Beruflich Dokumente
Kultur Dokumente
Tuition Note
June2015
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CONTENT
CHAPTER 1 BEFORE SETTING UP STRATEGIES ............................... 6
Corporate governance ..................................................................................................................................................... 6
Culture ................................................................................................................................................................................... 9
Stakeholder analysis: .....................................................................................................................................................14
Ethics:...................................................................................................................................................................................17
Absolutism VS Relativism .............................................................................................................................................17
Relativism ...........................................................................................................................................................................19
Corporate social responsibility ..................................................................................................................................23
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Corporate governance
This means to make directors work in the best interest of the company rather than of
their own.
This is based on agency theory, ie, separation of duties between owner and manager.
And in order to make directors work in the best interest of the company, company has
to incur agency costs, ie, salary, corporate governance, audit fees etc.
Best practices:
Chairman leads Board, and sets agenda for Board Meetings ensuring there is
enough time for important matters and all directors contribute.
Chairman is key contact for shareholders.
CEO runs the company.
3. Board composition
At 1st AGM after appointment to Board, and at least every 3 years afterwards,
by shareholders (note, for FTSE 350 companies, all directors are up for reelection
every year).
If not annual re-election for all directors, sensible to retire by rotation and
avoid potentially losing all the Board in one go.
7. Remuneration of directors
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8. Internal control
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Culture
What
Firstly, what is culture? Culture is the way people do things around here. Organisational
culture consists of the beliefs, attitudes, practices and customs to which people are
exposed during their interaction with the organisation.
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Culture Web
Secondly, we can build up our culture or analyse what sorts of contents of culture
within our organization by analyzing these aspects using culture web:
Johnson and Scholes said the culture within a company is made up of 7 elements:
We can build up our culture or analyse what sorts of contents of culture within our
organization by analyzing these aspects using culture web:
Symbols:
Eg, offices; status; cars etc.
Control systems:
Eg, managers are measured based on profit then this company may be risk aggressive?
Organizational structures:
How tall / flat is the organisation?
Power structures:
How much centralization is there?
Stories:
Does news within the organization focus on successes or failures?
The paradigm:
What assumptions are taken for granted?
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Types of cultures
Thirdly, depending on which company or industry you are in, Charles Handy said there
are 4 types of cultures within a company, they are:
Power culture
Heavily centralised with few decision-makers. Allows quick responses to changes in the
environment.
Role culture
Lots of formalised procedures. Can be very useful in an environment that is stable.
Task culture
Emphasis on getting the job done rather than following rules. Works well in complex,
unstable environments.
Person culture
Purpose is purely to look after the individuals (found where self-employed people are
the norm).
Strategic cultures
Fourthly, if a company is going to make a decision then it will be affected by the culture
within the company as well. Miles and Snow also identifies 4 Strategic cultures:
Defenders like strategic options that have worked in the past / low risks /secure
markets.
Prospectors like options that could deliver results even if they entail high risk.
Analysers will move into new areas but only after someone else has proved they
work.
Reactors do not plan ahead.
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Paradigm
The paradigm signifies the basic assumptions and beliefs that an organisations
decision makers hold in common and take for granted. It summarises and reinforces
the rest of the cultural web. The paradigm at Frigate shows a company run for the
personal gratification of the managing director and his family. Ron believes that his
lifestyle and benefits are the reward for taking risks in a hostile environment.
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Stakeholder analysis:
We know there are a lot of people in or outside the company and certainly they have
influence over the companys overall decision making process. So how can we classify
stakeholders?
In p3 exam, Medlow has come up with a model to classify these stakeholders using
Mendlows Mapping model.
Although company can set their objectives, mission statement, cultures, analyze
stakeholders well but most organisations fail within a very limited time span (100
years ) and research has suggested that a significant factor contributing to that has
been the failure to act with social responsibility.
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power because its very easy to recruit these people again from the outside market.
Approach:
These employees will have to be kept informed about the proposed changes.
Individual Student
Power and interest:
Low levels of both power because they cant have a significant impact on the whole
organization and interest as they are largely unaffected.
Approach:
These stakeholders require very little management as they are mostly unaffected by
the take over.
Certifiers EIoBa
Power and interest:
The accreditation body has a high level of power as it could withdraw the accreditation
at any time, significantly affecting the reputation and student numbers of Ecoba. The
level of interest is low as long as Ecoba operate it propery and it is accredited.
Approach:
This stakeholder needs to be managed carefully and the main approach should be to
keep them satisfied. However, they are stakeholders with high power and are capable
of developing higher interest levels if they become concerned about the new ownership
and becoming a key player. If this happens, this group will require much more active
management.
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Ethics:
Absolutism VS Relativism
Absolutism means there would be a set of rules regulating what you should do,
ie, SOX act.
Relativism means there would not be a set of rules regulating what you should
do, ie, UK corporate governance code (comply or explain approach).
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Deontology VS Teleology
Scenario: employ child labour to work in a factory with safe environment(outside the
factory and its not safe because of wars and when children work then they can earn
money and feed their family.)
Teleological
It will make their decisions based on the future benefit it can obtain.
Deontological
Legal obligation
But because employing child labour is allowed in the country so it seems that its
ethical to use child labour.
Human rights
By using child labour then children are not given the right to get access to
education so its wrong.
But they are working in a safe condition so using child labour is right.
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Relativism
This will depend on Code of ethics like ACCA code of ethics, other company specific
code of ethics or ethical Stages
Accountable to shareholders.
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Ethical stages:
Kohlberg model
Famous case study:
As wife has cancer and is about to die. A does not have money to buy the specific drugs
to help his wife.
Actions:
Action1: will not steal drugs because its not allowed by law[pre conventional stage]
Action2: steal drugs and will accept any sentence[conventional stage]
Action3: steal drugs and will not accept any sentence[post conventional]
Its important to identify which stage that company is in according to Kohlberg and
hence that company would have different actions (to stakeholders etc).
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Preconventional
Obey/discipline
Individuals will make ethical decisions depending on whether he/she will be punished
and if yes then he/she will not do that.
Instrumental
Individuals will make ethical decisions depending on whether it would be beneficial to
them, ie, to be instrumental.
Conventional
Follow peers
Individuals will make ethical decisions if people around them are making ethical
decisions.
Follow society
They will make ethical decisions if society at large are making ethical decisions as well,
ie, uphold laws.
Post conventional
Individual rights
Individuals will make ethical decisions if they think its right for them to do so.
Universal principles
They will make ethical decisions if they think its right for the society to do so as well.
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2, Expedients
Not only care about shareholders but also other stakeholders such as employees and
customers because want to make more money.
3, Social contract
Acre about other stakeholders because they have an expectation of you, ie, for TOYOTA
cars they would expect those cars are safe and then you are going to produce safe cars.
4, Social ecologist
Company would consider their impact on environment and appropriate actions.
5, Socialist
Company believe that everyone should be treated fairly and equally.
6, Radical feminists
Company should co-operate with other stakeholders.
7, Deep ecologist
Company believes that any objectives prior to social and environmental are not ethical.
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What is it?
CSR means you can turn that duty into opportunity.
For example:
Employees- they want to see how business changes the outside and hence they
work with company with delight.
If company can contribute to the actual environment and improve it and hence
employees would be happy to work with this company (perform duties within
company).
Shareholders- if they want the company to improve social issues and
environmental issues and hence they invest their money into the company to
turn that into an opportunity, ie, opportunity that after company using money
invested by shareholders, company would improve social and environmental
issues.
So its important for company to hold accountable to different stakeholders by telling
them how it contribute to social and environmental issues by using Triple Bottom Lines.
CSR reporting
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Chapter 2 Strategy
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WHAT IS A STRATEGY?
Definition of strategy
Pathways that company uses in order to arrive at vision.
2 Strategy as ideas.
Here the strategy aims to encourage innovation. Culture will be very important here.
A Strategy as ideas can lead to the opportunistic approach.
Opportunistic strategy is a strategy to exploit an opportunity in the external
environment.
3 Strategy as design.
Here the strategy is driven from the top in order to meet the objectives of the
organisation.
The process is very similar to that given earlier in this chapter.
A Strategy as design ties up with the planned approach.
The strategic planning model states that managers:
- Analyse the strategic position (resources and competences; opportunity and threats;
stakeholders etc).
- Consider various strategic options and choose one (porters generic strategy; Ansoff
growth matrix, SFA etc).
- Implement the required changes (Lewin etc).
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Corporate strategy
Within corporate strategy there are 4things:
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(SMARTIE)
Specific clear statement, easy to understand;
Measurable to enable control and communication down the organisation;
Attainable It is pointless setting unachievable objectives;
Relevant appropriate to the mission and stakeholders;
Timed have a time period for achievement.
Innovative come up with new ideas
Environmentally friendly
3. Portfolio of company:
Parental company [step by step teaching sub; allow sub to use parents resources]
Synergy creator
Portfolio manager [hands off approach]
4. Possible strategies:
Hold
Build up
Harvest
Divest
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1. Lifecycle theory
2. BCG matrix
Heartland
Feel
Value trap
Alien
Low
Low
Benefits
High
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Alien Businesses.
These are the business outside the industry of the business considering
takeover or merger proposal, so business has no knowledge of internal and
external factors affecting the business operating in that industry, needed to
make it successful. It can be said that it has low feel. There are no opportunities
for the parent to add value by helping it because potential business has the skills
necessary for its success. It can be said that it has low benefits.
Ballast Businesses.
These are the business inside the industry of the business considering takeover
or merger proposal. It can be said that it has high feel. There are no
opportunities for the parent to add value by helping it because
potential acquisition target has the skills necessary for its success. It can be
said that it has low benefits.
Heartland Businesses.
These are the business inside the industry of the business considering takeover
or merger proposal. It can be said that it has high feel. There are opportunities
for the parent to add value by helping it because potential business lacks the
skills necessary for its success. It can be said that it has high benefits.
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(10 marks)
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A SMART objective should be set in order to help company reach its goal. Hammond
Shoes does appear to have certain objectives, such as keeping production in Petatown
and providing educational opportunities for employees.
But these are too vague and they are not measurable such as it doesnt state how many
educational opportunities it will provide.
The core value of treating suppliers fairly could have been remembered within an
objective of paying all suppliers within 30 days. Evidence suggests that they now stand
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at over 60 days, so the company is failing to meet one of its core values fairness to
suppliers.
Hammond Shoes does not have a clearly defined mission or explicitly stated values. Its
objectives are restricted and rarely quantified and they need to be improved.
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Porter suggests that for each cost in the business which is either value adding or non
value adding.
Value-adding: extra benefit > extra cost
Non value-adding : extra benefit < extra cost. Porter suggests than non value-adding
activities could be outsourced.
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Substitutes
If there are many substitutes for a product then it becomes harder to raise prices.
There are three main kinds of substitute:
Direct substitute: where the customer buys the same product from a different manufacturer
Indirect substitute: where the customer buys a product from a different industry to meet the
same need
Monetary substitute: where different industries are competing for the same part of a
customers income.
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Climate,
Communications
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1, Market penetration:
Approach:
First, attempt to stimulate usage by existing customers
new uses advertising / promotions / sponsorships / quantity discounts
Then attempt to attract non-users and competitor customers via
Pricing / Promotion and advertising / Process redesign e.g. Internet/E- commerce
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2, Market development:
Approaches:
Strategic alliance:
Contract manufacture (licensing) the product is made abroad by another
company.
- Advantages lower risk since no need to build manufacturing plant
- Disadvantages may lose control over areas such as quality.
Joint ventures the company goes into partnership with a local company.
- Advantages lower risk since local knowledge gained and costs shared
- Disadvantages lower returns since profits shared.
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Franchising
Franchising is a method of expanding the business on less capital than would otherwise be
possible,because franchisees not only pay a capital lump sum to the franchiser to enter the
franchise but they also bear some of the running costs of the new outlets. For suitable
businesses, it is an alternative business strategy to raising extra capital for growth.
Probably the most well-known franchisers are McDonalds, but other franchisers include
Budget Rent-a-car, Dyno-rod, Express Dairy, Holiday Inn, Kall-Kwik Printing, Kentucky
Fried Chicken, Sketchley Cleaners and Body Shop.
The franchiser and franchisee each provide different inputs to the business.
(a) The franchiser
(i) Name, and any goodwill associated with it
(ii) Systems and business methods, business strategy and managerial know-how
(iii) Support services, such as advertising, training, research and development, and help
with site decoration
(b) The franchisee
(i) Capital, personal involvement and local market knowledge
(ii) Payment to the franchiser for rights and for support services
(iii) Responsibility for the day-to-day running, and the ultimate profitability of the franchise
Advantages of franchising
(a) Reduces capital requirements. Firms often franchise because they cannot readily
raise the capital required to set up company-owned stores. John Y. Brown, the former
president of Kentucky Fried Chicken, maintained that it would have cost KFC $450 million
to establish its first 2,700 stores if it had run them as company-owned stores, and this was
a sum that was not available to the corporation in the early stages of its life.
(b) Reduces managerial resources required. A firm may be able to raise the capital
required for growth, but it may lack the managerial resources required to set up a network
of company-owned stores. Recruiting and training managers and staff accounts for a
significant percentage of the cost of growth of a firm.
Under a franchise agreement, the franchisees supply the staff required for the day-to-day
running of the operation.
(c) Improves return on promotional expenditure through speed of growth. A retail
firm's brand and brand image are crucial to the success of its stores. Companies often
develop their brand through extensive advertising and promotion, but this only translates
into sales if they have a number of stores that customers can visit after seeing their
advertisements.
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To reap the benefits of its national or regional advertising efforts, the company needs to
attain the minimum efficient scale, in terms of number of stores, as quickly as possible.
Because franchising provides quicker access to capital and managerial resources, a firm
can expand more quickly through franchising than through opening new company-owned
stores.
Faster expansion through franchising, in turn, should allow companies to achieve a
favourable return on their promotional campaigns.
(d) Benefits of specialisation. Because the franchisee and the franchiser both contribute
different resources to the franchise, franchising provides an effective way of reducing costs:
each party concentrates on their core areas, and increases their efficiency in those areas.
In general, franchisers are more cost-efficient than franchisees in performing functions that
decrease in cost with a substantial level of output. By contrast, franchisees are more
efficient in performing functions which are more efficient at a smaller scale. For example, in
the fast-food business, product development and national promotion are more efficiently
handled on a large scale (by the franchiser), whereas the production of food itself is
handled better on a relatively smaller scale (by the franchisee).
(e) Low head office costs. The franchiser only needs a small number of head office staff
because there is a considerable delegation of operational responsibility to the franchisees.
For example, in the fast-food business, the franchisees provide the staff who work in the
restaurants, and so the franchisees incur the HR and payroll costs associated with that.
(f) Reduced supervision costs. Company-owned retail stores are run by employee
managers who may often perform poorly if they are not supervised. A company, therefore,
has to supervise its store managers, and this will result in central overhead costs. However,
under a franchise arrangement, because franchisees have invested capital in their own
stores, and because their earnings come from the profits of those stores, they are
motivated to work hard to maximise the success of the stores. Consequently the franchiser
will have much lower supervision costs.
(g) Risk Management. When opening new stores, a corporation does not know with
certainty the business potential and the chances of success of different locations. Under a
franchising arrangement, the franchiser can judge the profitability potential of different
sites without incurring a significant business risk. If a particular store fails, the franchisee
bears the brunt of the failure.
However, franchising also helps franchisees reduce their risks. Franchised stores typically
open more quickly, and become profitable more quickly, than independent
company-owned stores. The franchisee benefits from the franchiser's managerial
experience and from the established brand name. In effect, when a franchisee enters a
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lease agreement with the franchiser, it is leasing managerial know-how and brand
recognition, as well as the physical store it is operating.
Disadvantages of franchising
(a) Profits are shared. The franchisee receives the revenue from the customer at the
point of sale and then pays the franchiser a share of the profits.
(b) The search for competent candidates is both costly and time consuming where the
franchiser requires many outlets (eg McDonald's in the UK).
(c) Control over franchisees. (McDonald's franchisees in New York recently refused to
co-operate in a marketing campaign).
(d) Risk to reputation. A franchisee can damage the public perception of a brand by
providing inferior goods or services.
(e) Potential for conflict. There may be disagreement over the respective rights and
obligations of the franchiser and franchisee, for example over the level of support to be
provided or the fees payable.
These terms need to be clearly set out in a contact when the franchise is granted to reduce
the chances of conflict arising. Conflict may also occur if either side is acting in bad faith, for
example if the franchisee is providing inferior goods or services which risk damaging the
franchiser's brand.
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3, Product development:
Company needs to be innovative and strong in the area of R&D and have an
established, reliable marketing database.
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4, Diversification
This involves taking new products to new markets the riskiest option?
Critics argue that it is madness to take resources away from known markets and products only to
allocate them to businesses that the company essentially knows nothing about. This risk has to be
compensated for by higher reward which may or may not exist.
Brand stretching ability is often seen as being the critical success factor for successful diversification.
The new business and its strategy may well have teething problems with its implementation and this
may damage brand reputation. Thus there is significant risk.
Synergy the idea that value can be added by combination of units. The value of the
whole being greater than the value of the individual parts
Diversification can take two main forms:
1. Related diversification (concentric diversification)
Growth into similar industries where there is some linkage ie, selling clothes + shoes.
Vertical Integration
Backward secure materials supply, ie, a manufacturing company acquires a
company supplying raw materials.
Forward-secure the sale of product by acquiring a shop.
Horizontal Integration
In order to sell similar products, ie, sell ACCA courses as well as CIMA courses; selling
shoes as well as glasses.
2. Unrelated diversification (conglomerate diversification)
Completely new areas with which the business shares no common ground and so seen
as the last of the growth strategies, ie, selling shoes + selling ACCA courses.
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Suitability-fit in to strategy?
Will it meet organisational objectives? financial & non-financial
Will it take advantage of opportunities?
Will it build on our strengths?
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and
storing of fully
Re-branding
of
Local advertising
Web
products
configured
inbound
equipment
Quality
Re-packaging
inspection
products
Inbound
Operations
of
Technician
delivery
and
based
enquiries
installation
logistics
Outbound
Marketing
logistics
sales
and
service
1, Inbound logistics
Quality inspection is essential for pre-configured equipment where customers have
high expectations of reliability of using the product.
High quality reduces service costs, and contributes to customer satisfaction.
2, Operations
The re-branding and re-packaging operations add little value to the customer. They are
a relatively minor component in DRB's value chain.
They are currently being undertaken in a relatively high cost country despite adding
little value. DRB should re-consider the current arrangement.
3, Outbound logistics
Customer feedback shows that the installation service is greatly valued.
And most of DRB's larger competitors cannot offer an equivalent service so this is
currently a source of competitive advantage for DRB
4, Marketing and sales
Sales and marketing are currently only minor activities at DRB. They will have to be
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Strength
1 Brand
ONA has a strong brand identity, particularly with the citizens of Oceania.
This is a strength because this brand strength should help create customer loyalty, and
in turn sustain customer demand.
2 Safety record
ONA has an excellent safety record, and has had no fatal accidents.
This is a strength because safety is the threshold competence of the ONA and this can
help ONA attract more customers.
3 Customer service
ONA provides excellent customer service, and has won industry awards for both its
customer service and its in-flight meals.
This is a strength because this excellence helps ONA differentiate itself from some of its
competitors, and may allow it to charge premium pricing.
4 Employees
ONA is perceived as an excellent employer in Oceania. As a result, it employees are
highly motivated and courteous.
This is a strength because this helps maintain the high levels of customer service it
offers and will attract more customers to the ONA as a result.
5 Passenger occupancy in business class
ONA has very high passenger load factor for business class customers in the regional
sector than average.
This is a strength because this suggests ONA are strong in the lucrative business class
market and attract more revenue.
6 Receivables collection.
ONA's trade receivables is low (2006: 29 days; 2004: 31 days), which is beneficial
for cash flow.
This is a strength because this suggests there is an improvement in credit control
function in ONA.
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7 liquidity
ONA's current ratio has fallen from 1.24 (2004) to 1.05 (2006).
This isi a weakness because a falling current ratio may indicate that the company will
struggle to meet its debts when they fall due.
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4, Standardised products:
The training firms all provide a very similar service, and so it is easy for customers to
change providers. The levels of certification provides assurance over standards,
however, all three large firms all hold Gold certification meaning there is little to
differentiate them from each other. Again, this places the customer in a strong
bargaining position.
Bargaining power of suppliers:
If suppliers have high levels of bargaining power, they can raise their prices, or reduce
the quality of their service. The suppliers are the lecturers, their power is determined
by the following:
1, Limited supply:
Competent lecturing staff are limited and so hard to find even with attractive salary and
bonuses.
2,Supplier choice:
The lecturing staff have choice of who to work for and can easily move between rival
training providers.
Threat of existing competitors:
The number and size of existing rivals, and the way they react to each other and to new
entrants must be understood before moving into a new market.
1, Dominant suppliers:
There are three dominant suppliers who are on good enough terms to co-ordinate a
response to any new entrant. They will protect their market and ABCL can expect a
strong fight-back if it attempts to enter the market organically.
2,Smaller providers
There are 20 other providers in this market, accounting for approximately 20% of the
market share. This indicates that the dominant suppliers are tolerant of these smaller
rivals.
3, Differentiation:
The service provided by the existing suppliers is very similar, and once Gold
certification has been awarded to the suppliers there is little to differentiate them from
each other, and so little to prevent customers moving between them.
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ONA prides itself on its in-flight customer service, winning the Regional Airline of the
Year award.
If ONA moved to a 'no frills' strategy, it would need to abandon its tradition of excellent
customer service. This is unlikely to be a suitable strategy for ONA because it damages
one of its core competences.
And if ONA's existing customer does not satisfy with the level of service provided by
ONA then this will lead to a fall in the load factor as well. A strategy which leads to a fall
in load factors would not be acceptable for ONA.
Moving to a no frills strategy would not only require a major cultural change at ONA,
sacrificing the strengths of the organisation and the competences of its employees, but
it would also lead to redundancies. There would be significant redundancies in ONA.
And this will in turn damage the existing reputation of ONA. So using a low frill strategy
is not suitable.
Feasibiliy
Using a low frill strategy which means to reach economic of scale.
ONA currently only has, on average, one flight per day to each city in the international
sector and ONA would have to extend its flight network, flight frequency and fleet size
significantly.
Given the decrease in liquidity ratio and profit figure and we question whether ONA are
feasible to do that and it needs to be investigated.
Acceptability
If ONA chooses low frill strategy, then they may try to fly into airports that offer
cheaper taking off and landing fees. but these are often relatively remote from the
cities they serve. This remoteness may be acceptable to leisure travellers, but not to
business travellers and business travellers are ONA's key customers in the regional
sector.
Given that one of ONA's strengths is the high passenger load factors is achieves for
regional business travel, a strategy which involves moving to airports which are less
convenient for business travellers is unlikely to be suitable or acceptable.
Conclusion
It would require major changes in the structure, cost and culture of the company which
would be difficult to justify, and which do not appear suitable, acceptable or feasible for
ONA.
The extent of the changes required would represent a revolution rather than an
evolution of existing processes. However, a revolution is normally only required when
a company is facing a crisis and needs to change direction quickly. It can be argued that
a more incremental approach to change will be more beneficial, building on the
strengths of the organisation, its existing brand, and the competencies of its
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employees.
If ONA really wants to move into the no frills sector it would be better advised to set up
a new low cost brand to do this rather than trying to restructure its existing business
model.
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DEC2007 Q1(C)
Two alternative strategies ONA might consider are differentiation and focused
differentiation.
Differentiation
By adopting a differentiation strategy, ONA can seek to provide service that offer
different benefits from those offered by its competitors.
If these benefits such as free in-flight food and drinks,allocated seats are valued by
customers they will lead to an increase in passenger numbers. This will improve
ONA's market share and seat utilisation.
The success of the no frills airlines shows that not all passengers do value
these premium products; instead some want to fly as cheaply as possible rather
than paying extra for in-flight hospitality.
So basic differentiation strategy may not be suitable for ONA given the two
separate markets it serves standard class and business class in which business
class travellers will be more receptive to the premium service than the standard class
travellers.
Focused differentiation
A focused differentiation strategy looks particularly suitable for the regional sector.
ONA already has a strong market presence in this sector, and this strategy would allow
it build on these strengths.
ONA should consider the following initiatives to improve its product offering for the
regional business class market:
1, Faster check in arrangements. ONA should look to speed up the process of
booking and checking in because business class travellers are likely to value easier and
quicker checking in. In this respect, ONA should investigate the possibility of
introducing automated self-service check-in kiosks in the airport departure areas, or
an on-line check-in facility.
2, Supporting services. ONA should look to provide passenger lounges for its
business passengers
with internet and fax facilities so that they can work while waiting for their planes.
In the international sector, low flight frequency would also be a problem even if ONA is
trying to adopt a differentiation strategy.
The key to address this problem is to ally with established airlines which already serve
the same countries as ONA such as signing Code share agreements to increase flight
frequences.
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Cost
Finally, Management of costs is important, even though ONA is not using cost
advantage as a competitive strategy. Such as careful monitoring of wages and salaries
expenditure to ensure that these do not exceed revenue increases.
The alternative option that ONA could consider is to use Ansoff growth vector matrix.
There are 4 possibilities: market penetration; market development; product
development and diversification.
Option1: Market penetration
ONA can introduce an online check in system where people can check in online and by
doing so people may choose to fly with ONA rather than its competitors.
ONA can also penetrate the market by lowering down its cost such as cutting down the
number of sales agent and by doing so it can in turn cut down the commission fees
charged by them.
Evaluation
So its suitable for ONA because ONA is famous for providing good customer service
and so providing these extra service will fit in the overall strategy of ONA.
Given the healthy financial position that ONA has and to set up such an online checking
system will probably be feasible for ONA.
After setting up this online checking system will be acceptable by customers because
this will be more convenient from the customers point of view.
Option2: Market development
ONA can expand its market overseas by including more fight to overseas location.
ONA can also expand its regional market by offering more flights in the cities.
Evaluation
This is suitable as long as ONA can keep the same customer service offered in the new
market.
Given the investment into the new market is significant and the worsening financial
health of ONA and this might question the feasibility of the strategy.
This is acceptable from the shareholders of ONAs point of view because by moving into
the new market which can generate into more revenue and reduce the total cost down
given the economic of scale it reaches.
Option3: Product development
ONA can expand its products by offering more class such as first class seat which is
more
expensive than the business class.
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Evaluation
It is suitable because ONA compete by offering a high level of customer service rather
than adopting low frill strategy.
It is feasible given ONA can use its spare seats to develop more service like offering
more first class to business people.
It may be acceptable for business people to flight because of the current service level
that ONA offers and they are also more care about the service rather than the price
they are charged.
Option4: Diversification
ONA can diversify its business by offering hotel service together with the flight.
Evaluation
But it may not be suitable because ONA may not know how to run the hotel given a lack
of experience.
And given the decrease in liquidity ratio and profitability in the financial statement we
might question their feasibility of running the hotel if it is to grow organically.
Maybe ONA can ally with other hotel such as for the customer who fly with ONA can
enjoy a discount when living in the hotel and this may be acceptable by the customer
in turn.
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Integrated reporting
The aim is to create transparency of the company and also consistency(applying
integrated reporting to companies from all around the world).
Content:
Organizational overview
Governance
Opportunities and risks
Strategy and resource allocation
Business model
Performance
Future outlook
Implications:
IT costs
Time/staff costs
Consultancy costs
Disclosure