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.
