level. High relationship/low task behavior (S3) is referred to as "participating." With this style, the leader and followers share decision making and no longer need or expect the relationship to be directive. Participating style is best matched with a moderate follower readiness level. Low relationship/low task behavior (S4) is labelled "delegating." This style is appropriate for leaders whose followers are ready to accomplish a particular task and are both competent and motivated to take full responsibility. Delegating style is best matched with a high follower readiness level.

Selecting a Style Some people are motivated by reward
Some people are motivated by punishment Social systems work best with a chain of command When people have agreed to do a job, a part of the deal is that they cede authority to their leader

Question 15 Explain to TR, with reference to theory, the different management / leadership styles he could adopt to help him to become more effective in his role. (10 marks) BVC with Trevin Hannibal

Introduction A number of researchers have contributed to theories which have been developed to help explain the different leadership styles that managers can adopt. One such theory which could help TR in understanding the alternative styles he could use is Tannenbaum and Schmidt’s continuum of leadership behaviours BVC with Trevin Hannibal

The continuum is based on the degree of authority used by a manager and the degree of freedom for the subordinates in decision making. Tannenbaum and Schmidt identified a range of various styles along the continuum ranging from boss-centred to employee- centred. Boss-centred tends to be associated with an authoritarian approach whereas employee- centred is associated with a more democratic or participative approach. BVC with Trevin Hannibal

'tells', 'sells', 'consults' and 'joins'
This theory identifies four different styles labelled, 'tells', 'sells', 'consults' and 'joins' which reflect the degree of authority used by a manager and the degree of freedom for the subordinates in decision making. Taking each style in turn: BVC with Trevin Hannibal

'Tells is where TR would make all the decisions and tells the subordinates what to do. The advantage of this style is that decisions can be made comparatively quickly. The downside is that staff may resent simply being told of the decision by TR and this could result in getting compliance rather than commitment from his staff. BVC with Trevin Hannibal

'Sells' is where TR would make the decision, but rather than just announcing it or telling his staff, he would try to persuade them to accept it. As with 'tells', this style means that decisions can be made quickly by TR, who would have to use his skills of persuasion in selling the decision. However, staff may feel they have been manipulated and controlled. BVC with Trevin Hannibal

Consults' i is when TR does not make the decisions himself until he has presented the problems to his staff, hears their views and suggestions and then adopts the solutions suggested. This approach should mean that staff feel that they have been involved in the decision making process and hence are more likely to support TR. However, consulting can be time consuming. TR will need to be willing to take on board the suggestions made, otherwise staff may feel that they have not really been listened to and this can be damaging. BVC with Trevin Hannibal

'Joins ' is where TR would define the problem but then delegates the decision-making power to his staff. He would indicate the limits within which the decision must be made. Staff should feel empowered in the decision making process. However, they may disregard the limits and TR could find a decision made which is unacceptable to the organisation. Depending on how it is handled, staff may feel that TR is not taking on responsibility as their leader. BVC with Trevin Hannibal

Q-16 Evaluate the use of e-marketing at Maratec to enhance each of following five elements of the marketing mix: price, promotion, place, processes and physical evidence. BVC with Trevin Hannibal

Introduction Currently, Maratec is using a traditional model of marketing, which is not fully supporting the needs of the company as it strives for growth. By adopting e- marketing, further growth would be made possible and the issues identified would be addressed. BVC with Trevin Hannibal

Price Maratec uses cost plus pricing, which may cause some lost sales, as the cost is unknown at the time of agreement with the customer. The use of the external procurement company and the procurement of small orders of specific materials is likely to increase the costs and therefore lead to higher prices. Whilst high prices are not necessarily a problem, the inability to set the price when negotiating with the customer is not ideal. BVC with Trevin Hannibal

The use of e-marketing will require Maratec to be more specific with regards to pricing. Although it may display a ‘contact us for price’ instruction online, it would need to be able to provide a price within a reasonable time. Should it introduce e-procurement (see part b), then price links could be introduced to make this quicker. BVC with Trevin Hannibal

E-marketing could be used to offer special discounts on large orders, or on pricing for a subsequent item of furniture, following a previous order. BVC with Trevin Hannibal

Promotion Maratec’s current promotion model may work for a small company, but if the company wants to grow, then this is a crucial area for change. The current method of promotion is limited. The use of expensive brochures means that all potential customers see the same products, and the company only produces a new brochure very year. E-marketing allows individualisation, or personalised marketing. The website could record visitors’ click patterns and use targeted promotion based on the patterns detected. For example, if a potential customer browses tables and chairs, then Maratec could send them an focused on these products. BVC with Trevin Hannibal

The reach of promotion is also limited, either to those who have an acquaintance with an owner of a Maratec piece of furniture, or those who attend certain exhibitions. Whilst Maratec has a focused differentiation strategy, this may be appropriate. However, Maratec is looking to increase its sales, including an expansion of segments, to reach corporate clients. Online promotion may be a good way to make initial contact with these potential customers BVC with Trevin Hannibal

Place As Maratec produces bespoke furniture, it does not make sense to have many showrooms as each piece of furniture displayed only exhibits the style of Maratec and is not for sale. To open further stores would lead to high additional costs. However, by using e-marketing, the market reach is as wide as Maratec choose to make it; global clients could purchase products, on the condition that Maratec will support transactions from that country and will provide shipping to that destination. BVC with Trevin Hannibal

Processes – Many of the processes, excluding the actual production of the furniture, could benefit from the use of e-marketing techniques. The clients’ designs could be uploaded and progress shown when the client logs in to their own account. This would make the update process much smoother and overcome the difficulties of a client visiting the manufacturing plant. Maratec could post videos of the production process if required. BVC with Trevin Hannibal

Details of the materials sourced and the expected date of completion could be stored and updated as appropriate. Corporate clients could have access to re- order screens, allowing them to place orders for duplicates of its previously produced products. BVC with Trevin Hannibal

Physical evidence This is critical to Maratec’s success. As items are bespoke, there is no finished product to view before purchase. Therefore evidence of previous successes is important. Images of items may be placed on the website. This will help with visualisation for clients, as more images can be uploaded than in a traditional brochure. Maratec could also post evidence of the quality, in the form of quality standards awarded, and supplier quality statuses. Additionally, the word-of-mouth promotion may be extended through physical evidence, with customer reviews posted on the site BVC with Trevin Hannibal

If Maratec uses advanced manufacturing techniques such as computer aided design and manufacturing, the clients’ designs could be transformed into 3-D images, which again would assist with visualisation and ensure that enquiries are converted into actual orders. BVC with Trevin Hannibal

16-b Describe the principles of e-procurement and explain the benefits and risks to Maratec BVC with Trevin Hannibal

Introduction Procurement involves the sourcing of suppliers and forming of agreements with them, enabling purchasing of the right quality materials, whilst ensuring that the time and price are right for the company. This is not currently carried out by Maratec, who chooses to use a specialist procurement company instead. BVC with Trevin Hannibal

Principles of e-procurement
E-procurement makes use of electronic forms of communication to simplify the entire production process. It relies upon connections between suppliers’ and purchasers’ systems, enabling automated transactions. The focus is on getting the entire procurement process right: materials are delivered in the right quantity and quality, at the right price, from the right seller and at the right time. BVC with Trevin Hannibal

Most e-procurement systems require registration and login so that both supplier and buyer details are stored and both administrative (address, etc) and historical data are available. E-procurement can be approached in a number of different ways. For example, in a B2B marketplace, suppliers and buyers trade through a third party site. The relationship, and contractual relationship, is with the third party, although buyers and suppliers may enter into regular trades BVC with Trevin Hannibal

The third party sites usually focus on one industry, e. g
The third party sites usually focus on one industry, e.g. providing materials for the furniture trade. This would give Maratec access to many suppliers as needed for the growth of its business. T his would be the closest to their current model, with the third party taking some of the procurement responsibility by providing appropriate suppliers in the marketplace. BVC with Trevin Hannibal

An alternative approach suitable for Maratec could be buyer centric
An alternative approach suitable for Maratec could be buyer centric. Using this model, Maratec would have relationships with a number of individual suppliers. Systems would be integrated, and a procurement management system managed by Maratec allowing the selection of the best supplier for each requirement. This would also simplify management reporting, as the system would integrate with internal transactional systems, e.g. production control and accounting as well as internal reporting systems BVC with Trevin Hannibal

Benefits There are many benefits of e-procurement, although not all would be applicable to Maratec. This would certainly pass the control of the procurement process to Maratec, who currently relies on a third party service. As Maratec uses specific materials for their products, it is important to have access to a wide choice of suppliers, as a specific piece may be difficult to find. Simultaneously, however, Maratec may build a relationship with a certain supplier, who may suggest certain raw materials as they become available. BVC with Trevin Hannibal

There should be obvious cost reductions, as this would cut out the middle-man and enable Maratec to shop around for the best price, regardless of location. It should also speed up the process as there will be no need for communication with the procurement company, and Maratec could select suppliers who are able to deliver within a specified date range, or who are pre- approved on the system as they meet quality and reliability standards. BVC with Trevin Hannibal

Risks It is suggested that a procurement manager will only be recruited should the decision to use e-procurement go ahead. This may be risky as the e-procurement decision could be made without expert advice of a procurement manager. The model and method of implementation may be flawed and the system unusable for Maratec’s purposes. BVC with Trevin Hannibal

It is not known what agreement Maratec has with the procurement company currently being used. There may be a need to compensate the company for the cessation of the contract If implementation is successful, there are still risks. Maratec’s strategy requires quality materials in order to succeed. There is a danger that quality may be compromised if purchases can be made from any source, anywhere in the world. There is also the danger that deliveries may not be made on time. These two risks alone could eradicate all the benefits of e-procurement. BVC with Trevin Hannibal

E-procurement should reduce the administrative burden of purchasing, but cannot replace the strategic requirements such as sourcing and negotiating with appropriate suppliers, to help meet Maratec’s strategic objectives. Maratec will also need to consider data security. By making transactions online, it is possible that competitors may obtain access to their data, providing information about their strategy, products and customers. BVC with Trevin Hannibal

17 a) Analyse Sully Truin’s leadership style before and immediately after the training course and explain why the change of leadership style at ARC was unsuccessful BVC with Trevin Hannibal

Prior to attending the course, Sully Truin appeared to have, in McGregor’s terms, many elements of a Theory X manager about him. He felt that it was necessary to closely control and direct staff in order to get them to do what was needed. He perceived that, in general, employees wished to avoid responsibility and so wanted to be closely directed and controlled. This belief was reflected in work design in the company where employees were increasingly restricted to relatively simple repetitive tasks, for which he had defined well-established procedures BVC with Trevin Hannibal

While he was attending the course, Sully still had relatively trivial control issues referred to him and he was exasperated by his employees’ inability to take actions to resolve these issues. His initial diagnosis of this reluctance was that this was due to their personal inadequacies rather than the result of the work situation that he had created. In terms of the Tannenbaum and Schmidt model, Sully originally displayed a manager-centred leadership, whereby he made a decision and then announced it. Finally, in terms of the Blake and Mouton managerial grid, Sully’s style is primarily that of authority/obedience. His main concern is task completion, with a leadership style which dictates what should be done and how it should be done. BVC with Trevin Hannibal

The course questioned Sully’s tough-minded management approach, promoting a more democratic style where leadership responsibilities are shared with subordinates, who are also involved in the planning of tasks, not just their execution. The course essentially suggested that Sully changed his style of leadership, moving to the right on the Tannenbaum and Schmidt model and towards a stereotypical Theory Y manager. The course was run by a company who promoted the benefits of a democratic style of management. BVC with Trevin Hannibal

choice of leadership Depends on three factors
The characteristics of the leader The characteristics of those led The situation itself, the nature of the task BVC with Trevin Hannibal

The characteristics of the leader
As already discussed, Sully tends towards a Theory X style. However, his willingness to change style as a result of the course might suggest that his approach may be due to a lack of confidence in his subordinates rather than the reflection of deeply held values about leadership. BVC with Trevin Hannibal

The characteristics of those led.
It could be argued that Sully’s style has necessarily led to him employing people who are comfortable with his style, and demand a work environment which is routine, well- specified and tightly controlled. When Sully changes his style after the course, they are unable to contribute effectively and are left confused and anxious. It is their suggestion that Sully returns to his old style of leadership BVC with Trevin Hannibal

The situation itself, the nature of the task
In the case study scenario, the task has been increasingly constrained, so that it can be closely defined and controlled by Sully. It is relatively simple but decisions on problems have to be taken quickly. This is why they are referred to Sully. He is good at making an instant decision and has the authority to back it up. When subordinates were asked to take responsibility for these decisions, they felt that they did not have sufficient authority or experience and so they consulted their colleagues, which took time, before arriving at a decision BVC with Trevin Hannibal

Contingency or situational theorists would probably be critical of a training course that appeared to encourage a management style that would be unlikely to be appropriate for all situations. Even the most democratic of managers has to adopt an authoritarian style at some point to get certain things done or problems resolved. BVC with Trevin Hannibal

From a contingency perspective, it could be argued that before going on the course, ARC had a relatively good fit between leadership, subordinates and the task. Sully Truin was relatively well-liked, he was trusted by his employees to make decisions, and his power was high. As owner of the company he has the power to reward and punish employees. The tasks required of employees were clearly laid down and were well defined BVC with Trevin Hannibal

Reversion to Sully’s old style of management might make employees feel more comfortable but it does not solve the fundamental problems. The company is still over-reliant on Sully and, as well as causing him personal health problems, this also severely restricts the company’s ability to expand. The company could look more closely at the definition of the task and the competencies required of employees. The speed of change may have also been an important factor in the failure of Sully’s new democratic approach. His sudden conversion from Theory X to Theory Y manager was too much, too soon and left employees anxious and confused. BVC with Trevin Hannibal

17-b Describe the principles of job enrichment and evaluate its potential application in the Contracts Office at ARC. BVC with Trevin Hannibal

In general, business systems have five types of business activity: planning, enabling, doing, monitoring and control. In the scenario, employees are primarily responsible for doing and monitoring. However, the control activity, taking action when the monitoring shows that some action is required, is undertaken by Sully Truin. This manifested itself in the s and phone calls he received whilst he was on the management training course. BVC with Trevin Hannibal

The term job enrichment refers to a number of different processes including job rotation, enlarging and aggregating tasks. However, the term has become specifically used to refer to a policy of vertical task amalgamation. It is roughly analogous to merging the swim- lanes of a current business process model. An enriched job often contains responsibility for planning the job and for taking control actions when they are required. BVC with Trevin Hannibal

five core characteristics of enriched jobs
Skill variety: The job requires the use of a range of skills and talents. Task identity: (sometimes called closure): the job includes all the tasks needed to complete an identifiable product or process. Task significance: the degree to which the job has an impact on other people’s lives or work. Autonomy: employees have a degree of freedom, independence and discretion in scheduling and organising the work. Feedback: the degree to which employees possess information of the actual results of their performance BVC with Trevin Hannibal

In the context of these characteristics, giving employees responsibility for responding to problems (a controlling activity) was a first step towards job enrichment, particularly as it would lead to task closure (completing the solution of an operational problem) and emphasise the task significance (the impact of the decision on the field crews). BVC with Trevin Hannibal

Firstly, it exposed gaps in the knowledge and skills of the employees
Firstly, it exposed gaps in the knowledge and skills of the employees. These might be addressed through coaching from Sully. Secondly, it identified that the employees were happier following well-established routines and were quite content to be led. Asking them to take responsibility for decision-making led to anxiety and procrastination, culminating in their request for Sully to return to his old style of leadership BVC with Trevin Hannibal

The strength of the employee’s need for growth in the job is an important moderator. Such moderators explain why jobs which have considerable potential to motivate will not automatically generate a high level of motivation and satisfaction for all employees. Evidence suggests that the employees at ARC are naturally content within their job. People who have found the job too restrictive have left the company BVC with Trevin Hannibal

If Sully pursues his ideas for job enrichment, then he will have to carefully assess his current staff to see which, if any, are willing to pursue this wider role. Evidence suggests that ‘employees with low growth needs are less likely to experience a positive outcome when their job is enriched’ (Bratton and Gold). Consequently, Sully may have to bring new people in from outside if he wants to pursue his job enrichment policy BVC with Trevin Hannibal

His assessment of the skills, competencies and desires of his employees has to be even more comprehensive if he wishes to extend jobs to include planning and enabling tasks. However, such an extension would allow them to assist him finding and establishing contracts, helping grow the company BVC with Trevin Hannibal

RESISTANCE TO CHANGE BVC with Trevin Hannibal

Why Resistance To Change???
Fear of the unknown. Lack of good information. Fear for loss of security. No reason to change. Fear for loss of power. Lack of resources. BVC with Trevin Hannibal

Factors Effecting Change
Advocates of Change Degree of Change Time Frame Impact on Culture Evaluation of Change BVC with Trevin Hannibal

Flow Of Change Change Readiness Assessment Change Agents & Sponsors
Communication &Feedback Transition To New Workplace Skills Resistance Management BVC with Trevin Hannibal

Overcoming Resistance To Change

Education & Communication
Advantage: Creates willingness to help with the change Disadvantage: can be time consuming. BVC with Trevin Hannibal

Participation & Involvement
Advantage: Adds information to change. Disadvantage: Can be very time consuming. BVC with Trevin Hannibal

Support Directly satisfies specific resource or adjustment needs.
Advantage: Directly satisfies specific resource or adjustment needs. Disadvantage: can be time consuming; can be expensive BVC with Trevin Hannibal

Negotiation Helps avoid major resistance.
Advantage: Helps avoid major resistance. Disadvantage: Can be expensive; can cause others to seek similar deals. BVC with Trevin Hannibal

Manipulation Quick and inexpensive
Advantage: Quick and inexpensive Disadvantage: Can create future problems if people sense manipulation. BVC with Trevin Hannibal

Question 18 Advise MMM's executive board:
how it could use the 'SMART' model to achieve the new control system's objectives.(10 marks) BVC with Trevin Hannibal

Introduction The SMART model is an approach designed to make aspirational objectives explicit. The objectives which have been set for the new control system are: • To develop their the Heads' motivation • To encourage the Heads to accept responsibility for achieving strategic and operational targets • To encourage activities that generates income for external activities However, as drafted, they are statements of intent which are open to multiple interpretations. The SMART model could help, for example, as follows: BVC with Trevin Hannibal

Specific the objectives should be stated in a clear way so everyone understands them. For example, the first objective is concerned with ‘motivation’: but what does this mean? It could be made specific by attaching criteria to it. For the Head in charge of student experience ‘motivation’ could be defined, for example, as ‘increasing the pass rates on all courses to the national average BVC with Trevin Hannibal

Measurable: the objectives need to be quantified to enable control to take place. For the Head managing profit-making activities the third objective could be enhanced to state: ‘new activities should be introduced to raise an extra £1 million profit a year’. BVC with Trevin Hannibal

Attainable: any objectives which are set should be within the reach of those trying to achieve them. If unachievable objectives are set it will demotivate the managers and be a waste of time and money. This would also cast doubt on the process of objective setting. BVC with Trevin Hannibal

Relevant: the objective should be one that is appropriate to the organisation’s mission statement and its stakeholders. As regards MMM, its mission statement is very vague so arguably almost any objective would be relevant for it and the three that have been set for the new control system are relevant. For example, 'to develop the Heads' motivation' in achieving strategic and operational targets would contribute towards the mission 'to be the best'. In this sense the objective is relevant. BVC with Trevin Hannibal

Time-bound: the objectives need to have a time boundary; a date should be set for their achievement. For example the objective ‘to encourage activities that generate income from external activities’ and ‘raise an extra £1 million profit a year’ needs to state when this is supposed to happen. Without a boundary the objective is meaningless and control over it cannot be exercised. The objective needs to be modified, for example by adding ‘ by the end of 2012’. BVC with Trevin Hannibal

18-b Advise MMM's executive board: of the activities it must undertake to manage the process of: changing the university's culture BVC with Trevin Hannibal

Culture The executive board does not own the university’s culture and there is no simple or quick way of changing culture. However, the executive board does have the ability to influence the culture and it could do this in a number of ways by: • Its announcements: for example, communicating with its staff to explain and emphasise the importance of the new control system. BVC with Trevin Hannibal

Culture Its reward system: for example, by orientating its staff's personal objectives to those of the university and paying staff for achievement. Its symbols: the university could allocate money for new signage; it could improve some of the buildings that the new departments will occupy BVC with Trevin Hannibal

18-b Advise MMM's executive board
introducing the new departmental structure BVC with Trevin Hannibal

The departments are going to reduce in number from six to three
The departments are going to reduce in number from six to three. This implies a reorganisation of resources. MMM currently employs six Heads to manage its six departments: in the new structure it only requires three. MMM will have to make a decision about the future of the surplus Heads. BVC with Trevin Hannibal

The staffing establishment of all the new departments will have to be reviewed as six departments are decanted into three. This important task will require a separate personnel strategy. BVC with Trevin Hannibal

The changes will need to be planned within the context of a budget which delineates both the resources allocated to the tasks and the timescales for their completion. Thus, the budget should state what money is to be spent, how, where and by whom. BVC with Trevin Hannibal

Communication As the university is to be organised into three bigger departments, consideration will need to be given as to the internal communications within and between these departments. This theme could be developed within training. BVC with Trevin Hannibal

Training As the university is adopting a new organisational structure it will be necessary to inform its staff what this implies for them and how the university will function in future. Therefore, training will need to be organised. BVC with Trevin Hannibal

Resistance to change It is likely that the changes proposed by MMM will encounter some resistance. MMM will have to plan for ways of dealing with this. It may wish to use the six-fold approach suggested by Kotter and Schlesinger. However, it should be mindful that two of these approaches, manipulation and coercion are ethically dubious. BVC with Trevin Hannibal

18-c Discuss the role that a change agent could play in the change process in MMM. BVC with Trevin Hannibal

In order to progress these changes MMM will need to assign the responsibility for implementation to a person or a group of people. The person/people with this responsibility could be assisted by a change agent.The change agent could come from within the university or could be an external person or organisation, for example, a management consultant could be employed. However, the change agent's role, ‘per se’, would not be the implementation of the changes: rather it would be the facilitation of them BVC with Trevin Hannibal

Function of the change agent
Defining the problem: for example, what to do with three 'surplus' Heads. • Examining the causes of the problem(s): the reduction in the number of departments. • Diagnosing how this can be overcome: offering redeployment. • Offering alternative solution: severance terms. • Devising implementation strategies: when, how, where the surplus Heads will be redeployed. • Disseminating what has been learnt from this change process: MMM could use this experience to help it with future changes. BVC with Trevin Hannibal

On Answer Writing BVC with Trevin Hannibal

Answer writing BVC with Trevin Hannibal

Relaxed Body and Peaceful Mind
Exam stress – problem for all students, yet it’s normal  Good exam preparation Rehearse the exam day Sit and relax in a ‘peaceful place’ ‘To do list’ for the exam day Relaxation techniques Exam Stress causes stupid mistakes !!! BVC with Trevin Hannibal

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