Mr. Benitez placed the following advert in his local newspaper: “Offer for sale, 22 sets of (a certain football team’s) football strip. Only 22 left, I will definitely sell to the first party who accepts this offer for £440, by 9am Wednesday morning”.
a) Consider and apply the law as to whether this is an offer in law, or only an invitation to treat. Give reasons for your answer.
With regards to whether a newspaper advertisement is an offer in law, or an invitation to treat, case law directs us to Partridge vs. Crittenden (1968). Here, Partridge placed an advertisement in a local paper, offering rare birds for sale. The RSPCA brought a court action against Partridge charging Partridge with ‘offering’ a wild bird for sale, which was contrary to the Protection of Birds Act 1954. It was held by the court that he could not be guilty of offering the bird for sale, as the advert amounted to no more than an invitation to treat. However, this was because the advert offered no specific method for a potential buyer to make acceptance, and there would be no consideration on the buyer’s part.
However, Carlill vs. Carbolic Smoke Ball Co (1891) set an entirely different precedent for newspaper advertisements. In this case, an advert by the Carbolic Smoke Ball Co stated that a £100 reward would be paid by to any person who contracted influenza, colds, or any diseases caused by taking cold, after having used the smoke ball daily for two weeks according to the printed directions supplied with each ball. In an attempt to avoid catching the illness, Ms Carlill bought a Smoke Ball as advertised, used it according to instructions and promptly caught influenza. In this case, it was held that there was a binding contract between the two parties, as Carbolic Smoke Ball Co had made an offer to the whole world, with specific terms for acceptance, and had deposited £1000 in a bank as a show of good faith. The consideration on Ms Carlill’s part was held to have come from her using the ball according to the instructions provided.
Thus, in the case of Benitez’s advert, it is arguably an offer, as it lays out specific terms of acceptance, and states that it is only available to a member of a specific class: whoever reads the local paper, and is first to reply to the advert. Indeed, being first to reply, and guaranteeing to pay £440 could be held to be providing consideration. There could be confusion over who is first to reply to the advertisement, as there is only one strip, and the postal rule would apply (see below). At first sight, I would be tempted to conclude that this is an offer, as is open to acceptance, shows willingness to be bound on specific terms, £440 by 9am Wednesday, is certain, and can only be accepted by a reader of the paper, or someone whom a reader informs. However, given that Mr Benitez has not specified how acceptance must be received, this advert is not open to the whole world and that there is no specified way to accept, I would have to conclude that it is in fact an invitation to treat. In my view, and supported by Partridge vs. Crittenden, what Mr Benitez is in fact saying is that he makes a promise to accept the first offer for £440 he receives by 9am Wednesday morning.
If Mr. Benitez had made a formal legal offer, consider which of the two would-be buyers below is more likely to have accepted the offer. Give full reasons why:
b) Mr. Dudek saw the advert and left a message on Mr. Benitez’s answer phone, at 9am Tuesday saying, “Does this include the goalies strip? If so, I will take the lot”.
Mr Dudek is making a request for information, which is not normally considered an offer, as Stevenson vs. Maclean (1880) showed. Indeed, Mr Dudek’s acceptance statement can also be considered a conditional acceptance, which Neale vs. Merrett (1930) states is in fact a new offer. In this case, case law states that Mr Dudek has made an offer himself of £440 for the 22 shirts provided one of them is “the goalies strip”. However, if the original offer included “the goalies strip”, then Mr Dudek could have been considered to have accepted the offer, as Stevenson vs. Maclean showed that a request for information does not terminate the original offer, hence Mr Dudek’s second statement would be viewed as an unconditional acceptance of the offer, as the requested information would have been supplied.
c) Mr Gerrard also saw the advert, and he wrote a letter to Mr. Benitez, saying “I will give you £400, and I enclose a cheque to this value”. The letter was posted first thing on Wednesday morning, but did not get there until Thursday morning.
Mr Gerrard is making a counter offer to buy the goods for £400. As the case of Hyde vs. Wrench (1840) decided, a counter offer to buy goods for a different price to that specified in the offer effectively over rules the original offer. Had Mr Gerrard sent a cheque for £440, he would have accepted the offer, as the postal rule states that acceptance occurs at the time of posting. In this case, the counter offer removes the original offer, so had Mr Gerrard posted his cheque for £400 at 8am, he could not have then accepted the offer by sending a £440 cheque at 8:30am, as the original offer would no longer apply. Mr Benitez will now have to decide whether to accept Mr Gerrard’s £400 offer, or continue negotiations.
Thus, Mr Gerrard cannot possibly have accepted the offer, as he has not made any form of acceptance, conditional or otherwise. He has in fact made a completely new offer, which Mr Benitez may consider for a reasonable period of time. In contrast, Mr Dudek’s acceptance can be seen as conditional, and thus would overrule the original offer. However, the wording of the message suggests otherwise: it is composed of two distinct statements, thus Mr Dudek is not making a conditional acceptance, he is making a request for information, and if this is fulfilled, he is making an unconditional acceptance. However, if “the goalies strip” is not included, then neither Mr Dudek or Mr Gerrard has accepted the offer, and Mr Benitez would then be free to negotiate with either, or neither, of the two in order to determine the final purchaser of the strips.
The current ongoing debate discusses the added value of HRM in relation to best practice versus best-fit. Best practice suggests the universal success of certain HR practices, while best-fit acknowledges the relevant impact of contextual factors. This paper will discuss the impact they have on the employee and the organisation.
The exploration for the effect of types of HRM on organisational performance has focused on a universally applicable best practice model of high commitment management. There are fundamental problems with this approach in the theory on the lack of a link with the organisational strategies. Recently authors have demonstrated that good practice in HRM has an affect on the bottom line. The Sheffield study Patterson et al, (1998) suggests that “if managers wish to influence performance of their companies, the most important area they should emphasise is the management of people” (Patterson et al, (1998) cited in Purcell, J 1999:27).
The concept of human resource management has emerged from the 1980s into a core consideration of corporate strategy in the 1990s, (Legge, L 1995). There is no single definition of HRM in the literature yet the emphasis has to a large extent been on the strategic role of human resource management in organisations. Some research has identified HRM with strategic aspects of ‘best-fit’ or aligning people to the needs of the organisation as expressed in corporate strategy and others have examined HRM as a means of gaining enhanced organisational performance, (Golding, N (2004) cited in Beardwell, I. et al 2004). However the contribution that human resource may make to an organisation’s performance and effectiveness has been linked closely to the changes in different business environments including macro and micro contexts.
Recognition of the importance of HR has increased in recent years; this is a result of competition from overseas economies. In countries for example Japan, Germany and Sweden investment in employee development is higher that the UK. This has led to some organisations reviewing their policies on training introducing continuous investment in their employees. Although when multi national organisations have entered the UK, they have introduced their global HR policies (Beardwell, I. et al 2004).
For HR to succeed it must take on a proactive role within the organisation. Strategic HR creates value by providing opportunities for organic learning, development of intellectual capital and enhances core competencies. This value is crucial to the organisation’s future success (Treen, D. 2000). Employers are increasing extorting the best possible performance from employees. Best practice will increase the skills of the current workforce, and with recruiting it will reinforce the culture of a highly skilled work force (Mullins, L. 2005). Strategic HRM has gained both credibility and popularity over the past decade, specifically with respect to its impact on organisational performance (Paauwe, J & Boselie P. 2003).
There is a need for a higher value to be placed on employees, and therefore get the best performance from the employees. This resource requires development to gain and maintain competitive advantage According to Delany (2001) “successful organisations keep people issues at the fore front of their thinking and at the core of their decision making and planning”. Delany adds “organisations that get the people things right are the organisations likely to be around in the future” (Delany (2001) cited in Mullins, L. 2005:748).
There are fundamental differences in the approach to HR. Storey (1987) discussed these as ‘hard’ and `soft’ versions of HRM. The ‘hard’ version places little emphasis on workers’ concerns and, therefore, within its concept, any judgments of the effectiveness of HRM would be based on business performance criteria only. In contrast, ’soft’ HRM, while also having business performance as its primary concern, would be more likely to advocate a parallel concern for workers’ outcomes (Storey cited in Guest, D. 1999).
These models of HR theory, will justify why there has been an increase in this management practice. Walton (1985) defined HR as “mutual goals, mutual influence, mutual respect, mutual rewards, and mutual responsibility” Walton further added that the ‘psychological contract’ under this unitarist, high commitment model is one of mutuality, but it is a mutuality strictly bounded by the need to operate within an essentially unitary framework (Walton cited in Beardwell, l. et al 2004)
This view reflects a longstanding capitalist tradition in which the worker is viewed as a commodity. The consequential exploitation may be paternalist and benevolent; but, equally, it may operate against the interests of workers. Essentially, workers are simply resources to be squeezed and disposed of as business requirements dictate. More importantly, the interests of workers and their well-being are of no significance in themselves. As John Monks (1998) stated “In the wrong hands HRM becomes both a sharp weapon to prise workers apart from their union and a blunt instrument to bully workers” (Monks (1998) cited in Guest, D 1999:258).
Although some commentators have argued that the role of human resource what ever model is used explicitly views employees as another resource for managers to exploit. In the past, managements had failed to align their human resource systems with business strategy and therefore failed to exploit or utilise their human resources to the full. The force to take on HRM is therefore, based on the business case of a need to respond to an external threat from increasing competition (Guest, D 1999).
Today’s HR departments will recruit and develop the real strategic human resource needs of a modern business. The image of recruiting, training and development has changed and can be used a key driver for delivering shareholder value (Rogers 2004:25). Employers are increasing extorting the best possible performance from employees. Best practice will increase the skills of the current workforce, and with recruiting it will reinforce the culture of a highly skilled work force (Mullins, L. 2005). Organisational strategy is at the heart of the best fit/best practice debate. Therefore if best fit prevails, then it is possible to model the type of HR required for a given type of business, and this practice can be adopted in a wide number of firms in similar circumstances (Purcell, J 1999).
Commentators now agree that there is no need to look any further than the human resource to gain competitive advantage, although the models use vary. Pfeffer (1998) discharges all other models in the search for alternative sources of organisational competitive advantage, arguing that the only advantage is to “manage people right” in an employee-centred approach, introducing a model of “seven practices of successful organizations” This is the foundation for best practice, demonstrating how human resource practices can be aligned with the skills and behaviours needed for business strategy. These practices includes employment security, selective recruiting, self-managed teams and the decentralisation of decision-making, comparatively high compensation contingent on organizational performance, extensive training, reduced status distinctions, and extensive sharing of financial and performance information throughout the organisation (Pfeffer, J 1998).
Pfeffer (1998) further suggests that effective performance depends upon the link between HR policies and the business strategies. Firms with a cost minimisation approach to HR can be successful in cost-competitive markets whereas adopting high-performance work practices may match competition on the basis of quality and service. The role of HR managers in identifying and building core competencies, there is a close fit between strategy and human resources. Competencies are complex, multidimensional, interrelated and interdependent knowledge systems. Consequently, if HR managers design HR policies to match the core competencies of an organisation, they may also build in rigidities that simultaneously work against future change (Pfeffer, J 1998).
Johnson and Scholes, (1997) discussed “organisations which successfully manage change are those which have integrated their human resource management policies with their strategies and the strategic change process… training, employee relations, compensation packages and so on are not merely operational issues for the personnel department; they are crucially concerned with the way in which employees relate to the nature and direction of the firm, and as such they can both block strategic change and also be significant facilitators of strategic change”. Concluding that aligning HR practices with organisational strategy will add value to the organisations resources (Johnson G & Scholes K 1997:494)
Both models advocate the value that is placed in the human resource and aligned to the organisational strategy. Best practice will place the emphasis on the core competencies of the employee and develop these to address the overall organisation’s strategy. Whereas Best fit HR will compliment the strategy and fit in with the organisations culture. Neither model is a panacea; organisations should choose HR practices and strategies that fit with their culture, and requirements. The employee should be a valued resource, integrated into the organisational strategy.
Bibliography
Books
Beardwell, I. et al. (2004) (4th Edition) Human Resource Management a Contemporary Approach Prentice Hall, Harlow
Johnson G & Scholes K (1997) (4th Edition) Exploring Corporate Strategy
Prentice Hall, Hemmel Hempstead.
Legge, L. (1995) Human Resource Management: Rhetoric’s and Realities,Macmillan Business, USA.
Mullins, L (2005) (7th Edition) Management and Organisational Behaviour
Prentice Hall, Pearson Education, Edinburgh
Pfeffer, J (1998) The human equation building profits by putting people first
Harvard Business School Press, Boston
Journals
Guest, D (1999) Human Resource Management–The Workers’ Verdict
Human Resource Management Journal, London, 1999.Vol.9, Iss. 3;
Marchington, M & Grugulis, I (2000) Best Practice Human Resource Management: Perfect Opportunity or Dangerous Illusion? The International Journal of Human Resource Management
Paauwe, J & Boselie, P. (2003) Challenging ‘Strategic HRM’ And the Relevance of The Institutional Setting Human Resource Management Journal 2003.Vol.13,
Purcell, J (1999) Best practice and best fit: Chimera or cul-de-sac?
Human Resource Management Journal, London: 1999.Vol.9, Iss. 3
Rogers, S. (2004) Power To The People Managers
People Management, London: Sep 2004. Vol. 10
Wal – Mart is one of the world’s biggest and most successful retail organisations. Its reach spans the whole of the US, the United Kingdom, and parts of Asia. It has over 1.2 million employees in America alone, and worldwide that figure can be said to be approximately 1.7 million. With profits rising to $10.3 billion dollars in 2005, an increase of 13% from the previous year, there is no doubt that it has been successful in the retail sector. However, its success has come at a price that does not tally with established service marketing theories as we will see.
In order to have a good understanding of Wal-Mart’s human resource practices in light of its success in relation to relevant services marketing theories, one will first need to identify and evaluate these relevant theories.
In recent times many developed countries have seen a dramatic increase in the importance of services to national economies and to the individual consumer. In the major European countries, the US and Japan, more people are employed in services than in all other sectors of the economy put together. Both public and private sector services in these countries account for between 60 and 75 percent of gross domestic product (Torrington et al. 2005). Now, a service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything.
Its production may or may not be tied to a physical product. The retail sector offers both tangible and intangible continuum for goods and services, i.e. a physical product is what customers want and the employees of a particular retail organisation provides a service that makes that experience easy so that customers come back (Lovelock 1996).
Successful service marketing theories recognise that the specific nature of services requires tailored marketing approaches and that traditional product-based marketing is unlikely to be effective if principles are transferred without adaptation. Just like manufacturing firms smart service businesses use marketing to create powerful brands which are positioned strongly in chosen target markets. However, because service firms differ from tangible products, they require additional marketing approaches (Levitt 1981). In a product business, products are fairly standardised and can sit on the shelves waiting for customers. But service business, the customer and front-line service employee interact to create the service. Thus service providers must work to interact effectively with customers to create superior value during service encounters. Effective interaction, in turn, depends on the skills of front-line service staff, and on the service production and support processes backing these employees. Established service marketing theories states that successful service companies focus their attention on both their employees and customers. They understand the service-profit chain, which links service firms’ profits with employee and customer satisfaction (Heskett et al. 1994). This chain consists of five links:
• Internal service quality: superior employee selection and training, a quality work environment and strong support for those dealing with customers.
• Satisfied and productive service employees: more satisfied, loyal and hardworking employees.
• Greater service value: more effective and efficient customer value creation and service delivery
• Satisfied and loyal customers: satisfied customers who remain loyal, repeat purchase and refer other customers
• Healthy service-profits and growth: superior service firm performance.
Therefore, reaching service profits and growth goals begins with taking care of those who take care of customers. All this suggests that, in order to achieve favourable service outcomes, service marketing requires more than just traditional external marketing, it also requires both internal marketing and interactive marketing (Brooks 1998). Internal marketing means that the service firm must invest heavily in employee quality and performance. It must effectively train and motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction.
For the firm to deliver consistently high service quality, everyone must practise a customer orientation. It is not enough to have a marketing department doing traditional marketing while the rest of the company goes its own way. Marketers must also encourage everyone else in the organisation to be customer-centred. Infact, internal marketing must precede external marketing. It makes little sense to advertise excellent service before the company’s staff is ready, willing and able to provide it (Bateson 1989). Thus, the service organisation must orient its employees carefully, instil in them a sense of pride and motivate them by recognising and rewarding outstanding service deeds. Interactive marketing means that perceived service quality depends heavily on the quality of the buyer-seller interaction. In product marketing, product quality often depends little on how the product is obtained. But in services marketing, especially in high-contact and professional services, service quality depends on both the service deliverer and the quality of the delivery (Gronroos 1984). Effective service deliverer customer interaction is important for achieving a satisfactory service transaction. Service marketers cannot assume that they will satisfy the customer simply by providing good technical service. This is because the customer judges service quality not just on technical quality, but also on its functional quality. Also, each interaction is a moment of truth for the provider, where not just the service encounter, but also the organisation, will be decisively judged by the customer. Thus, professionals cannot assume that they will satisfy the client simply by providing good technical service. They have to master interactive marketing skills or functions as well (Bitner 1996). Effective buyer-seller interaction may help to secure a satisfied customer. As competition and costs increase, and as productivity and quality decrease, more marketing sophistication is needed. Service companies therefore face three major marketing tasks: they want to increase their competitive differentiation, service quality, and productivity.
With this in mind we can now evaluate Wal – Marts human resource practices with regard to the service marketing theory stated above.
Wal – Mart is a retail success compared to a wide range of other retail organisations in the US and around the world that have tried and failed in the retail sector. Its success has come about from the wide range and far reaching goods and services it provides in the retail sector.
However, there is a dilemma with regard to this. In established service marketing theories as stated above, it argues that for an organisation to be successful it will have to hire, train, maintain, and reward, the best employees, so that they provide the best services to customers, which lead to customer satisfaction and retention, which also leads to increased profits for the organisation. This established theory differs from the practice of Wal – Mart which has faced increased criticism with regard to employees being pressured into working unpaid overtime, alleged sexual discrimination towards female employees, which constitute two thirds of its workforce (Adams 2005), low pay, poor worker safety, disability discrimination, etc (Miller 2004), and the company still enjoys outstanding profitability and growth whilst its employees are not treated fairly . Possible reasons for the success of Wal – Mart in light of such human resource practice and the theories mentioned can be said to come from the fact that it is a large organisation with outlets in and outside the US as well, i.e. when an organisation becomes too big, bureaucracy and red tape tends to filter through, therefore, employees have been slow to call for these damaging claims about the organisation possibly of fear of loosing their only job.
Also, because it has a strong hold on the retail sector, i.e. there are not a large number of retail outlets that provide the goods and services that Wal-Mart provides in bulk, it deems every employee as tangible, i.e. they can always hire someone else with no hassle whatsoever, thereby they do not pay as much attention to taking good care of their staff. Also, because most of their employees are women (two thirds), management within Wal – Mart can be said to be negligent of gender advancement. I.e. it is deemed that most women will one day return to the home to take care their family and children. Therefore, there is no incentive on the part of management to increase staff pay, provide rewards to the best performing staff, and improve worker safety, as mentioned previously because of the size of Wal-Mart bureaucracy and red tape prevails, thereby making it difficult for the most simple and important aspect of human resource management to be bypassed.
In addition critics dismiss Wal –Mart’s seemingly progressive HR Policies as cosmetic attempts to maintain its public image rather than a real effort to address the underlying problems it has, which shows that there is a lot of bureaucracy which only tends to be prevalent in large organisations. Under established theories on service marketing, for an organisation to be successful with regard to profitability and customer retention, management within the organisation would have to invest in hiring the best people, rewarding outstanding employees, all mentioned previously, does differ from the success of Wal – Mart with regard to the theoretical aspect of identifying employee treatment as the key to running a successful organisation rather than the problems which Wal – Mart faces. In addition, the fact that Wal – Mart is a privately owned company means that although it is subjected to the laws and regulations pertaining employee relations, it can do as it pleases. I.e. each and every employee that is hired by Wal – Mart takes the job under certain terms of agreement which the organisation should not be called upon if an employee is not happy with the way they have or are being treated by the company, because they have taken the job according to the terms of their employment. Also, because it is a privately owned organisation there is no worker representation which makes it very easy for Wal – Mart to do as it so pleases. Although, certain laws governing employee relations does state that employees should be treated fairly with regard to pay, health benefits etc, most organisations are in a business to make money, i.e. to be profitable and if what they do enables them to achieve this then they will continue doing what they have always been doing. Wal – Mart however seems to be trying to do something about this problems that have risen, i.e. the company’s CEO arguing that the company prides itself on its open door policy, and its fair treatment of what it terms ‘associates’. However, due to the size of the company (bureaucracy) any policy changes in favour of employee relations will be slow to trickle down to those most sort after, and will cost money to the company, in which theoretically company’s are always trying to cut costs to make a profit. Imagine a policy change that affects 2.2 million employees, that is a lot of money to spend which will surely affect its profit intake.
The implications of this finding is that although the issue of employee relations within Wal – Mart differs from established theories of service marketing, it can be said that this is a special case. Reasons being that if Wal – Mart does not get its act together in time it will be subject to court proceedings which will result in a large payout to employees, which will in turn dent its image and profitability. Theories in service marketing have boundaries. These boundaries are to do with the law on employee relations. If an organisation like Wal – Mart does not treat its employees fairly as stated within service marketing theory then it is subject to legal proceedings. Service marketing theories are established according to the law in a particular country and anything outside that can be said to be an unlawful practice. This can be said to be the major block as to why established theories on service marketing differs from the human resource practice of Wal – Mart. In addition to this, the fact that established theories in service marketing differs from the practice of Wal – Mart’s human resource means that academics would need to have a rethink about the boundaries of the validity of such theories, i.e. they would need to incorporate other aspects that are unforeseen such as the law governing employee relations within the private sector, the psychological aspect of being in a job because that is all an employee is reliant on to earn a living, etc. These are issues which academicians within the service marketing field will need to look into and address.
CONCLUSION
One can conclude here that although the norm from which established theories of service marketing states that the key to a successful organisation is making sure that the right employees are hired and taking care off, which waters down to customer satisfaction and retention, which then leads to profitability, differs from the HR practice of Wal – Mart, service marketing theory is still a new phenomenon and like any other established theory it is prone to refinement and amendment as we humans are constantly evolving, so do trends in marketing, the sciences, economics, and other theories, etc are also evolving. Therefore, the theory is still valid it will need to incorporate other aspects of service marketing which are unforeseen as mentioned in the latter.
REFERENCES AND BIBLIOGRAPHY
Adams, R (2005) “Nickle & Dimed (and passed over): Dukes V. Wal-Mart Proceedings of the 12th Annual Conference of the European Institute of Retailing and Service Studies.
Bateson, J.E., (1989), Managing Services Marketing: Text and readings, Hinsdale, IL: Dryden Press.
Brooks, R.F., and Lings, I.N., (1998), Implementing and measuring effectiveness of internal marketing, Journal of Marketing Management, 14, pp. 325 – 351.
Cole, C., and Palmer, A., (1995), Services Marketing: Principles and practice, Upper Saddle River, NJ: Prentice Hall, pp. 56 – 60.
Bitner, M.J., and Zeithaml, V., (1996), Services marketing, New York: McGraw Hill, pp. 8 – 9.
Gronroos, C., (1984), A service quality model and its marketing implications, European Journal of Marketing, 18, 4, pp. 36 – 44.
Heskett, J.L., Jones, T.O., Loveman, G.W., Sasser Jnr, and Schlesinger, L.A., (1994), Putting the service – profit chain to work, Harvard Business Review, March.
Kotler, P., Wong, V., Saunders, J., and Armstrong, G., (2005), Principles of Marketing, 4th European Edition, Prentice Hall.
Levitt, T., (1981), Marketing intangible products and product intangibles, Harvard Business Review, May – June, pp. 94 – 102.
Miller, G (2004) “Every day low wages: The hidden price we all pay for Wal-Mart” A report by the Democratic of the Committee on Education and the Workforce, US House of Representatives.
Normative Philosophy in business ethics is focused upon the analysis of the behaviour of an organization with respect to a set standard as argued by George D. Chryssides and John H. Kaler (1993) . This method even though argued to risk the unreal philosophy by some authors is extensively used to analyse the behaviour of an organization for ethical and un-ethical behaviour. In this essay the normative theories are used to compare and contrast an ethical fund and un-ethical fund. For the discussion purposes, Ethical funds from Canada and Vice fund from United States of America are analysed using the theories of Normative Philosophy. A factual evidence of both the companies is first presented to the reader followed by the critical analysis in the form of discussion to the reader. This is followed by the conclusion on which the ethical fund and the un-ethical fund are identified based upon the results from the analysis.
2: Company Information
2.1: Ethical Funds
This company is a Canadian mutual fund investment company that pioneers in providing a wide range of mutual fund solutions to its customers in Canada. The company details extracted from the website (www.ethicalfunds.com) is presented to the reader below.
President & Chief Executive Officer: Don Rolfe
Year Formed: 1992 (The first Ethical Fund® (Ethical Growth Fund®) was launched in 1986)
Assets Under Management: $1.8 billion*
Number of Unit Holders*: 180,000
Number of Employees 243*
*As at February 2005
From the overview on the company annual report (2004) it is also clear that the company provides mutual funds solution to the customers with focus upon value added services and optimum rates of interest to provide maximum benefit to the clients. Furthermore, the policies of the company reveal that the company is not only interested in socially responsible investment but also explicitly stated that the investments will not be made in the following categories of business
Tobacco: The Company will not invest in the companies under the category of Tobacco manufacture and sales.
Military: Under this category the company will not invest in organizations that are involved in the manufacture weapons of destruction to support military action.
Nuclear: The company will not only refrain from investing in organization that employ nuclear reactor but also refrain from investing in companies that are involved in any for of nuclear business.
2.2: Vice Fund
Vice Fund is an US based mutual fund organization that provided investment advice to its clients through the long-term growth of the capital. The key facts about the organization extracted from the company’s annual report (2005) are as follows
President: Dan Ahrens
Assets Under Management: $31.482 million *
Number of Unit Holders*: Not Available
Number of Employees Not Available*
*As at February 2005
Unlike the Ethical Funds, the Vice Fund invests upon any organization irrespective of the nature of the business. The company also provides services through other subsidiary organizations like Generation Wave Fund.
The company also does not provide a standard set rate to the customers and does not take the liability for any minor changes in the market.
3: Discussion
Andy Crane and Dirk Matten (2003) argue that the normative analysis of the organizational behaviour and business ethics comprise of three essential tools (or theories) as discussed below
3.1: Objectivism
Andy Crane and Dirk Matten (2003) say that the objectivism whish is the synonym for ‘epistemological realism’ mainly corresponds to the factual analysis of the numbers (i.e.) the analysis of the company’s activities and their transaction policies that establish a logical track. This makes it clear that the Objective approach of the normative analysis is predominantly concerned with the ability of the organization to establish ethical behaviour through their business process and policies embracing the business.
In the light of the above statement, the insight into Ethical Funds makes it clear that the company not only provides a wide range of financial investment solutions but also discloses the information on the rate of interest and the returns guaranteed for the investment (if applicable). Alongside, the company’s annual report also justifies that the shareholders were provided with the complete information on the financial performance along with the return from the investment on every organization by the company during the financial year. Also it is clear from the company annual report (2004) that it provides services under only one business name. This makes it clear that the company is adhering an uncomplicated method of business management.
Vice Fund on the other hand provides financial investment solutions under two trading names namely Vice Fund and Mutuals.com This method of providing services under two different trading names obviously increases the complications in the management eventually leading to un-ethical business activities between the organizations. Also, the company does not disclose all the relevant information to the shareholders and investors thus making the business process more translucent rather than transparent method as in the Ethical Funds above.
3.2: Subjectivism
Subjectivism unlike, its counterpart above mainly concerns with a company’s external dealings like for example the kind of organizations that the company invest upon and the extent of risk etc. This also includes the organization’s responsibility to account for liability and protect the investment by the investors. This makes it clear that the subjectivism approach of the normative philosophy not only evaluates the external elements that influence the company but also provide the bigger picture on apprehending vital flaws in the business that leads to un-ethical business management. This makes it clear that this theory actually analyses the moral philosophy in a normative manner (i.e.) the subjectivism approach provides a logical approach to analysing the moral philosophy attributes of the business.
The overview on Vice Fund’s investment strategies has revealed that the company invests upon any organization only focusing upon the rate of return from the investment rather than considering the nature of the business. This apparently increases the risk associated with the business and the investments of the organization. For example the investment in an organization in military sector will result in a loss when it becomes the prime target for terrorist attack. Also, the investment by the company in casinos and gaming organizations without having specific policies in the investment has increased the level of risk to a very high level.
Furthermore, it is clear from the exploration into the company’s website which states that the organization will not take any liability for loss due to a specific investment. This makes it clear that the company’s adherence to the business ethics is minimal or negligible. The above arguments also justify that the risk involved with the investment by the general public on this company is very high.
The factual representation of the company Ethical Funds on the other hand has revealed that the company adheres to strict policies on investment. This is not only as part of the social responsibility of the organization that attributes to the moral philosophy but also to the normative philosophy due to the fact that the company evaluates the risk associated with the investment. This makes it clear that Ethical Funds is not only operating at a lower risk level but also value the investment of the customers by refraining from investing on business sectors that involve high level of risk.
Furthermore, the company also takes special interest in investor benefits and also eliminates the liability through avoiding risk-involving investments. The rate provided by the organization are also competitive to that of the vice Fund counter part.
From the above arguments it is clear that the Vice Fun is not following an ethical route to the business management in the market.
3.3: Monism and Pluralism
The normative philosophy of analysing the business includes the Monism and Pluralism approach when the organizational policies on a single concept have multiple dimensions (i.e.) when the organizational policies have different sections that influence upon the same concept or terms and conditions. This approach as argued by James Surowiecki (2005) provides a profound analysis on the hidden clauses of the business terms that are essential to be identified in order to establish the validity of the business. Even through the hidden clauses appear¬ to be part of the moral philosophy, the fact that the information as such when analysed without performing a qualitative analysis (moral) justifies the approach under normative philosophy.
An investigation into the company policies with respect to the investors and investment by the organization reveals that the company adheres strictly to its policy with respect to the investment. It is also clear that company through the risk management by strictly refraining from investment on Nuclear, Tobacco and Military sectors of business justifies that the company’s policy on investment is strictly controlled by more than one conditional clause. Since this is for the company to invest, the funds deposited by the investors of the organization, this plural form of sections under one condition makes it clear that the organization is trust worthy for investment.
On the other hand, an insight into the Vice fund reveals that the company doe not have any set rules to follow in terms of the investment. This is clear from the varied range of company funds that comprises its investment. This makes it clear that the company’s high risk approach is also risks the investment by the clients in the organization. This singular approach where a set of policy framework is essential makes the company prone to risk.
Furthermore, the company’s multiple conditions on the investors end where it takes no liability for the loss on investment, further shows the plural approach of the organization in preventing the any liability to the customers.
4: Conclusion
The discussion on the two companies has revealed that Ethical Funds is more subjective, has an objective approach to the customer relations as well as the overall business and above all adheres pluralism in the investment of the money invested by the investors to the funds. Furthermore, it is also established that the company adheres to strict rules and regulations whilst performing the business transaction and also provides comprehensive information on the company’s policies, assets and other details.
It is also established that the Vice Fund the counterpart organization in the analysis not only involves high level of risk in the investment eliminating objectivism as well as the subjectivism through the high level of risk involved in the investment by the customers rather than accepting all or some of the liability. Furthermore, the pluralism established in the terms and conditions with the investors further makes it clear that the company is not adhering to healthy business methods.
It is also proved that the normative analysis of the business ethics adhered by an organization not only provides consistent results but also provides clarity in the discussion through the use of justifiable information to derive upon a valid decision.
Thus to conclude this report, it is clear that the Vice Fund is explicitly un-ethical in nature whilst the Ethical Funds is explicitly ethical in nature.
5: References:
Books
Andy Crane and Dirk Matten (2003), Business Ethics, UK: Oxford University Press
George D. Chryssides and John H. Kaler (1993), An Introduction to Business Ethics, UK: International Thomson Business Press
Journals and Reports
Annual report (2004), Ethical Funds, Canada
Annual report (2005), Vice Fund, United States of America
James Surowiecki (2005), The Wisdom of Crowds, UK: Abacus
This essay explores the rationale behind MG-Rover’s attempt to forge alliances. It begins with a brief history of the brand because in order to understand the rationale for alliances, you must understand where the company found itself at the start of the new millennium.
The Rover brand emerged over a century ago and provided high-quality cars to the middle-classes. Rover was then assimilated into the nationalised British Leyland in the mid 1960s. However this was, in hindsight, seen as a failure as it starved the brand of investment and seriously harmed its reputation for quality. In 1982, the Austin Rover Group was spun-off and a recent strategic alliance with Honda was giving them access to Honda’s engineering expertise and produced some excellent results. However the group was then sold to British Aerospace in 1988 who in turn sold it on to BMW in 1994. This ended the alliance with Honda.
Within a year, Rover was, within BMW circles called “the English patient” as they believed they had bought a chronically sick car company. The production and labour facilities were seen as antiquated and the model range in urgent need of updating. BMW persevered and invested billions of pounds in revamping the whole operation to try to modernise it. They finally gave up in 2000 when the drain on BMW’s resources was threatening their own strong balance sheet. The company was sold to a group of private investors, the Phoenix Consortium, for a nominal sum. This newly formed entity was named the MG-Rover group. This group had, however, lost two key niche brands along the way – the Mini and the Land Rover. MG-Rover had, in effect, been picked clean of key satellite brands and what was left was a company with essentially three models; the Rover 25, 45 and 75. The very problems it faced at this juncture were the reasons it attempted to forge alliances over the next five years with other firms including Proton, Tata , China Brilliance and SCIA . These reasons included:
Lack of production volume
MG-Rover lacked any serious production capacity. The top five car producers all manufactured over three million units a year each in 2003 . In comparison, MG-Rover’s production of 107,000 units in 2003 was almost derisory. The key to success in the automobile industry is either volume or a successful niche product. With volume, you get economies of scale which can carry the high costs of developing a new model. MG-Rover’s 107,000 cars alone could not justify carrying all the overhead necessary to justify new models. Without new models, sales fell. The attempt to forge an alliance was an attempt to escape from this vicious circle. The attempted collaboration with Chinese firms was an attempt to rapidly scale up production in a single market with huge potential. Equally the Chinese were eager to acquire a ‘Western’ brand and technology.
Lack of R&D Capacity
When BMW sold the Land-Rover brand to Ford, the Research and Development facility at Gaydon also went with it. This deprived Rover of most of its R&D capability which is vital in today’s car market where constant innovation is the key to success. Combined with its lack of production volume, MG-Rover lacked any ability to perform serious innovate research itself. The joint ventures with Honda and BMW had shown what MG-Rover was capable of but without deep-pockets it was stuck in a time-warp.
Poor Model Range
This is obviously linked to the lack of R&D but exposes even deeper strategic problems within MG Rover. Even when BMW owned Rover, the only new model it launched was the Rover 75 - an executive saloon . Yet the growing segments in the market were the super mini, the Sports Utility Vehicle and the MPV. MG-Rover had little or nothing in these segments. Ironically MG-Rover had, under BMW, drastically improved its quality of the range it had. However, the result of this model gap, was that it was haemorrhaging market share in its only real market; the UK. In 1990, it had 13.62% of market share in the UK, by 2004 it was down to 2.99% - see graph below. MG-Rover simply did not have the full range of models to keep attracting younger customers. An alliance was needed to flesh out their model range. In hindsight, now it can be seen that the strategic alliance with Honda was probably Rover’s best chance of success. It allowed Honda easy access to the UK market and Rover would have gotten access to their R&D and a wider product range. They had jointly developed five models before the break-up of their alliance. It is clear that Rover was probably seeking what it already had had with Honda.
Graph from p.17 ‘Who Killed MG Rover’: A special Report from Cambridge MIT Institute’s Centre For Competitiveness and Innovation: Trumpington St., Cambridge, UK
Lack of International Markets
MG-Rover was essentially an English company. The only internationally recognisable brands it possessed was Mini and Land Rover. When these were gone, it was tied to the vagaries of the UK economy and could never achieve the global economies of scale that, for example, Toyota or VW had. This weakness repeatedly hindered Rover over its history. Because when it did have good models like the Montego, Maestro and Metro, it simply did not have the distribution network to sell them internationally to gain volume and higher marginal profits.
The alliance with BMW gave it a renewed potential for accessing the European market and beyond but when BMW was gone, Rover was back to square one. It needed alliances to rectify this and help it to expand geographically. However, established world markets were oversupplied and the only real place it could turn was developing markets. Rover still had the technological experience which was marketable in these regions - this is why China drew their interest. China had the mass market that would allow it to scale up production in a low labour cost economy – it seemed an ideal solution to Rover’s problems.
Negative Publicity
It is worth noting that the weaker MG-Rover became, the lower its sales went. The public did not want to buy a brand that might not exist next year. A successful alliance may well have stemmed this effect and even turned it. MG-Rover needed the imprimatur of another successful company. The only period when their image was really improving was when BMW owned it and its prestige and technology rubbed off – but even this was not enough to support sales.
Lack of Cash
This real issue at the core of MG-Rover’s problems from the moment it broke from BMW was cash. Without a rich parent pumping money into the company, it was consuming its own capital to cover the day to day losses it was making. By 2003, it had even sold its main production plant, Longbridge for 45 Million pounds and was leasing it back. In 2001, it had sought investment from China Brilliance in order to fund new models but this deal eventually fell through. Again in 2004, Rover and the Shanghai Automotive Industry Corporation (SAIC) were courting but the consummation never took place. SAIC was just not willing to pour in the cash necessary. Their logic was incredibly sound - if BMW cash and technology could not turn Rover around, could anyone do it? The Chinese also realised that they knew more about their own markets than Rover did and all they were really after were Rover’s models and technology; not a potential money-pit. In the end, all that was bought – by the Nanjing Group – was the rights to the MG-Rover’s models and technology for 67 Million pounds. Later the Longbridge plant was physically stripped of the machinery and this was shipped to China.
It must be asked if the real rationale for a search for alliances may really have been a quest for someone to finally buy any value that was left within MG-Rover. The men behind the Phoenix Trust were not new to the industry, they must have know the situation MG-Rover was in.
In the final analysis, when MG-Rover split with BMW it was too big to be a niche market player and too small to be the global player it wanted to be. It needed to forge alliances to rectify these problems. It needed technology, a new model range and a brand boosting connection with another firm. But most of all, it needed cash.
Bibliography
Holweg, M, Oliver, N, Who Killed MG Rover? , Centre for Competitiveness and Innovation, Cambridge University, Cambridge, 2005.
Rover’s Billion Pound Plunder, Retrieved from http://news.bbc.co.uk/1/hi/ business/4574603.stm, November 2005.
Rover Sold To Nanjing Autos, Retrieved from http://news.bbc.co.uk/1/hi/ business/4708739.stm, November 2005.
Williams, K, William, J, Haslam, C, 1987, The Breakdown of Austin Rover: A Case Study in The Failure of Business Strategy and Industrial Policy, Berg Publishers, Oxford.
J.B. Quinn (1992) argues that the producing power and economic strength of any organization within the business is more reliant upon its intellectual and service capabilities. This is mainly because of the fact that the information is the critical element that contributes for the growth of an organization in the modern era where there is stiff competition both in the national and international markets. In this report the General Insurance company’s strengths and opportunities are analysed in connection with the intelligent enterprise theory of J.B. Quinn (1992). The following sections provide a critical analysis on the company’s core information management strategy in the light of the above statement.
2: Service competencies
From the case study it is clear that the company pioneers in the providing effective service to its customers in the insurance industry from as early as 1987. This is evident from the company’s successful issue of 250,000 policies and 70% of the human resource under 32 years of age in 1987. Alan M. Kantrow (2001) says that the service competencies of an organization are critical for its sustainable growth in the target market. This is mainly because of the fact that the increase in the competition in the insurance industry, it is imperative to gain strong service competencies in order to differentiate the company from its competitors. The management structure of General Insurance makes it clear that the branch managers have lot of opportunities to develop new products and services in the insurance industry focusing upon their geographical area. This is synonymous with the argument of Cohen, and D. Leventhal (1999) that the service competencies within the organization can be developed focusing upon the branch level competencies with the ability to introduce innovation in the service methods that are successful in a particular geography for the company.
Furthermore, it is also evident from the arguments for G. Hamel and C. K. Prahalad (2001) that the innovation and development in the service competencies is predominantly a derivative of the efficient management of the information or knowledge management within the organization. This makes it clear that an organization should not only deploy efficient information management system but an effective knowledge management system that provides intellectual support for the development of innovative methods to accomplish high level of service competencies.
Alongside, it is also clear from the case study that the main problem faced by the General insurance is that of information overload whereby the branch managers were overloaded with information on the company policies and strategies in hard copies rather than electronic versions. Also, the reluctance of some of the branch managers to use electronic mailing system as well as the stringent administrative policies that conflicted with the innovative strategies of the branch managers towards business development further hampered the ability of achieving intelligent enterprise. This is also because of the increase in the pressure on the branch managers who were expected to do the budgeting and planning with little support from the top-level management. Even through it is debatable that the management information system was established as early as 1987, the lack of flexibility in the system was the major factor that made most of the branch manager to refrain from using the information source. In the light of the intelligent enterprise scenario, where J.B. Quinn (1992) argues that an organization can accomplish effective knowledge management and increase its service capabilities through the use of the intellectual resource of business only when the managers are not overloaded with information. This makes it clear that it is essential to deploy a flexible and interactive management information system that provides efficient as well as easy access to key information. From the above argument it is also clear that the General insurance company can effectively accomplish strong intellectual capabilities through the re-structuring of the information management system currently deployed to provide key information to the enable the branch manager for quick decision-making as well as support the development of the service capabilities of the staff. This is obviously because of the fact that the availability of the right information at the right place at the right time enables quick process of the business transaction as argued by John Ward and Joe Peppard (2002)
3: Smallest Replicable Unit
J. B. Quinn (1992) argues that the smallest replicable unit within an organization is the critical element that attributes to the business intelligence of the organization. This is mainly because of the fact that the smallest replicable unit being the business unit that can be copied from one branch to another branch is the deciding factor of the level of complication in an organization’s management information system. The above argument is justified by P. Bierly, and A. Chakrabarti (2002) who say that the time taken by an organization to replicate a business unit corresponds to the size and especially the amount of information handled by the business unit being replicated. P. Bierly, and A. Chakrabarti (2002) further argue that in order to achieve intellectual leadership and accomplish business intelligence, an organization should not only maintain a streamlined organization structure but also deploy efficient and structure enterprise content management where the business content can be effectively replicated within optimal expense of time and resources.
In the case of General Insurance, the smallest replicable unit is the branch itself since the organization did not have a streamlined and efficient information management system that is used by all the branches. Alongside, the fact that the information from the head offices are circulate to the branch managers in the form of hard copies of printed papers rather than electronic versions which has actually doubled the workload according to the some of the branch managers makes it clear that the company’s information management or the business intelligence through the use of the management information system is not efficient. Furthermore, it is also clear from the approach of J. B. Quinn (1992) who argues that the smallest replicable unit in a business environment is mainly dependant upon the complexity of the information management and above all the corporate strategy of the organization itself. This is because of the fact that the strategic planning and approach by the top-level management is the main element that contributes to the complexity of the information eventually resulting in information overload as well as complicating the smallest replicable unit within the business as argued by D. K. Goldstein and M. H. Zack (1999) .
It is also interesting to note that the corporate planning of the organization is the influencing element on the business intelligence of an organization as argued by H. Mintzberg (1994) . This is mainly because of the fact that the strategic planning within an organization is the key element that attributes to the quality and structure of the information management system. This eventually contributes to the level of complexity in the system thus making it clear that the corporate planning itself should reflect upon the information management in order to achieve an intelligent enterprise solution.
Apart from the problem of complex information management structure in General Insurance that affects the smallest replicable unit, the fact that the company has accomplished the difficult task of accomplishing the electronic form of information management and communication makes it clear that there is ample opportunity for the organization to accomplish business intelligence. This is mainly because the streamlining of the existing system to reflect upon the business scenario and providing easy information access to the branch managers will improve the service capabilities of the organization as well as reducing the complexity of the information management. The lower level of the complexity will obviously enable business intelligence within the organization. This is justified by J. Nahapiet and S. Ghoshal (2001) who say that the intellectual capital involved with the smallest replicable unit is reduces with the streamlining of the information management process, which attributes to the intelligent enterprise described by J. B. Quinn (1992).
4: New Management Paradigm
J. B. Quinn (1992) says that the management restructuring in an organization is not always necessary to accomplish intelligent enterprise. But it is essential to revise the management methods, which is essential to achieve high level of productivity through the use of the intellectual and service capabilities. This is synonymous to the argument of T. Davenport, S. Jarvenpaa, and M. Beers (1999) who say that the management approach towards the planning and management of its business units is the one that needs to be revised in order to accomplish business intelligence within the organization. This is because of the fact that an organization by re-structuring the overall management process, it can accomplish business process re-engineering more than business intelligence. Since the existing business process is profitable in General insurance, which is evident from the consistent productivity of every organization, it is clear that the management methods need to be revised rather than the management structure.
From the case study it is evident that the conflict of interests among the branch managers due to the stringent administration methods for audit purposes whilst implementing innovative methods without regarding the administrative process makes it clear that the major problem faced by the organization in terms of management is the conflict of interest. This is because; the conflict of interest is the major element that causes the heavy workload for the managers, which eventually decrease their involvement in implementing effective information management. Derek Torrington and Laura Hall (2002) argue that the managers in an organization can perform effectively only when senior management methods are not creating conflict of interest. This makes it clear that not only for business intelligence but also for the effective performance in the human resource management perspective itself, it is essential to eliminate conflict of interests between the managers and the management.
It is also interesting to note that by reducing the conflict of interests in an organization, it is not only easy to establish a streamlined information management process but also increase the intellectual assets of the organization through innovative methods of achieving service capability that outperforms its competitors. Apart from the factor of competitive advantage and streamlined business process, the elimination of the conflict of interests in the organization will reduce the redundancy in the working methods of the managers as argued by Markus J. Thannhuber (2004) . In the General Insurance case study it is clear that the work of the branch managers was overloaded due to the necessity to accomplish innovative sales promotion with adherence to stringent administrative methods, which has actually increased the workload resulting in redundancy. Furthermore, the comments by one of the branch managers that it is essential to view any communication on paper rather than the electronic mails make it clear that the feedback from the audit process on poor administration has forced the mangers to use traditional methods of information management rather than using the technology.
From the above arguments it is clear that in order to achieve intelligent enterprise within General Insurance it is essential to revise the management process and provide an optimum management level between the administrative process and implementation of innovative methods by the branch managers without the concern of failing to pass the auditing process.
5: Implication on T Mobile UK Ltd
T-Mobile UK Ltd is a subsidiary of the Germany based mobile service provider T-Mobile International AG & Co (Company Profile, 2005 ). The company operates as part of the group in the UK providing mobile voice and data service to residential and business customers.
From the case study analysis above, the following implication of Intelligent Enterprise by J. B. Quinn (1992) can be identified upon the organization
a. The organization is a branch of the overall group that is operating on a global basis. This makes it clear that the centralised information management to cater the business intelligence on a global basis as well as accommodate the service capabilities that compete with the competition in the UK mobile phone market (for T-Mobile UK Ltd) is essential. The current implementation of the IBM e server responsive infrastructure to streamline the information management process to efficiently provide key information to the store managers upon the sales and forecasting as well as supporting the top-level management in decision making through the effective analysis and presentation of the corporate information to cater corporate planning focusing upon business intelligence makes it clear that the organization has implemented the intelligent enterprise strategy. Furthermore, the fact that the company not only provides online information access to the managers and employers but also to the customers through providing the itemised online system. This approach has not only increased the company’s productivity but also reduced the costs associated with the paper based itemised billing statements sent to the customers thus increasing the overall financial performance of the organization
b. The smallest replicable unit within the T-Mobile UK Retail stores is not the whole store but any segment of the store business that can be productive in another branch. The effective networking of the information and availability of the transactions conducted by a staff member in any of the till computers across the UK retail chain of stores makes it clear that even the store staff can be the smallest replicable unit. This approach has not only increased the productivity but also enabled the effective human resource management since the staff allocation between a set of stores in a given location is possible without any issues.
c. The company profile of T-Mobile has further revealed that the management process of the organization is streamlined with the focus upon the sales whilst maintaining the balance between the administrative methods to accomplish effective auditing process. This makes it clear that the conflict of interest between the store managers of the organization and the senior management is very low or negligible. This also justifies that the new management paradigm is not always necessary to accomplish intelligent enterprise whilst it is essential to revise the management process to streamline the overall information management within the organization.
6: Conclusion
The arguments in sections 2, 3 and 4 have proved that the company under study General Insurance can accomplish business intelligence and improve its service capabilities through streamlining the business process in the light of the information management. It is also clear from the discussion in section 5 that the T-Mobile UK Ltd has accomplished higher level of performance and productivity through the effective implementation of the business intelligence and service capabilities in the organization.
References:
Books
Derek Torrington Laura Hall (2002), Personnel Management HRM in Action, UK: Prentice Hall
D. J. Teece, 1987, The Competitive Challenge: Strategies for Industrial Innovation and Renewal, Ballinger Publishing co., Cambridge, MA, 1987, pp. 221-233
J. B. Quinn, (1992), Intelligent Enterprise, The Free Press
John Ward and Joe Peppard (2002), Strategic Planning for Information Systems, 3rd Edition, UK: John Weily and Sons
Markus J. Thannhuber (2004), The Intelligent Enterprise: Theoretical Concepts and Practical Implications (Contributions to Management Science), UK: Physica-Verlag
Journals and White Papers
Alan M. Kantrow (2001), INTELLIGENT ENTERPRISE AND PUBLIC MARKETS, McKinsey Quarterly, 00475394, 2001, Issue
Company Profile, (2005), T-Mobile International AG & Co, UK: Data Monitor Plc
D. K. Goldstein and M. H. Zack (1999), “ Capturing Value from Knowledge Assets: the New Economy, Markets for Know-how, and Intangible Assets”, California Management Review, Vol. 40, No. 3, Spring 1999, p. 55-79
G. Hamel and C. K. Prahalad (2001), “The Core Competence of the Corporation”, Harvard Business Review, May-June, 2001, pp. 79-91
H. Mintzberg (1994), “The Fall And Rise Of Strategic Planning”, Harvard Business Review, vol. 72, no.1, 1994, pp.107
J. Nahapiet and S. Ghoshal, (2001), “Social Capital, Intellectual Capital, and the Organizational Advantage”, Academy of Management Review, vol. 23, no. 2, 2001, pp. 242-267
J. G. March, (2001), “Exploration and Exploitation in Organizational Learning”, Organization Science, 2001 vol. 2, no. 1, pp. 71-87
New Analysis, (2005), T-Mobile rings the changes with IBM and Triangle, UK: IBM (www.ibm.com)
P. Bierly, and A. Chakrabarti (2002), “Generic Knowledge Strategies in the U.S. Retail Industry”, Strategic Management Journal, Vol. 17, Winter Special Issue, 2002, pp. 123-135
P. Goodman and E. Darr, (1996), “Exchanging Best Practices Through Computer-Aided Systems”, The Academy of Management Executive, vol. 10, no. 2, 1996, pp. 7-19
T. Davenport, S. Jarvenpaa, and M. Beers (1999), “Improving Knowledge Work Processes”, Sloan Management Review, Summer, 1999, pp. 53-66;
Private Finance Initiative (PFI) was launched with the objective to rapidly develop and augment public facilities in a win-win situation for the government and the private sector and the overall benefits being enjoyed by people in general. Keeping capital payments out of the government’s borrowing requirement, and generating good value for money are the two main reasons for the government to encourage PFI. It is basically transfer of risk from the public to the private sector. PFI is mainly applied by government to projects that are big, complex and require regular maintenance.
To assess and understand the Private Finance Initiative the Treasury defines PFI as follows:
“PFI is the mechanism for the public sector to contract for the purchase of services on a long term basis to take advantage of private sector management skills incentivised by having private finance at risk. This will commonly involve the private sector supplying a new major capital asset, such as a hospital or a school, on a design, build, finance and operate basis”
“A system for providing capital assets for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets and then operates those assets to sell services to the public sector. In most cases, the capital assets are accounted for on the balance sheet of the private sector operator”
www.dasa.mod.uk/natstats/ukds/2004/glossary.html
In my research it was found that although government intention was to provide a clear benefit to the people with better public facilities the actual implementation had some problems. I highlight two cases where things didn’t go quiet as planned.
The first case is “Tower Hamlets”: 27 schools were to be refurbished at a cost of £120m by a company called Tower Hamlets Schools Ltd. The major contractor behind the company was a company called Ballast PLC and the finance backing was by Abbey National Treasury Services (ANTS) – Ballast PLC was a subsidiary of a DUTCH company which closed business and the finance company Abbey National Treasury Services withdrew completely from the PFI finance market.
As a result many schools were left with buildings under construction affecting the teaching standards and in some cases student moral. Further more to continue services the schools paid a higher fee to Tower Hamlets Schools Ltd to keep it in business and ensure completion of the project.
The above case highlights how international businesses can affect the execution of contracts awarded under PFI. We can compare using two models on Internationalization – 1) The old model on internationalization i.e. The Uppsala Model and 2) The new theory which says that new companies are going global right from the start i.e. The New International Venture Theory
As we can see in the above case that since the Dutch parent company had losses and went out of business local schools in UK had to face problems.
A second case is that of the very infamous “Jarvis”, it is the largest contractor in the PFI scheme run by the government. As a large company it has run into problems with many contracts. It currently holds about 10% market share by value of the contracts awarded.
Prominent amongst its failed commitments are the Potters Bar rail accident, Jarvis-built school in Scotland, Jarvis contract to re-roof schools in the Wirral and the Lancaster University delay in providing new halls of residence.
Jarvis and its subsidiaries have now changed names in order to avoid a public backlash against the many poor performances it has had. Jarvis has begun to call the group ‘Engenta’ and also bids for contracts in the name of “Prismo”. The Jarvis Primary Health Company, a joint venture with the Montrose Partnership, changed its name to Patient First Partnerships
Even though the company has issued profit warnings and has paid millions of pounds in compensation, it remains an important player in the PFI business as it is a one-third owner of Tube Lines, which runs several London Underground lines under a large Public Private Partnership contract.
PFI has its own share of success as well, with large scale development over the past decade – record number of new schools and hospitals, highly capital incentive projects for rail and road development which now have staggered payments over 25 years normally and prisons. The Docklands Light Railway Extension of 4.2kms is a successful project linking the South of the river Thames and SE London to Kent.
Public – Private partnership has many best practice cases which highlight the gains - typical government projects run into problems of cost/time overruns, levels of usage, construction delays, integration of technology and automation and effective management of the projects. Key to many projects is the on going service and maintenance provided by the private sector enterprise. A typical PFI consortium involves a construction company, a finance bank and a service provider who would maintain and run the facility.
In theory the key benefits from the PFI scheme are:
- Public services to be provided by private sector:
o Expertise in certain core areas results in better deliverance of the public service which government might not be able to match. Also in smaller countries where governments don’t have the experience of executing large projects successful private companies can do the same effectively.
- Efficient Private management:
o As management is in private hands accountability increases hence greater efficiency results.
- Separation of ownership and services:
o A key argument is that of governments putting tax pounds upfront for expensive public facilities like roads. With PFI the ownership is with the private company and the government pays for the services it receives.
- Competition amongst private bidders:
o Competition results in rival companies providing the best services at the lowest cost.
- Risk management
o Typical government projects over run on schedules and budgets resulting in tax payer money being blocked or delayed in a non performing facility. In the PFI the onus of project completion and deliverance is on the private company hence the government just needs to ensure that the project is completed on time within the set parameters.
But critics point out that the government is committing a lot of money by way of payments spread over 25 years and hence future governments will have fewer funds at their disposal for development. By 1999, future commitments for PFI projects in Britain totaled £83.8 billion (up to 2026).
As the PFI increases, to raise money the government may increase taxes and charge for services it provides and hold back the expenditure. The PFI is estimated to result in 150,000 transfers and 30,000 job losses from 1998 to 2007.
If we follow the cycles provided in the Uppsala model we can see that the PFI is being fine tuned to deliver better services and avoid project delays just as a company expands gradually into foreign markets with growing local knowledge and experience. During research we found that PFI was successful in building roads and prisons but failed when it came to schools hospitals, and IT project. One of the main causes for the failure with PFI is that with technology advancing at a very fast pace it is not feasible for the government to keep updating its IT sector and therefore it was a big failure in the PFI. The government should find out the causes of such failures at hospitals and schools and extend the best practices in the successful completion of road and prison projects.
One of the most common feature of PFI is that the cost keeps increasing and therefore not feasible at times to continue with the project and therefore a big question if efforts and money should be invested in the PFI.
The above case study has been very useful to understand the concept of Private Finance Initiative that has been adopted by the government. There are numerous lessons learnt from the above case as it gave me a brief analysis of how the government operates and finances out its huge projects for better development and maintenance, as if it is done by the public sector than there are many political issues that might effect the development and maintenance of the project and therefore it prefers PFI to doing it by itself as according to the government it is the transfer of risks to the private companies.
The case and further research gave me an idea of the pros and cons of Private Finance Initiative as it may be successful in a few cases but not necessarily in all kinds of projects and therefore the government has to look into detail of which projects to be given to the PFI.
As we said above that from research it can be seen that cost was one of the main concerns in the PFI and therefore the private companies should look into this carefully and try and resolve this to lower cost to get more projects from the government for development and maintenance.
British government has claimed that the private sector “can compensate for the higher cost of borrowing by being more innovative in design, construction, maintenance and operation over the life of a contract by: avoiding “costly over-specification in design”; creating greater efficiencies and synergies between design and operation; investing in the quality of the asset to reduce maintenance costs; and “managing risk better”.
REFERENCES
Ford, D. (ed) (2002) Understanding Business Marketing and Purchasing, Third Edition, Thomas learning
Buckley, P.J. and Ghauri, P.N. (1999) The Internationalization of a Firm, Thomson Business Press
Hill, (ed) (2002) International Business, Competing in the Global Marketplace, McGraw Hill
Daniels and Redebaugh (ed) (2003) International Business for twenty first century, Pearson Education
Lee, kiefer and Steve Carter (2005) Global marketing Management, OUP
• A Government initiative which aims to bring private sector enterprise and discipline into areas traditionally regarded as public
www.niauk.org/article_30.shtml
• A system for providing capital assets for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets and then operates those assets to sell services to the public sector. In most cases, the capital assets are accounted for on the balance sheet of the private sector operator.
www.dasa.mod.uk/natstats/ukds/2004/glossary.html
• Introduced by the Conservative government in 1992 as a way of generating new investment in public services without raising taxes.
news.bbc.co.uk/1/low/in_depth/business/2001/ppp/1483456.stm
• The UK Government’s initiative to encourage the development of private finance in the public sector.
www.stirling.gov.uk/index/services_homepage/learning/ppp/ppp-glossary.htm
• A government or public authority initiative to acquire private financing for public sector infrastructure.
https://www.marketplace.lloydstsb.com/doc/glossary/pfi.html
• A UK government initiative in the 1980’s to introduce the benefits of private sector management and finance into public sector projects, such as road building and the building and running of hospitals. The PFI differs from privatisation in that responsibility for “public service” aspects of the project - eg clinical responsibility in hospitals - remains in the public sector.
www.fanshawelofts.co.uk/glossary.aspx
• The Private Finance Initiative specifies a method by which the United Kingdom government provides financial support for “public private partnerships” known as Public-Private Partnerships (PPPs) between the public and private sectors
Communication plays a vital role in any part of the business. In the increasingly competitive environment of business in the UK, the need for effective communication is demanding for achieving competitive advantage in the target market. Marketing communication is the process of communicating the marketing strategies and their implications throughout the organization in order to increase the ability of the organization to become proactive to a situation in the target market as argued by Philip Kotler (1988) . Frances Brassington and Stephen Pettit (2003) further argue that marketing communication not only corresponds to the communication of the marketing strategies and the marketing plan by the top level management to the operational team but also to encourage the interaction between the employees and implement their ideas that will be effective in achieving higher level of sales in the target market. This is mainly because of the fact that marketing is no longer considered as a separate part of the business and the dawn of the twenty-first century with the growth of conglomerates across the globe, organizations have realised that the marketing process itself should be integrated with the entire business of the organization and should embrace the business strategies which is possible only through the effective marketing communication throughout the organization. In this essay a critical analysis on the benefits of marketing communication to the marketing and business strategies of an organization are discussed. The analysis focuses upon five major elements of the business of any organization that contribute to the effective deployment of the marketing and business strategies namely Resource allocation, Human Resource Management, Cost Reduction, Performance, and Supply Chain Management.
2: Resource Allocation
Implementation of a marketing plan always demands the allocation of the appropriate resource not only for the purpose of marketing but also for the manufacturing of the products or the development of the services that are being marketed to the customers in the target market. Frances Brassington and Stephen Pettit (2003) further argue that the resource allocation is one of the critical elements that contribute to the success of the nay marketing campaign. In retail sector scenario where the marketing is an essential part for the communication of the product details effectively to the customers, the effective allocation of the resources to manufacture the products that is being promoted so as to meet the customer demands is the key for increasing the sales of the product lines desired.
Resource allocation is also an essential element for the successful implementation of the marketing plan because of the fact that the availability of the resources and their efficient procurement at a cost that could meet the promotion sales of a product is essential for the success of the marketing plan because of the fact that the promotion campaign of a product or the launch of a new product in the target market can prove profitable only through the effective allocation of the resources both the raw material for production as well as the machinery and human power to produce the product in order to achieve optimum level of production which will increase the sales of the products. This can be accomplished only through the streamlined and effective communication of the marketing plan and the necessary information to the production team of the organization in order to effectively allocate the resources to increase the sales as well as meet the demand of the customers as argued by Eric J Carson and Fisher J Robert (2005) . This is mainly because of the fact that the effective resource allocation not only streamlines the manufacturing process but actually enables the business operations right from the product design up to the labelling of the finished goods to respond to any change in the target thus increasing the productivity and the effective use of resources.
Human Resource Management
Human Resource is an in expendable resource as argued by Dennis Adcock (2000) . This is mainly because of the fact that not only that the employees are treated as resources but their actual participation in the business at all levels of operation and management is results in the effective manufacturing of the goods and services and the increase in sales of the products so conceived by the top level management. Furthermore, the fact that the interaction of the employees in the operational level and the value to their ideas on streamlining the production process in case of products and implementing new methods of customer service and developing relationship with the customers in case of service marketing not only increases the involvement of the staff in the deployment of the business strategies of the organization but also increases the level of confidence among the customers about the products or services promoted by the organization thus increasing the sales as well as gaining customer relationship for long-term business development. This is synonymous to the argument of Philip Kotler (1988) that retaining an existing customer is worthier than searching for new customers.
The fact that the staff in the organization also reflect upon the organization’s overall mission and its view on serving the customers in the target market further increases the requirement of effective communication of the marketing plan and the strategies since the marketing mix to achieve a certain promotion or the launch of a new product/service in a target market (new or existing) can be accomplished not only through the effective deployment of the resources but also with the efforts of the staff involved at all levels of the organization.
Cost Reduction
It is intriguing to note that the organizations not only strive to increase their revenue through the increase in sales but also through the effective management of the costs and reducing unwanted costs as argued by Gary Geissler and Steve Edison (2005) . This is mainly because of the increase in the awareness that the cost reduction is a major element in increasing the productivity of the organization. The increase in the deployment of the processes like the batch processing and mass production through the deployment of advanced methods of production justifies that the organizations are increasingly striving to reduce the costs associated with the production or procurement of the goods rather than only concentrating upon reducing the price. Gary Geissler and Steve Edison (2005) further argue that this is mainly because of the increasing level of saturation in the competition through reducing the price of the goods in the target market. Retail sector for example where the competition is intense based upon the price, the proper communication of the market situation is critical for increasing the sales as well as reducing the storage space. The increase in the use of the shop floor through reducing the storage space by implementing real-time sale and distribution system to accurately identify the demand is a given store at TESCO Plc has not only increased its sales but also drastically reduced the costs associated with the procurement and storage of the goods since the time up to which a specific item is in the storage area of a TESCO store is not more than 48 hours which justifies that the effective and prompt communication of the market situation is essential for the effective deployment of the strategies in order to gain competitive advantage through increasing sales and reducing costs.
Performance
Performance of an organization is the key factor that is used for assessing the company’s performance by the external world. Apparently, the performance is measured against the financial results and the corporate governance of the organization as argued by Naras V Eechambadi (2005) . Furthermore he argues that the performance of an organization is attributed by the effective communication within the organization not only the company policies but mainly the market trends and related information throughout the organization. This is because of the fact that the information so communicated on the market not only increases the awareness of the staff involved both at operational level and strategic level but also increase the ability to interpret the market situation by the organization as a whole rather than the team in the marketing department who cannot always perceive the overall market situation as well as the position of the organization with respect to the production and management. This will not only increase the sales for the organization but also enhance the overall performance of the organization, which is imperative for the organization’s position in the target market for achieving leadership in the market.
Supply chain Management
Supply chain management is the backbone of an organization’s successful implementation of any marketing promotion as argued by David A. Griffith et al (2005) . The supply chain is apparently the process of managing the distribution of the goods from the supplier to the retailer, which can be effectively accomplished to meet the market requirement only though the effective communication of the market situation and reflect upon the market trends. As argued before the strive for the organizations to reduce the costs through increasing the shop floor for sales and reducing the storage space can be accomplished only through the deployment of online supply chain management (i.e.) a live supply chain management system to meet the requirements of the stores in a retail sector organization on a day-to-day basis. The strive of Marks and Spencer Plc to integrate its suppliers with the organization’s overall supply chain has not only increased the sales but also reduced the costs associated with the sales which justifies the effectiveness of marketing communication.
Conclusion
Thus from the above arguments it is clear that the marketing communication is essential for not only increasing the sales but also for increasing the overall financial performance of the organization through cost reduction and effective supply chain management. Hence to conclude this report it is clear that marketing communication is essential for accomplishing the marketing and business strategies of an organization.
References
Books:
Dennis Adcock, (2000), Marketing Strategies for Competitive Advantage, John Wiley and Sons Ltd, UK.
Frances Brassington and Stephen Pettitt, (2003), Principles of Marketing, third edition, UK: Prentice Hall Financial Times.
Philip Kotler, (1988), Marketing Management Analysis, Planning, Implementation and Control, New Jersey: Prentice Hall Inc.
Journals and Reports
Company Profile, (2003), Marks and Spence Plc,. UK: Data Monitor Plc
Company Profile, (2004), TESCO Plc, Data Monitor Plc
David A Griffith et al (2005), The Effects of Interactivity on Cross-Channel Communication Effectiveness., UK: Journal of Interactive Advertising, Spring2005, Vol. 5 Issue 2, pN. PAG, 00p, 2 charts, 2 diagrams; (AN 17029046)
Eric J Carson and Fisher J Robert, (2005), Predicting intentions to return to the Web site: Extending the dual mediation hypothesis UK:. Journal of Interactive Marketing, Summer2005, Vol. 19 Issue 3, p2, 13p; DOI: 10.1002/dir.20040; (AN 17566197)
Gary Geissler and Steve Edison, (2005), Market Mavens’ Attitudes Towards General Technology: Implications for Marketing Communications. UK: Journal of Marketing Communications, Jun2005, Vol. 11 Issue 2, p73, 22p; DOI: 10.1080/1352726042000286499; (AN 17132330)
With increased competition in industry, businesses are recognising that is it essential to give themselves the edge and that having the right employees at every level, with the appropriate skills, is fundamental to the running of a profitable business.
The need to attract, motivate and retain high-quality staff has therefore become more important.
While competitive wages are recognised as an important way of keeping employee happy, there are a number of other benefits packages now offered, for example, bonus schemes, gym membership, health insurance and increased flexibility.
Flexible working and work-life balance
With employers reporting skills shortages and the competition for suitably qualified and experienced employees increasingly fierce, organisations seek to make themselves more attractive, as ‘employees of choice’. One way of doing this is to offer employees a work-life balance through a range of flexible working options.
Flexible working includes reduced or compressed hours; career breaks; extended maternity and paternity leave; job share; or time off for volunteer work. The implementation of work-life balance practices often requires a change in culture and attitudes across the organisation, as the employer-employee relationship shifts from one of traditional command and control, to one with more balance, where the employee has more autonomy.
“The principle at stake here is that work should be healthy and should leave time and energy to pursue interests outside work. Demographic changes, a more diverse workforce, business imperatives and government policy have all been driving work-life balance up the agenda.”
Such polices are supported by legislation such as the Employment Relations Act, Working Time Regulations and Flexible Working Regulations.
On the Work and Families Bill 2005, which proposes increased maternity and paternity leave rights and an increase in statutory holidays, the Institute of Directors’ Miles Templeman, said:
“Our members, by and large, support family-friendly policies. Three out of four believe that it is actually morally right for society to have family-friendly policies in the workplace. They realise that these policies aid staff recruitment and retention and ultimately boost morale.”
Another factor driving investment in workplace health is employers’ duty of care. New UK and EU legislation means employers are increasingly obliged to manage the physical and psychological wellbeing of their staff. This, along with the threat of possible litigation means organisations are embracing an approach that focuses on the psychological, as well as physical health of employees. A growing issue of concern is that of workplace stress.
According to research by the Health and Safety Executive (HSE):
“Over the past two decades, there has been a growing belief in all sectors of employment and in government that the experience of stress at work has undesirable consequences for the health and safety of individuals and for the health of their organizations”.
The HSE estimates that half a million people suffering from work-related stress, anxiety or depression and that an estimated 12.8 million days off work are annually attributed to work-related stress, anxiety or depression.
Regulatory requirements
Social change had created greater rights for employees, as well as greater expectations, but put more pressure on employers. Legislation over the past decade, including that covering the National Minimum Wage, Working Time, Information and Consultation and discrimination. The influx of employment law began in earnest, with the Employment Relations Act 1975, which has been many times updated.
Over the past 25 to 30 years, laws governing employee relations has become increasingly complex and complying with the ‘red tape’ it causes is a huge issue for the contemporary employer. Britain’s increasing integration with Europe over this period means that employers must adhere to European directives, as well as domestic legislation. Many employers feel that the balance of power has swung too far in the favour of workers.
Tribunal culture
According to research by Sage, last year saw 115,042 employment tribunal claims brought against employers, representing a 6% rise over the past decade and the average unfair dismissal award was £7,275.
It seems that while legislation appears to be supporting employees, the pressure it puts on employers could actually reduce employment opportunities:
“Although business is aware of the importance of fair play and equitable rights, the corresponding increase in form filling and resulting complex legal wrangles is having a disproportionate impact on small companies. In fact, a fifth of all businesses have considered giving up because of red tape surrounding employment legislation. The growing mountain of red tape has actually stopped 32% of businesses from taking on new employees.”
Many employers are choosing to settle out of court rather than face a costly employment tribunal, causing employers’ organisations to call for further reforms to the system, according to the Confederation of British Industry (CBI). Defending tribunal claims is costly for UK businesses, in terms of legal fees, management time and stress. CBI research also found half of all employers felt there had been a rise in “weak and vexatious” claims.
Corporate Social Responsibility
Many employers have become involved in Corporate Social Responsibility (CSR), a term which has been born out of business’ increasing consciousness of its impact on society and environment. CSR is about companies taking into account the economic, social and environmental impacts of their work, and regularly addressing the interests of the wider society.
Such measures can bring tangible benefits to smaller businesses, as a company with an ethical reputation can not only boost sales, but also attract better staff and improve retention and motivation.
In term s of employee relations, this can mean: improving consultation with employees, encouraging workforce diversity, and inviting employee participation and suggestions.
Industry
The past 25 to 30 years has seen a decline in manufacturing and rise in service sector employment:
“Although its overall contribution to wealth generation continues t be substantial, manufacturing only accounts for 15% of total employment.”
This had changed the choice of work available and has lead to shift away from what may have been previously thought of as ‘blue collar work’.
There is also an increased demand from customers for ‘round-the-clock’ service, which is another reason why workers have more options of jobs with flexible hours, for example, call centre work.
Unions
The role and influence of trade unions, and the practice of collective bargaining, has declined over the last 25 years: “Trade union membership fell rapidly during the 1980s and 1990s, with little replacement by other structures; hence the widespread concern about a ‘representation gap.’”
This decline has been attributed, in large part, to the legislation of the Tory government:
“…the election in 1979 of a Conservative Government and its re-election in 1983, 1987 and 1992 meant above all that throughout the past 15 years there has been a Government pro-business and anti trade union.”
However, there has been an increase in the number of bodies of intervention, such as Acas, the Low Pay Commission and the Citizens’ Advice Bureau.
Demographic changes
There are now more people than ever graduating form university, which means there are more people entering the workplace with higher aspirations and expectations.
Life expectancy has increased over the past 25 to 30 years, while the birth rate has declined, meaning the workforce is older and more people are working past the traditional retirement age, either through choice or necessity. This means that employers’ attitudes to older workers has had to change: instead of being seen as ‘over the hill’ or ‘on the scrap heap’, they are seen as experienced and useful employees. Some employers, such as B and Q, are actively embracing older workers.
There are other demographic changes that have changed the context of employment relations quite radically:
“The role of people from ethnic minorities is likely to become increasingly significant – it is estimated that they will account for no less than 50% of the growth in the working population over the next decade…migrant/immigrant workers already make up much of the shortfall in labour supply and are likely to continue to do so.”
Women
The proportion of economically active women has risen since the 1970s, a trend that is expected to continue. According to Court (1995), this has been driven by a transformation in the working patterns of mothers:
“In the early 1970s there was a very marked difference between women with children and other women, in terms of their labour market behaviour. This is much less the case now and women with dependent children are more likely to be working than not working.”
Much of this increase can be accounted for by the rise of part-time roles: between 1971 and 1993, 93% of the total increase in women’s employment was in part-time work.
While half of employed women still work in the same three occupational groups that have dominated since the early 1970s (clerical/secretarial; personal/protective services; and sales), women have increasingly gained entry, in this period, into managerial and professional employment. In 1971, these occupations accounted for just 12% of women, rising to 20% by 1993.
According to research by the Equal Opportunities Commission (EOC), there is a growing convergence between the participation of women and men in paid work. However:
“This convergence masks deep and enduring differences… The most significant difference between the sexes is the pronounced pattern of gender segregation in different industrial groupings… some are heavily male-dominated such as engineering whilst others are mainly female-dominated such as hairdressing. New industries show no sign of breaking the mould. A second major difference is working hours. While men are overwhelmingly concentrated in full-time work, large numbers of women work part-time and this is closely associated with their responsibilities for children and other dependants.”
The EOC research shows that, overall, women remain at a disadvantage because of occupational segregation, as it means they are concentrated in lower-skilled and lower-paid jobs, with less access to vocational training and education. Women’s concentration in part-time employment also confines them to certain occupations and industries, which are generally low paid.
However, this continued gender segregation creates inflexibility in the labour market and inhibits both men and women from achieving their full potential, as well as limiting the pool of skilled labour available to employers:
“Gender, rather than an individual’s skills and abilities, continues to be a major determinant of individual economic prosperity. National strategies in employment, education and training are required to reduce gender segregation in the labour market, and to promote wider opportunities for women and men.”
The Sex Discrimination Act 1975 made sex discrimination unlawful in employment and vocational training, as well as making it illegal to discriminate against someone on the grounds of being married. These laws were tightened in October 2005 to specifically outlaw sexual harassment and discrimination on the grounds of pregnancy.
However, practical barriers, such as access to affordable childcare and flexible working arrangements still hamper the progress towards true gender equality in the workplace. The so-called ‘glass ceiling’ also still exists: a cultural and organisational barrier caused by a lack of encouragement, or expectation, of success and a lingering unease about women in positions of authority.
Although the Equal Pay Act 1970 gave individuals the right to the same contractual pay and benefits as a person of the opposite sex in the same employment, a gender pay gap still exists, perhaps for many of the reasons outlined by the EOC. His currently stands at 18%, comparing the wages of males and females employed full-time.
This suggests that, although women, and those with children in particular, have greater access to employment, and legislation to back this up, they are still being penalised in terms of reduced wages and development opportunities.
Technology
Technology has had a huge impact on industry and employee relationships. Few workplaces today do use computers, which was not the case in the 1970s. The proliferation in the use of PCs, internet, intranet and emails has made work easier, arguably, but communication faster and simpler, certainly.
Employers can communicate with employees en masse, via email, intranets and text message. Such technology makes information retrieval much faster. It also gives a boost to the notion of flexible working, making it easier for people to work from home or while travelling, using laptops, broadband and Bluetooth technology, for example. Recruitment is increasingly being carried out via the internet.
The impact of these technological innovations could be seen as positive from both employers’ and employees’ points of view, but there are some possible drawbacks, including a decline in personal, face-to-face communication. There is the notorious case of a boss who informed workers they were being made redundant, via text message.
In addition, Some could argue that the ‘always on’ culture, ie, the fact that people are almost always contactable by email or mobile phone, means workers are less able to switch off from the workplace and adds to work-related stress.
Temps
Industrial change and the increasing unpredictability of the workplace landscape have led to an increase in the use of temporary (temp) or casual workers. Temporary positions can be a more flexible and convenient way for employers to fill posts, as well as providing more flexible and convenient roles for the growing numbers of mothers, students and older employees in the workplace.
“Agencies confirm that there had been a large and sustained level of increase in the volumes of their business in the past few years. They suggest that there are increasingly coherent and systematic criteria in choosing to employ temporary staff on the part of their customers, supplementing, but not replacing, the traditional rationales of covering leave and meeting peaks in demand. These are: ‘matching staffing levels to peaks in demand’ and ‘short-term cover whilst staff are away on holiday or sick leave’.”
The increase in the use of casual labour could be due to need to cut costs, or the need to outsource activities cost-effectively.
Donaghy (2005), point out two important enduring features of the employment relationship, despite the changes over the past three decades:
“Nothing is automatic about the employment relationship: to put it into effect involves dialogue, day-to-day consensus building and ‘give and take’. Both conflict and co-operation are inherent, given the uncertainty, there is enormous cope for divergent goals and behaviours.”
The Organisation for Petroleum Exporting Countries was conceived in the 1960s in which the member countries consists of Saudi Arabia, Algeria, Libya, Nigeria, Indonesia, Venezuela, Iran, Iraq, Kuwait, and Oman. The reason for this was in response to efforts by U.S. oil refiners, led by Standard Oil of New Jersey, to reduce the price they were paying for imported oil. Until the 1972 oil boycott, OPEC explicitly attempted to raise the price of oil. To maintain higher prices, the OPEC members must restrict their output (various government oil companies within the OPEC member states), or they will produce more oil than the world will demand. Each member nation must therefore agree to an output quota. Now in order to understand the overall strategy of OPEC, one will first need to identify the meaning attached to strategy in this context.
According to Chandler (1962), strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. In order words strategy can be said to deal with the big decisions a business organisation faces, the decisions that ultimately determine its success or failure.
With this in mind we can now talk about the strategy assertions of the Organisation for Petroleum and Exporting Countries. We will use Porter’s five forces analysis and Whittington’s four basic concepts of competitive strategy to understand the overall business strategy of OPEC.
Porter (1980) Five Forces Model consists of internal rivalry, substitutes and complements, supplier and buyer power, and barriers to entry.
Market Definition
This analysis is confined to countries that produce oil for energy consumption all over the world. According to British Petroleum figures, OPEC member countries currently produce about 40 percent of the world’s consumption of oil, and while non-OPEC members also contribute rough the same percent that figure is decreasing due to the depletion of non-OPEC member states reserve base. As a whole, one can class OPEC member states as being a monopolist organisation where they control more than 30 percent of the market of a good or product. OPEC and non-OPEC member states account for 80 percent of the world’s production of oil, hence this analysis would focus on the two.
Internal Rivalry
As stated previously OPEC was established in 1960 and has remained what is known as a cartel ever since. Its first real impact with regard to the price of oil was in 1982, OPEC set an overall output limit of 18 million barrels per day, down from 31 million barrels per day in 1979. Prices were to be maintained at $34 per barrel. Each member nation had an individual production quota, except for Saudi Arabia, the largest producer, which adjusted its output as necessary to maintain prices. Maintaining the cartel has proven difficult. Sometimes, such as during the Iran – Iraq War (1980 – 1985), member nations sought to produce more than their allocated quota. This glutted the world market with OPEC oil. Despite attempts by the ‘swing producer’ Saudi Arabia to reduce output, prices plunged. In the mid 1980s OPEC slashed the price of oil by 15 percent and reduced output by 3 percent. Throughout most of the 1980s and 1990s, oil prices hovered around $15 - $20 per barrel. Due to the global economic expansion particularly from India and China, demand for oil has surged. Saudi Arabia (swing producer) convinced other OPEC nations not to expand production to meet demand. The result was that oil prices went up to $30 a barrel for the first time in a decade. Collectively if the member countries adhere to there allocated quotas they are a formidable force to reckon with. There has also always been that tendency for certain members to cheat which leads to internal rivalry and the breakdown of the cartel. However, OPEC as a group has strived right from its inception in the 1960s and at the present moment their coordinated efforts to reduce investment and decrease the production of oil which has lead to an increase in the price of oil to $60 per barrel shows that the cartel is still alive and well.
Barriers to Entry
High development costs, investment, and the experience-skills based advantages of the incumbent oil companies such as Royal Dutch Shell, Agip, Chevron, Total, Esso, and British Petroleum in the various OPEC member countries has made entry into oil production extremely difficult. Depending on the type of oil (heavy and light) that is found in areas where it is easy to extract oil, there are high start-up costs involved (it is easier and cheaper for the oil companies to extract oil on-shore than it is to extract oil off-shore). At the present moment all the easy areas or regions where oil has been found are being explored by one of the major oil companies mentioned above. Thereby, what is left are regions where the oil found is difficult to extract and would require large sums of investment and experience to enter the market. Hence, only the existing incumbents will be positioned to extract this oil, thereby very high barriers to entry. Incumbents are also protected by the learning curve. In countries where there are different social, cultural, and political mechanisms which require experienced and knowledgeable people to be able to get the ball rolling is essential to the speedy process of producing oil in an oil producing region. This poses another barrier to entry.
Substitutes and Complements
From the perspective of the oil companies the only substitute for oil which is used as the main source for energy around the world are synthetic fuels such as bio gas, hydrogen, solar energy, and battery powered fuels. Although, majority of these alternative fuels are still being researched and developed by various independent organisations around the world, these synthetic fuels are already being tested on all sorts of forms, which rely on oil for energy. For example, bio gas which was first developed in Sweden is currently being tested on cars for efficiency and the fact that its use is less pollutant brings it to the foray as a very good alternative source of fuel to oil. In addition, most oil companies tend to discourage investment into the use of alternative fuels because it will put them out of business. However, the oil producing regions are fully aware that the price of oil is a major factor here. For example, Saudi Arabia are fully aware of the fact that if they allow the price of oil to hover at a rate that is too high, this will become too expensive for ordinary people to purchase oil for energy consumption, and the oil companies profits might reduce due to a decline in the demand of oil because its price is excessively high. This has the knock-on-effect of increasing research and use of alternative fuels in which if they allow this to happen, it would be disastrous to their economy. Saudi Arabia is wholly reliant on oil for foreign exchange earning, hence they have to make sure that there is enough oil in the world market where the price is not too low nor too high. This is one of the major reasons the Saudi’s act as the swing producer with OPEC. Not to forget, if synthetic fuels were to take off, it would mean complements such as cars, airplanes, etc. would need to be re-engineered. This would cost a fortune for manufacturing firms and a reduction in their profits in which most manufacturing firms would be reluctant to embark on this path.
Supplier Power
The key marketable inputs are labour and machinery. The suppliers of labour include, mining engineers, civil engineers, and construction engineers. The suppliers of machinery tend to be the major oil companies such as Royal Dutch Shell, BP etc., which manufacture and produce the machinery that is used for drilling rigs and building a platform (off-shore oil exploration). These suppliers all have indirect power. Supply and demand forces in the market for engineers have been especially tight in recent years, forcing up their wages. The price for machinery and other valuables such as transportation have also risen in recent years. OPEC and their suppliers (the oil companies) make large relationship specific investments. Engineers learn to work in teams, but also adjust to new settings as most oil exploration sites require highly trained and skilled individuals. Most engineers are not easy to replace when work start on an oil site, due to tacit knowledge and the tie constraint involved in getting an oil site up and running for the extraction of a particular oil region. This also creates a barrier to entry. The oil companies do not have the monopoly power to hold OPEC member’s states so as to obtain higher prices. This comes from the governments of the member states themselves, and if they require the oil companies to stop production or reduce production, the oil companies would have to adhere to this or face possibly contract termination.
Buyer Power
Buyers of the oil produced by OPEC include various governments around the world and the oil companies themselves who purchase oil for energy use and consumption. Various governments around the world and the oil companies do not wield purchasing power as this rests on the oil producing nations of both OPEC and non-OPEC countries. If OPEC for example decides to cease the production various governments and the oil companies cannot do anything about that. However, this would be catastrophic to world economic growth as most industrialized nations are highly reliant on oil for energy use and consumption. For example, in 1990 the major factors that lead America attacking Iraq, during the invasion of Iraq on Kuwait (Gulf War) was the fact that America heavily relied on Kuwait for its oil, and an invasion by Iraq on Kuwait was highly undesirable by American authorities as this would affect the economic growth and development of the country. Today, the oil companies to a certain degree wield substantial power. This has come about because of their historical presence in the oil producing regions with regard to experience, cultural awareness of the oil producing countries and familiarity with government authorities in these regions. However, the power of authority still lies with the governments of the oil producing regions. If for example, one of the oil producing member states was not pleased with the performance or contractual obligation of a particular oil company, they could terminate the contract and hand it over to another oil company. In reality although this rarely happens there have been cases where the oil companies have provided a very shoddy service, i.e. environmental pollution and destruction due to leakages on oil rigs (Shell in Nigeria and in 2003 an oil tanker leaked over the coast of Devon), which has led to large payment sums being made to tackle the damage done to the environment and families by the oil companies.
Table 1 Five forces analysis of the Oil market
Force Threat to Profits
Internal rivalry Medium to High
Entry Low
Substitutes/complements Medium
Supplier Power Medium to High
Buyer power Medium
Now, Whittington divides strategy into classical, evolutionary, processual, and systemic.
Classical
This refers to theoreticians who regard profit maximisation as the supreme goal of business, with this to be achieved through deliberate planning. This thus, encompasses a realistic and rational approach to business strategy. Applying this to OPEC, the organisation does not regard profit maximisation as the supreme goal of the business, but rather to create stability in the world price of oil through reducing output. It is noted in academic literature that oil in the ground has more value than oil that is being produced. In other-words, OPEC members deem that they are better off just providing enough oil that meets world demand rather than flooding the market with too much oil (producing too much oil in order to make a profit). This differs from Whittington’s classical approach in the sense that although profit maximisation is seen by most theoreticians as the prime objective of any organisation, OPEC as a whole sees this as necessary but gauges what is known as a product which is being depleted at a fast rate in which when the product (oil) runs out there will be no more profits to be made. Hence, it gauges its actions against the world price of oil so as to see what is most beneficial to it as an organisation.
Evolutionary
Whittington, terms evolutionary as an aspect where a business has to constantly keep pace with the ever increasing changes in the business environment so that the firm can not only stay in business but also make a profit. Theoreticians as a whole ascertain these to changes in the tastes and fashion of society, in which business will have to adjust or evolve with in order to keep the business alive and healthy. Bring OPEC into the foray, OPEC has in the past keep pace with changes in the demand for oil. However, of recent they have cut back on investment into new oil fields, and production. Reasons being are that if they invested in new oil fields and produced enough oil to reach demand over a specific period of time, there is the possibility that the investment could go down the drain. I.e. when OPEC saw an increasing demand for oil from South East Asia during the rapid growth of the Tiger economies as they were known at the time they increased production in-order to meet demand. However, a recession kicked in and what followed was a drastic decline in oil inventories, a scenario OPEC members did not foresee. This lead to a drastic drop in the price of oil because there was too much oil in the world oil market, and OPEC members had to bear and take the brunt (losses). Hence, the evolutionary strategy is a paradox which is not rational to the business strategy of OPEC.
Processual
This represents the use of business processes, which will align the business goals of the organisation with strategy. Basically, it assumes that markets allow firms to be inefficient. Individuals within organisations have their own personal goals and must negotiate and compromise to reach shared goals. Hence strategy in this aspect is crafted and emerges to the benefit of the organisation as a whole. OPEC as a whole does have a management structure, which includes a rotational presidential platform between various members of the cartel, the secretary general who is voted on a two year basis, and various other management positions which are engaged in the smooth running of the organisation as a whole. This has the effect of having a coordinated approach to the business goals of OPEC, which is to stabilize the world price of oil in times of crisis.
Systemic
The systemic strategy views strategy as embedded within social systems. It sees norms as socially constructed and therefore strategy maybe planned and deliberate through making it appropriate for the social context. The systemic model sees the classical model as a particular strategy model that may be appropriate in specific contexts, and inappropriate in other contexts. Applying this to OPEC, the strategy it practices can be said to differ from socially constructed norms. Its main aim as noted is being able to stabilize the price of oil in the world oil market. Hence, social systems are inappropriate in measuring the strategy alignment of OPEC.
CONCLUSION
As a whole the key to profitability for OPEC member countries is to reduce output, whereby a shortage of oil means the price of oil will increase. Thereby increased profits for OPEC member nations. However, they will have to measure the market and make sure that they do not reduce output too much to a level where it would trigger an increased investment into alternative fuels, which would lead to a switch from oil to synthetic fuels. Reasons range from oil being the major foreign exchange earner for most OPEC member countries, and without it, their economies will falter. Notwithstanding, the supply of oil continues to increase, and the proven reserves of OPEC member nations seems to increase every year with new additional oil fields being found. This is not the case with non-OPEC members such as Norway, Russia, and Mexico. Their proven oil reserves seems have fallen much lower than originally estimated, hence OPEC has a much more solid base in which their strategy to reduce output so as to increase the price of oil or stabilize the price of oil, seems to be a strategy to reckon with. OPEC will thrive as long as they can successfully maintain and have oil and the oil companies will continue to produce more oil as far as there is profit to be made.
REFERENCES AND BIBLIOGRAPHY
Besanko, D., Dranove, D., Shanley, M., and Schaefer, S., (2003), Economics of Strategy, 3rd Edition, Wiley.
BP (2005) Statistical Review of World Energy, June.
Chandler, A., (1962), Strategy and Structure: Chapters in the History of the American Industrial Enterprise, Cambridge, MA, MIT Press, p.13.
OPEC statistical review, Annual Report and Accounts, 2005.
Porter, M., (1980), Competitive Strategy, New York, Free Press.
Scholes, K., (2002), Exploring Corporate Strategy, Prentice Hall.
Shell Transport and Trading Company PLC, Annual Report and Accounts, 2004.
Whittington, R., (1993), What is strategy, and does it matter? Routledge, London; New York.
