Bowman Strategy Essay

Bowman Strategy Essay.

1.0 Introduction Strategy is a long term directions for companies. Bennett (1996, cited by Cousins 2000) describes strategy as: “The word strategy is used to describe the direction that the organisation chooses to follow in order to fulfil its mission”. Today, strategies are vital for businesses, in many cases it helps to achieve a competitive advantage. Increasing competition in most sectors and technological development has led to accelerated changes in the global economy. In order to meet the market needs, strategies encourage and enable the adaptation of companies in a changing environment (Tribe, 2010).

The aim of the report is to conduct a research on Bowman’s Strategy Clock which will demonstrate a rational, reflective and critical evaluation of the concept. To do so, the report is going to be divided in three parts. The first or the report part is going to give an overview of the Bowman’s strategy with its background. The second part will analyse the model and its different strategies by using example from companies.

Then some authors’ opinions about the model will be analysed.

2.0 Bowman’s Strategy Clock 2.1 Strategy Overview In 1980 Michael Porter published his seminal book wherein he identified three generic strategies for a business to gain competitive advantage: cost leadership, product differentiation and market segmentation (Johnson et al., 2008). Basically, Porter analysed that business compete either on price (cost), on perceived value (differentiation), or by focusing on a very precise customer (market segmentation).

Source: Eldring (2009) With his model, Porter (1980- cited in Eldring, 2009) explained that a company must choose between one of the three generic strategies otherwise it will be “stuck in the middle” and suffer from below-average performance.

In 1996, Cliff Bowman and David Faulkner developed Bowman’s Strategy Clock Looking at Porter’s Generic strategies in a different way. This model extends Porter’s three strategic positions to eight. Figure 1 below, represents Bowman’s eight different strategies that are identified by varying levels of price and value. Figure 2: Bowman’s Strategy Clock

Source: Johnson et al (2008)

2.2 Model explanation Bowman strategy is a competitive strategy. Competitive strategies are tools that businesses use to achieve competitive advantages (Johnson et al. 2005). The Bowman’s clock strategy is a more sophisticated approach, which recognizes and deals with certain criticisms of Porter’s model (Tiwari, 2009). For instance, as it has already been said, according to Porter generic model, a business has to choose one generic strategy are it means that the company is place in the middle which means being “dead”. However what Bowman believes is that a business can be both low cost and differentiated and still be successful over the long term, such as the companies Swatch, IKEA, Sainsbury and many others. In Bowman model, these companies are situated at the hybrid position, also known as combined strategy (Dobson et al. 2004). Figure 3 demonstrates that there are eight approaches on the clock in total. Meanwhile, these strategic positions can be grouped into three- risk strategies, low price strategies and differentiation strategies (Thomson & Banden-Fuller 2010, 184).

Figure 3: Bowman’s Strategy Clock companies examples

Source: (Thomson and Baden-Fuller, 2010: 184)

To have a clear understanding of the eight different positions of Bowman’s Strategy clock, the author has decided to illustrate them with some companies’ examples.

2.2.1 Low Price Strategies Number 1 and 2 (No frills and Low price) on the clock are organisations who are going to position themselves in a part of the market which is looking for reasonable prices. The examples given are Ryanair and Easyjet. Indeed these two companies have managed to cut their costs by only focusing on their core service (every extras have to be paid by customers), also by using online bookings, and using secondary airports. The advantages of these two strategies are that the expectations of the customers who are choosing their services are very low because of the costs of the service/ products; they are more likely to be satisfied as figure 4 demonstrate it.

Figure 4: Customers’ expectations

Source: Cook (2008: 17) However the drawbacks of these two positions are that the only way to succeed here is through cost effectively selling quantity, and by constantly attracting new clients. These businesses will not be winning any customer loyalty contests, but they may be able to sustain themselves as long as they stay one step ahead of the consumer (Mindtools, 2012)

2.2.2 Differentiation Strategies From number 3 through number 5 (hybrid, differentiation and focused differentiation) are companies that are offering a customised product or service. The service or product is designed separately for each individual customer, and therefore customers are prepared to pay a price premium for that. The examples given is British Airways whose goal is to present better-quality service to its customers, stakeholders and employees alike (British Airways, 2010). A lot of companies in hospitality industry (such as 3 to 5 star hotels) would not try to compete on price; they would try to position themselves near position 4 or 5 on the model by offering something better, or improve a service.

However in order to choose focused differentiation as strategy, businesses need to have a strong branding to make sure their customers are willing to pay a higher price for it. Strong brand have the power to capture consumer preference and loyalty (Armstrong, 2009). This is the reason why this strategy often takes place in the luxury segment. But it can also takes place in other segment such as technology, where for instance with the brand Apple. The company Apple has such strong brand images that according to a recent survey cited in Hughes (2011) consumers are extremely interested in the prospect of an Apple-branded television, that they are willing to pay a twenty percent premium over existing TV prices for such a device.

Although it can be difficult for businesses to carry on the successful hybrid strategy due to the lower level of margins caused by the low costs products. As it has been mentioned earlier, companies that have both low cost and differentiated can sometimes be successful because they are quite difficult to compete against The value and quality is good and consumers are assured of reasonable prices. This combination builds customer fidelity.

2.2.3 Risk Strategies The strategies 6, 7 and 8 are called risk strategies because there is a high risk for failure when applying them within a business. For instance number 7, increasing price and keeping a low value product or service is only possible in a monopoly market situation and the customers have no choice else than to pay high price for poor value (Thomson and Baden-Fuller, 2010).

However, in a competitive market, this approach remains unsustainable for long. Generally the companies arbitrarily increasing prices soon lose market share, as consumers migrate to competitors that offer the same value at lower prices. An example of a company in hospitality industry that was using high Increased price and standard values is the previous national airline of Belgium from 1923 to 2001 before its bankrupt (Castle, 2001). Regarding low value and increased price suggests Dwyer et al. (2010) that the night club cover charges as example.

2. 3 Model criticisms Although most of the researchers agree that it is an excellent model for companies to understand how to compete in the market place. Some remains sceptical regarding the position number 3 (hybrid). Simister (2011) believes that a differentiated, low cost hybrid position may be an achievable position only under certain conditions and that therefore it is not it is not applicable for every sector. The strategy clock can also lead to negative thinking and almost justify doing nothing for companies. The model’s strength is to consider competitive actions to possible moves in the clock but all of them could be damaging to business’ profit. Sometimes companies have to be ready to take a risk and make a decisive move because if they do not, another competitor will. . Conclusion

The strategy clock represents a set of eight generic strategies for achieving competitive advantage: It is a very useful model to help understand how businesses compete in the market place. This is a powerful way of looking at how to establish and sustain a competitive position in a market driven economy. A competitive advantage is an advantage gained over competition by offering consumers superior value, either through lower prices or by providing additional benefits and service that justify similar, or higher, prices. By looking at the different combinations of price and perceived value, companies can begin to choose a position of competitive advantage that makes sense for them.

Bowman Strategy Essay

Blue Ocean Strategy Canvas & the Four Actions Framework Essay

Blue Ocean Strategy Canvas & the Four Actions Framework Essay.

Applying the Blue Ocean Approach December 3, 2012 Problem Statement B-cycle charges an annual fee in range of $50-100 for membership thereby making its offering uncompetitive against mass bicycle merchandizers like Wal-Mart and Target who sell bikes at highly discounted and cheap prices. Analysis Plan/Data Used/Key Assumptions Analysis Plan: We will use the Blue Ocean Strategy Canvas & the Four Actions Framework to assess steps B-Cycle needs to take to stay ahead of its red ocean bike dealership competitor. Key Assumptions:

1. Purchasing a bicycle is a discretionary spend 2. There is a strong market for cheaper substitutes to owning a bicycle Data: 1. B-Cycle charges an annual fee in range of $50-100 (Source: B-Cycle website) for its membership while its usage fee is relatively cheaper in range of $5 for 24 hours to $15 for 7-day rental

2. Mass merchandizers like Wal-Mart & Target dominate Bicycle Dealership & Retail industry, which is a $6.1 billion industry, with 75% market share (Source: IBIS Industry Report)

3. A mass merchandizer like Wal-Mart sells a comfort & cruiser bike at a starting price of $69-88

4. B-cycle charges fees up to $1200 for loss and damage to its bike (Source: B-cycle website) Data Analysis & Conclusions B-cycle annual membership fee is at same price point as the retail price of a comfort or cruiser bike sold by WalMart which makes buying a bike a more tempting proposition as opposed to renting a bike.

B-Cycle does not offer liability protection for bike damage and customers could end up paying up to $1200 in damage fees which makes it very expensive proposition compared to owning one’s bike. In order for B-Cycle offering to compete effectively against mass merchandizing bicycle dealership like Wal-Mart, B-Cycle should make its price proposition more attractive for customers so they can rent a bike as opposed to buying a bike.

Recommendations to Management Eliminate Membership Fees. Create a loyalty program for its members that rewards members based on usage. Reduce customer liabilities against damage or loss of a bike by offering protection program. Increase locations across the country to gain footprint and market share in the bike rental segment.

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Blue Ocean Strategy Canvas & the Four Actions Framework Essay

Policing Paper – The Chicago Alternative Policing Strategy (CAPS) Essay

Policing Paper – The Chicago Alternative Policing Strategy (CAPS) Essay.

Over the last 20 years, a new concept of policing has emerged that will replace the law enforcement aspects of an officer’s duties and replace them with crime prevention.  This new concept is community policing, which “should develop partnerships with neighborhood residents, develop programs tailored for specific problems, and give rank-and-file officers more decision-making freedom with regard to how best to deal with particular problems” (Walker & Katz, pg 50, 3).  Although this new approach to policing has been around since the 1980s, the city of Chicago was the first large police department to adopt the program city-wide with the announcement of the Chicago Alternative Policing Strategy (CAPS) in April 1993 (Skogan, et al.

, 2002).  This paper will explain the strengths, weaknesses, and future of the CAPS program.

As explained above, the community policing concept allows the officer to become a problem-solver instead of a reactor by developing relationships within the neighborhoods in which the department serves.  CAPS adopted a five-step program to assist with this effort.

  These steps include:

· “Identify and prioritize problems

· Analyze problems

· Design response strategies

· Implement response strategies

· Assess the success of response strategies” (Skogan, et al, 2002, pg 4, ¶ 3).

The five steps were accomplished through turf orientation and mobilizing city services.  The turf orientation consisted of 279 beats with nine or 10 officers assigned to each.  These officers were suppose to develop relationships and trust among the residents of each beat; however, due to the high number of 911 calls, the officers found that they did not have the necessary time to accomplish both tasks.  Therefore, the Chicago Police Department hired extra officers that were assigned to “free-roving rapid-response units” (Skogan, et al., 2002 pg 5, ¶ 6).

These free-roving units were responsible for handling the extra 911 calls and were not tied to a specific beat, which allowed the beat officers to remain within their territories long enough to establish trust and relationships with the public.  The beat officers also mobilized city services to help with the initial clean-up needed to deter crime and reduce the public’s fear of potential crime.  City ordinances were changed to expedite the removal of graffiti, abandoned vehicles towed, and abandoned or unsafe buildings demolished.  Malfunctioning street lights were also fixed, and civilian coordinators put in charge of providing the beat officers the necessary services they needed to solve problems within the community (Skogan, et al., 2002).

Once the initial issues had been addressed, the beat officers needed to get the community more involved in the CAPS program.  The first step in this was to obtain citizen input about the concerns within the neighborhoods and create new roles for residents to ensure their neighborhoods remained safe.  Beat meetings were created to “serve as a forum for exchanging information and prioritizing and analyzing local problems” (Skogan, et al, 2002, pg 8, ¶ 2).  These meetings were held on a monthly basis in church basements and park buildings, and allowed the beat officers and the residents of each community to become better acquainted.  However, many of these meetings ended up being filled with complaints from residents instead of prioritizing and creating action plans to correct problems.  Therefore, more training has been provided for beat officers and civilian facilitators in order to maintain order within the beat meetings (Skogan, et al., 2002).

Residents were also given more roles to ensure the neighborhoods remained safe.  District advisory committees (DACs) were created to advise commanders of concerns and plan police-citizen projects.  These committees consisted of “community leaders, school council members, ministers, business operators, and representatives of significant organizations and institutions in the district” (Skogan, et. al, 2002, pg 11, ¶ 2).  However, this aspect of the CAPS program has not evolved as originally expected.  Partly because the DACs have not thought strategically about correcting wide-spread problems, and partly because the DACs are not as diverse as they should be; leaving gaps in the representation of all races and social classes within a large area (Skogan, et al, 2002).

Although there have been a few pitfalls in the implementation of the CAPS program, there have also been some improvements.  One such improvement includes crime analysis.  A crime-mapping system has been created that is updated continuously; allowing police the information needed for problem-solving and tactical operations.  The city has also implemented a new 311 system that is used for nonemergency situations (Skogan, et al, 2002).  Another improvement has included the creation of a roving task force that includes police, building, health, and fire inspectors.  This task force’s sole responsibility is to enforce antigang and drug house ordinances.  A third improvement includes the cooperation of city legal staff whom have set up offices within communities to assist police in reoccurring problems, prosecute hate crimes, and conduct seminars about crime prevention (Skogan, et al, 2002).

Since the implementation of the CAPS program, Chicago has seen a decrease in crimes ranging from burglary, auto theft, street crime, gangs, and drug problems.  However, the future of the program greatly depends on the current motivation of residents, police, and city leaders.  The city must become creative in ways to maintain its current CAPS program during these difficult economic times that have affected budgets on the city, state, and federal level, as well as replace retiring leadership with knowledgeable and driven officers and sergeants (Skogan, et al, 2002).

Policing Paper – The Chicago Alternative Policing Strategy (CAPS) Essay

Apple’s Innovation Strategy Essay

Apple’s Innovation Strategy Essay.

Innovation strategies are important for businesses to remain viable in this competitive market. Innovation also allows businesses to set the pace for the future. Apple continues to be the known as one of the leading electronic manufacturers in the world. Their innovation continues to impress consumer and remain a threat to its competitors. Apple is known for its Mac line of products. This paper will describe and evaluate Apple’s Innovative Strategy, provide information from the Securities and Exchange Commission (SEC) filings, and introduce the Mac Mini from Apple.

Description of Innovation Strategy

In today’s society, consumers want the latest technology in their homes and businesses. Apple continues to provide new products and meet the needs of the consumers. Apple has been successful because of their effective marketing and research strategies. Apple’s innovation has allowed them to produce desktops, iPads, iPods, notebooks, and wireless devices just to list some of their products (Apple Inc., 2015).. Apple continues to provide high quality, moderately priced products to consumers.

The organization uses consumer surveys to get feedback on how well the products are doing in the market. The survey also provides other features consumers would like within a product.

In 2014, Apple introduced the Mac Mini after the discontinuation of the server model. The Mac Mini was the first consumer desktop to be sold without display, keyboard, or mouse after Apple’s success release of the iMac (Apple Inc, 2015). The target consumers of this product are consumers changing from the traditional Windows PC. The purpose is compatibility. The Mac Mini added feature is the HDMI port which allows consumers to connect to televisions or other display as an alternative to Apple TV.

Apple’s Innovation Strategy Essay

Tesco Pricing Strategy Essay

Tesco Pricing Strategy Essay.

The focused price cuts made it possible for Tesco to attract more customers with Lower price than other supermarket. Tesco provide endless good deal placing in core good around non-foods to undercut levels of competition which actually Tesco marketing with good deal. Tesco make an effort to develop powerful relationships with his suppliers to get the best worth for our customers. Tesco is already set the prices according to the income of the demographic area of the store. Specifically, Tesco pricing strategy is based on its marketing message of ‘Every Little Helps’.

Tesco management aims to reduce the cost of purchases and operational costs through and a set of other measures in order to pass the cost advantage to customer as the main brand value. Most of the products available in Tesco are also available in other retailer store too. To compete with other organizations, cost-plus pricing is the most suitable pricing strategy for Tesco. Cost-plus pricing is the pricing strategy that adding a standard markup to the cost of product.

For example, Supplier sells a soup powder at RM20 to Tesco, Tesco may sell for RM30, its means a Profit of on cost.

Type of pricing strategy Tesco using now is cost-based pricing .Cost-based pricing affected the prices based on the costs for producing, distributing .Cost-based pricing only suite for Tesco own label products instead of national brand product .This is because Tesco set its own brand products price based on its production cost. Last pricing strategy Tesco adopted is Good-value pricing. An important type of good-value pricing at the retail level is everyday low pricing .Everyday low price with few or no temporary price discount. In Tesco case, they charge different products at promotional price in everyday basis. For example, Tesco sell fish cheap on Monday, but charge lower price at vegetable on Tuesday.

Tesco Pricing Strategy Essay

Strategy Assignment Essay

Strategy Assignment Essay.

1. In an industry where profitable firms are scarce, Emirates has delivered solid growth and solid financial performance for years. Why? What is behind Emirates’ success?

Ṝecently, on May 20th 2014, the Air French – KLM announced their results showing record losses. The strategy of alliance between two struggling airlines is yet to prove its success. Meanwhile, in a complete contrast, The Emirates Airlines have passed a massive order of 32 Airbus 380 super jumbo jets at the Berlin Air show 2010. Today, Emirates has a total of 140 orders for the Airbus 38010 and is the largest operator of A380 crafts around the world.

Emirates is an industry bellwether for aircraft purchases, having purchased a whopping 200 aircrafts in 2013 alone.

In over a period of 29 years, Emirates has grown to be one of the biggest players in the airlines industry. This solid growth and an impressive financial performance over the past years is the proof of an invincible business strategy adopted by the company. We can link its success to the leadership of the company and to the Dubai Government’s support.

Leadership Strategies

The Emirates Airlines success has been the continuity of its management team, many of whom have been with the airline since its start of the company. The leadership team has 23 years of experience inside the company. HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Maurice Flanagan, Executive Vice Chairman and Tim Clark, President of the Emirates Airline.

The major contribution on each of the below mentioned fields has taken the
airline and the aviation industry, far from where it started.

– Realising the Advantages: The government-owned Dubai carrier has lower personnel costs than much of the industry, in part by drawing many workers from the nearby lowwage nations of Pakistan and India1. Emirates has other advantages that have placed it on a par with Singapore Airlines – the two are the world’s fastest-growing and most profitable jetliners- including its remarkable Dubai location within an eight-hour flight of more than half the world’s population2.

– Customer Service: In an industry characterized by decreased service amenities and increased discomfort to improve bottom lines, part of Emirates’ appeal to many passengers was its emphasis on a premium service experience. Differentiating itself through service not only enabled Emirates to build passenger loyalty and reap subsequent value, it also allowed the airline to avoid direct competition with low-cost competitors based on price.

–  Small wings, Big dream – Capitalization of the Initial Fund: In contrast to other major Airline operators such as Air France and British Airways, who have often received huge bailout packages or debt reliefs from the government; The Dubai government had given the airline a total of just $18 million, including the start-up money.

– The leadership in the organisation were able to capitalize on this initial funding by the Dubai Royal Family and flew out of Dubai with just two aircrafts, leased Boeing 737 and an Airbus 300 B4 from the Pakistan International Airlines. The first flights connected to the neighbouring
cities of Karachi, Pakistan and Mumbai, India, and they soon started an operations to the capital of India, New Delhi.

– The Positioning1: The location is a strategic one – A well-oiled hub centred in a major catchment area. Emirates enjoy the low price of fuel and also the low cost labour in this region, which is more than just convenient for an Airline operator. Emirates moves passengers west-east, east-west, north-south and vice-versa and many of them only touch Dubai in transit.

Dubai benefited from relatively good weather; aside from occasional fog and the general heat, airport operations remained relatively free of the rain and snow storms that often caused delays in European and American airspaces.

– Global Base2: Given its global base and high number of transit passengers, connections at Emirates’ Dubai hub were essential for running its network effectively. Twice a day, once from 12 a.m.–2 a.m. and again from 6 a.m. – 8 a.m., a spike of passengers deplaned from points west for a two-hour window to connect to their east-bound flights. These spikes strained the airport’s capacity, but they were essential to allow connecting passengers the widest possible choice of connections from points east to west13. Emirates’ growth into new markets produced some additional peak-period hiccups.

– Strategic Expansion: The strategic move of placing a planning department to forecast major growth regions and placed orders for the number of new planes it expected to use. Once the planes were confirmed, the planning team examined the overall fleet, the available craft currently in use, and how many planes remained. This base was then  used to determine whether to add capacity to existing routes or launch a new route. If case of the former option, Emirates determined whether to add new service to an existing route or to swap out a service’s existing plane with a larger and newer craft. Emirates relied on only three types of aircraft, because of which planes could be deployed onto existing routes to supply much more easily to match the demand. –

Strategic Alliances with Manufacturer: Existing plane models with Emirates in the end of 20th century, could only fly distances of up to 14 hours, due to which they were not able to connect to the key potential markets such as Los Angeles or Sao Paulo. To increase the range of the aircrafts, Emirates approached Boeing and Airbus and pushed the two airline manufacturers to develop ultra-long-range, wide-body aircraft that were better suited to Dubai’s longer routes13. They also assured the companies with a guaranteed buy from them.

– Strategic decision to not be in an Alliance7: Emirates believed that the marketplace will be hindered when an airline will need a consensus from its Alliance partners. In 2000, however, the carrier briefly considered joining “Star Alliance”, but opted to remain independent of all the three major alliances in the industry. Emirates are currently not a member of any of the three global airline alliances.

– Younger & Limited number of Fleets3: Restricting its fleet to only three types allowed Emirates to optimize its pilot Deployment more effectively and serve its long-haul destinations. It also standardized the customer experience.

Emirates also maintained a younger fleet in the industry, with an average airplane age of 6.4 years, which enhanced the passenger experience and increased fuel efficiency.

Leadership at Emirates is considered as an influential and democratic. The aptitude and skills inspire as well as influence the subordinates to achieve a common goal. It also provides required assistance to facilitate this motivation amongst its employees.

Dubai Government Support

Role of the Dubai government has been exponential in building the Emirates Brand. The government maintained a strict arms-length financial relationship with the airline through its holding company, the Investment Corporation of Dubai (ICD). The UAE government supported Emirates’ entry into new markets by negotiating bilateral aviation agreements with foreign states whose markets Emirates wished to enter. Emirates also enjoyed subsidised fuel, no income tax, and strategic synergies with the Government at its principle hub which also aided the success of the airline.

Dubai’s government had worked hard to build up the city’s tourism base and establish it as a travel and logistics hub high-profile projects, along with close coordination with the hospitality industry. It helped create a strong pull that attracted business and leisure tourists alike. The Dubai government further facilitated incoming tourist flows by eliminating the majority of visa requirements and launching marketing campaigns. The government also sees Emirates to be one of the strong pillars in their economy, which has paid a total of $2.3 Billion in dividend since the royal family bankrolled the venture 28 years ago.

2. What is the role of Dubai in Emirates’ success?

In the initial years of Emirates, many potential customers in target markets were still largely unfamiliar with Dubai, and few saw it as a principal tourist destination. This view of Dubai hindered Emirates to be known as a popular brand in the aviation industry.

Though, Emirates was not able to change this face of its primary hub, the Government of Dubai invested a huge amount of money to change the global view of Dubai. High profile projects such as the Burj-al-Arab, the World and Palms development projects, and the Burj-Khalifa tower helped grow the city’s global renown, which in turn led to higher volumes of tourists. To lure tourists, Emirates partnered with local tourism organizations to promote the city of Dubai. Tourism packages offered events such as desert safaris, and the airline structured its bookings to allow short stopovers for little or no cost.

Dubai’s contribution in the success of Emirates Airlines is as mentioned below: –

Location2: The Dubai benefited from several inherent strategic advantages as a hub city. Dubai’s position on the Arabian Peninsula placed it at the nexus of global transit routes, a strategic location between Europe, Oceania, Asia, and Africa. This allowed Emirates to take maximum advantage of its connectivity.

– Resources: UAE being the major exporter of oil in the world meant that the major resource for the Emirates – the fuel – was available at a very low price

than many of its competitors. Emirates was capable of reducing their fixed cost, and the subsidies and Tax exemptions by the government fused many of the profits made by the company into its own development.

Due to the lower operation cost, Emirates was able to pass the benefits on to the customers which many of its competitors couldn’t afford to.

Air Traffic: Dubai’s relative distance from congested European airspace meant that aviation traffic was minimal and that flights could connect at almost any time of the day, allowing for twenty-four-hour operations.

For Emirates, the flexibility in operations meant covering trips to the entire world and having customers reach their destinations at the most preferable time.

– Weather: Dubai benefited from relatively good weather; aside from occasional fog and the general heat, airport operations remained relatively free of the rain and snow storms that often caused delays in European and American airspaces. The good weather conditions in Dubai meant that there was lesser factors for delays, as most of its operations are based on connecting to another flights using the hub as a gateway to the next travel13.

– Connectivity: Dubai’s small size was not seen as a deterrent by the Emirates. Over one-third of the planet’s seven billion citizens lived within a four-hour flight of Dubai, and over two-thirds lived within an eight-hour flight. The connectivity option made Emirates push to reach many destinations as possible. For customers, it also served as the fastest way to connect to their destinations, where in other major carriers offered a zigzag path.

– Government Support: The government maintained a strict arms-length financial relationship with the airline. The UAE government supported Emirates’ entry into new markets by negotiating bilateral aviation agreements with foreign states whose markets Emirates wished to enter. Emirates also enjoyed subsidised fuel, no income tax, and strategic synergies with the Government at its principle hub which also aided the success of the airline.

– Dubai’s Tourism: Dubai’s government had worked hard to build up the city’s tourism base and establish it as a travel and logistics hub high-profile projects, along with close coordination with the hospitality industry. It helped create a strong pull that attracted business and leisure tourists alike.

The Dubai government further facilitated incoming tourist flows by eliminating the majority of visa requirements and launching marketing campaigns.

– Dubai’s Open-Air: In order to tap these new markets and fill its network, however, Emirates needed regulatory approval to fly to new destinations. While some nations such as the UAE, the US and the Netherlands have open skies agreements with other nations permitting unrestricted access to their markets by any foreign carrier, many countries continue to regulate the level of access. The UAE government supported Emirates’ entry into new markets by negotiating bilateral aviation agreements with foreign states whose markets Emirates wished to enter.

– Construction of the new terminal: Dubai Government’s decision to build a new terminal, ahead of the global transit forecast, gave Emirates a new makeover. The hub created by the government of Dubai with an infusion of huge investment gave Emirates more reasons to increase its fleets. The new Terminal had become a new face of the Emirates airlines and one more reason for the customer to fly Emirates.

3. Is Emirates’ strategy sustainable? Why?

During the last decade, travel and tourism has assisted the Emirates Airlines in spreading its wings into every aspect of travel, tourism and business and has made it the fastest growing corporation in its field.

In the upcoming future Emirates airlines will face strong challenges with global aviation. The overall growth aspiration of the region demands a high-performing aviation system – including airlines, airports, and air traffic control – that in 20 years must successfully serve more than four times the passengers it serves today. International benchmarks illustrate that even today’s aviation system does not fulfil current demand. Middle East aviation markets, especially United Arab Emirates, have set the level for reforming their aviation systems and have started encouraging trading and deregulation of airlines rules. In addition, the Middle airline sector plays a smart role in developing a world-class airline services, such as Emirates Group, with above average profitability4 & Qatar Airways, which has a five-star Skytrax ranking14.

Emirates has always been precise with its strategies, and has always enjoyed it benefits. But, in the upcoming future few of the factors which Emirates enjoy today will start to deteriorate such as

– Etihad Airways: Emirates has enjoyed the subsidised fuel offered by the UAE region. While other airlines such as Lufthansa, Singapore Airlines have struggled to bring their operating cost 6 down, Emirates has always been able to work under at the lowest possible operating cost 6, providing its customers with the benefit and grabbing a huge market share.

The invasion of Etihad Airways, the national airline of the UAE, is an in house competitor for Emirates. Etihad, which enjoys all the exclusive facilities like Emirates, such as the subsidised fuel, exemption from the Income Tax, Free-Air initiatives from the government has structured a similar business model for itself. It also accesses to be the gateway to major cities around the world and is the hub of the UAE tourism at the Abu Dhabi International Airport, few kilometres away from Dubai.

With the youngest fleet3 amongst any other players in the industry, it has grown at a humungous rate within a decade of its operation. It has learnt from the mistakes done by the Emirates and has tried to imitate the same to improve its quality and to be one of the best airlines in the world at the age of 10. Etihad has also shaped its airlines to be the cheaper of the two in many of the common destinations, taking away Emirates’ customers. Emirates’ lower operating cost, and the premium services had brought huge profitability to the company, but Etihad by dropping down the premium services one-step below has been successful in attracting more customers at a lower price tag.

Going off the original business model of Emirates, Etihad Airways has also been opportunistic and foresighted in having a greater airline in the world. It has not just increased its fleet size, but has also held stakes8 in many major airlines around the world such as Alitalia, Air Serbia and Jet Airways. Etihad has agreed to be in code-shares9 with some of the major players in the industry.

Qatar Airways: Right at the nose tip of Emirates and Etihad, Qatar airways has followed a similar business structure, to be one of the major competitor for

Emirates. Qatar, being one of the major oil sources in the gulf has allowed Qatar airways to enjoy similar facilities as its competitors. Qatar Airways soon realised the lack of tourist for its primary hub, contrast to that of Emirates/Etihad, and have modified its business model to suite its transit customers. Doha Airport, Qatar airlines’ primary hub has reported to have more than 90% of its arrivals customers to be in transit for their next flight11.

Qatar airlines, capitalizing on the above figures, has reduced its waiting time significantly, gaining customers attention who are in longer routes. With a Five-Star Skytrax rating14, Qatar Airways has differentiated itself from the Emirates to be higher premium brand of the two. Emirates, which was in-turn knows for its high quality service is facing serious threats from Qatar Airways, which has renounced itself to have the best in class air experience. Qatar airlines has also joined the One-World air alliance15, providing customers with a greater value in the any of the seating class and helping them earn frequent flyer points.

– Pacific Sector2: Emirates has been very successful in connecting eastern and western worlds. But, when it comes to the pacific travels, they have no existence. Today, even though a greater number of population are in Emirate’s reach, a majority of those population is still under the middle-class level. The rich population between the pacific is out of the emirate’s reach. With huge number of population traveling between the European and the American (South/North) regions, there is nothing much Emirates can do to attract these customers.

The location of Emirates’ primary hub does not allow it to take any advantage of people traveling from Europe to Americas. Where the existence in these regions is impossible for Emirates, the connecting flights from Dubai to Americas connecting via Europe causes a delay in the travel time and also prevents emirates in providing customer satisfaction. Thus by missing this route, Emirates has a significant part of the global traveling sector out of its reach.

– Increasing Income1: In the Middle Eastern regions (UAE), where most of the Emirates’ man force comes from have showed major improvement in its growth. Adding on to this, the lower labour population of Emirates, which  comes from Asia Pacific regions of India, Sri Lanka and Pakistan have also showed improvements in their average per-capita income These factors will force Emirates to rethink its cost structure. The lower labour which Emirates have enjoyed over the past decade will be one of the major factor shaping the future of Emirates as the leader of aviation industry.

International Competitors: Strategic competitors such as Singapore Airlines and Turkish Airlines have also been able to mark themselves as a hub in connecting different parts of the world. Most of the Asian and Australian population traveling to Americas find it easier to travel via Singapore Airlines which has a lower travel time, such as Sydney to California; Others traveling from developing regions of china find it convenient to fly to European regions with Turkish airlines. The gateway created by Emirates, has no upper hand in these unfortunate situations as their hub will take a longer flight time.

– Lower Cost Airlines: With increased number of lower cost airlines in the recent years, there is a huge trend of population, especially from the developing regions who prefer to travel at a lower cost than having a premium service. Emirates, will have to make some strategic moves either to have their airlines positioned to be an average cost airline with premium services, to have a fair trade-off with its customers and gain the depreciating markets from low cost airlines.

– Air Traffic: In the past decade Emirates has gained advantage with its lower air traffic levels, helping it to have its customers arrive the hub on time to connect to their respective flights. But with the increased air traffic by Emirates itself, having being forecasted to carry twice as capacity soon in future. This air traffic increase will be also aided by the next door airline Etihad, being in almost the same region. Emirates will have to position itself to manage this nasty situation, since most of its passengers cannot afford to be delayed in reaching the hub.

– Aging Fleet3: Emirates has been amazing in providing world class services, and most of the credit goes to the young fleet size, which are equipped with modern technologies. But with the aging fleets, Emirates will have to either face difficulty in pleasing its customers with an outdated technology or spend a fortune on new fleets to maintain customer experience.

Strategy Assignment Essay

Porters Generic Strategy Essay

Porters Generic Strategy Essay.

Introduction

It is clear that competing for sustainable and superior performance enhances a firm’s profitability. Equally, this same level of profitability depends largely on the attractiveness of the industry which is easily measured using the Porter’s 5 tools and more importantly, the position the firm takes within the industry to leverage on its strengths. To compete properly, a firm must address two fundamental questions. Should it focus on identifying a microcosm of the industry or serve the entire market? According to Michael C.

Porter, the porter’s three (3) generic strategies are very important strategies, which can be applied to products and services in any industry or organization regardless of its size.

The Three Porter’s Generic Strategies

In order to gain competitive advantage, Michael Porter developed three generic strategies that a company could use; The Cost Leadership Strategy, The Differentiation Strategy and the Focus Strategy. These strategies have been used by various organizations to become more competitive in the market.

Below is a representation of these strategies.

1. Cost Leadership Strategy: This strategy is all about minimizing the cost of creating/delivering the firm’s products or services. It means having the lowest average cost of production compared to relative competitors and still not compromise on quality. There are two main ways the strategy can be achieved; a. Increasing profits by reducing costs while charging industry-average prices. b. Increasing its market share by charging lower prices while making profit on each sale through economies of scale While this approach might be attractive because of its obvious advantages like the entry barriers that result when competitors are not able to produce at the same low level of cost or size of the market share the company gains, there is still the risk of losing the advantage when other rival firms begin to cut costs as well by using advancement in technology to enhance their production capacity.

The cost leadership strategy is also broad in scope as it sells to different customers in its industry. Firms looking to use this strategy must be able to; i. Access the capital needed to invest in new technology, which will lead to a larger market share in the long run. ii. Provide continued capital investment to maintain its cost advantage through economies of scale. iii. Develop cheaper ways to produce existing products and.

iv. Maintain a tight control of its overhead costs.

2. Differentiation Strategy: This strategy allows companies to produce products and services that offer unique attributes that customers can perceive to be better than what the competition offers. It can be seen as a way for firms to compete by creating a completely new market and dominating it. The extra value the product or services provides to the market allow the firm to charge higher prices (premium) which then compensates the increase in costs used to provide that extra service. The differentiation strategy is achieved by using any combination of the following approaches;

a. Different design.
b. Different brand image.
c. Different product or service features.
d. Different and more advanced technology.

3. Focus Strategy: This strategy is a slight variation of the other two generic strategies. However, as the name implies, the focus strategy allows firms to focus on a particular niche market and provide uniquely low costs (cost focus) or uniquely different products (differentiation focus). Since the strategy is targeted to a select part of the market, it creates a strong loyalty for its brand from its customers, which helps to further reduce the threat of rivalry.

Porter’s Generic Strategies in Action: Apple Inc.

Founded on April 1, 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne, Apple Inc is a multinational corporation that designs and leads innovation in the consumer electronics, computer software and personal computer’s industry. Apple Inc. traditionally focused on personal computers but later shifted its focus to consumer electronics. It now has a range of high-end products including the Macintosh line of computers, iPod, iPhone, and the iPad. They are also involved in developing innovative operating systems and browser. Its main competitors are Microsoft, Samsung, HP, Blackberry, Acer, Toshiba, Nokia and Dell. Apple Inc. leads the competition by implementing a Differentiation Strategy. Apple Inc. sets itself apart from its competitors by providing unique features for its products, which the customers really cannot get anywhere else.

These unique features include design, functionality, durability and consistency. Also, Apple electronic products are known to be sleek, simple and minimalist. It’s MacBook and iMac products have a reputation for long battery life and completely zero tolerance for viruses, which are known to plague other competitor’s products that run either Windows or Linus operating systems. Another aspect of differentiation that Apple utilizes well is its amazing customer service.

Through its Apple Stores worldwide, Apple creates a very interactive forum where customers can come to purchase new devices or fix faulty ones. These unique aspects of its differentiation strategy are what give Apple the right to charge higher prices, thereby commanding a premium for their services. This strategy has proven to work well for the company because its market share has constantly been increasing since it released the iPod in 2005. The following diagram illustrates Apple inc’s strategic position relative to two of its competitors in the mobile industry;

Apple inc. implements a number of strategies that makes it different from its competitors. It is more focused on meeting the customer’s needs than anything else, so they didn’t need to compete on price, and could set their own prices, because they were delivering something much more valuable to the consumer. The following are some of Steve Job’s quotes that reflect Apple Inc’s focus on the differentiation strategy; “If it could save a person’s life, could you find a way to save ten seconds off the boot time?” “You’ve got to start with the customer experience and work back towards – not the other way around. “Being the richest man in the cemetery doesn’t matter to me.

Going to bed at night, saying we’ve done something wonderful; that’s what matters to me.” One of Apple Inc’s business strategies is to release few but highly anticipated high-end products while others like Samsung focused on releasing a wide variety of products to the market. Apple Inc. allows for long development cycles that grow anticipation and showcased new innovations with each new release under Steve Jobs whose strategy was develop and sell brand new, innovative products which blended art and technology in order to provide a simple and streamlined user experience. After its initial release of the iPod and iPhone, Apple Inc. continued to innovate in the mobile device market through smartphones and then tablets which began to create a loyal customer base around their brand.

Conclusion

Since inception, Apple Inc carved its own market by creating unique products that targeted a specific market. The company continuously innovates to produce the best products in the market and strategically rolls them out so that its customers appreciate it even more. The following are its production and marketing emphasis: Production Emphasis: Nobody does it better

Marketing Emphasis: Ours is better than theirs

Apple Inc. focused on making technology more artistic with design features that catch the eyes of the customer. The efficiency of its products also makes customers want to pay a higher price. The company differentiated itself and its products from the competition and ensured that its loyal customers were always satisfied.

References

Chris Nosal. “Apple’s Marketing Strategy – Sell On Value, Not Price.” Web. 25 Mar. 2014. < http://www.chrisnosal.com/apples-marketing-strategy-sell-products-on-value-not-price/> Dan Mcgaw. “7 Key Strategies That You Must Learn From Apple’s Marketing.” Web. 28 Mar. 2014. < http://blog.kissmetrics.com/7-strategies-apple-marketing/> Fion McCormack. “Apple’s IPhone Marketing Strategy Exposed.” Yahoo Small Business Advisor. Web. 20 Mar. 2014. Grobart, Sam. “Apple Chiefs Discuss Strategy, Market Share-and the New IPhones.” Bloomberg Business Week. Web. 23 Mar. 2014. < http://www.businessweek.com/articles/2013-09-19/cook-ive-and-federighi-on-the-new-iphone-and-apples-once-and-future-strategy> Jerry Alison. “Business Strategy: The Three Generic Strategies.” HubPages. Web. 30 Mar. 2014.

Porters Generic Strategy Essay

McDonald s Rebirth Through a Low Growth Strategy Essay

McDonald s Rebirth Through a Low Growth Strategy Essay.

For several decades McDonald’s experienced uninterrupted growth in sales, profits, and number of stores opened. When the company seemed to reach maturity in life cycle, one CEO’s decision for a low-growth strategy started the rebirth of McDonald’s. In its early years, McDonald’s success was founded on principles of high quality standards and service. However, as time passed, their standards and controls slipped and same store sales began a downward trend. Some insisted that the dip in same store sales was evidence of market saturation.

However, McDonald’s executives disagreed. With strong support, one McDonald’s CEO went on a new-store binge.

As McDonalds continued its unprecedented expansion, relations with franchisees deteriorated because corporate owned outlets were cannibalizing franchisee’s profits. Another CEO began to acquire other fast-food restaurants, but that model failed as it proved a drain on profits. McDonald’s was struggling to keep its growth mode. Then James Cantalupo took the reigns and began a low-growth strategy that turned the company’s fortunes around as he slashed capital expenditures by 40% by closing poorer performing restaurants and adding fewer new restaurants.

Eighteen months into Cantalupo’s stint as CEO, McDonald’s stock price rose from eighteen dollars per share to just over twenty-four dollars per share. Just as McDonald’s fortunes seemed to turn, James Cantalupo died suddenly of a heart attack.

SWOT Analysis
Internal Strengths & Weaknesses:

Among McDonald’s greatest strengths are its brand recognition, strong advertising, and market share. It was the most valuable fast food brand worldwide in 2013 with an estimated brand value of eighty-five billion dollars, three times its closest competitor, Starbucks [see appendix 1.1]. McDonald’s strength of brand recognition can primarily be attributed to its strong advertising and market share. This is evidenced by a 1970’s survey which revealed that ninety-six percent of children identified with Ronald McDonald, ranking him second only to Santa Clause. Furthermore, McDonald’s uses high-profile sponsorships and major advertising campaigns to maintain awareness and promote new launches (e.g. 2014 FIFA World Cup and 2014 Winter Olympics). In 2013, its advertising expenditure in the United States alone was 1.43 billion dollars [for details see appendix 1.2].

McDonald’s has won its market share via strong marketing/advertising efforts and providing convenience for its customers. When McDonald’s accelerated growth period ended, it had approximately 13,000 domestic restaurants. The belief was practical; the more stores in a city, the more per-capita transactions would result. As of 2013, McDonald’s had 35,429 restaurants worldwide- 14,276 of which are domestic (Statista, 2015). McDonald’s other internal strengths include: partnerships with big brands (e.g. Disney), international presence, localized food menus, and revenue. Now that we have examined McDonald’s internal strengths, lets examine the company’s internal weaknesses.

Among McDonald’s greatest internal weaknesses are its negative publicity, low presence of corporate social responsibility, high employee turnover, and low strategy differentiation. McDonald’s is heavily criticized for offering unhealthy foods to its customers, further exacerbating the obesity problem in America. The documentary film “Super Size Me”, which explores the health consequences of a diet based solely of McDonald’s, is one example of the negative publicity surrounding McDonald’s. Environmental groups often criticize McDonald’s for a lack of sustainable sourcing of beef products (USA Today, 2014). This reflects poorly on McDonald’s for having a weak presence of corporate social responsibility. Furthermore, McDonald’s has a high employee turnover as it offers low paying and low skilled jobs.

These jobs are often seen negatively by employees and usually result in high employee turnover. This is an internal weakness because it increases training costs and adds to McDonald’s overall costs. Lastly, McDonald’s has low strategy differentiation. It has become incredibly difficult for McDonald’s to differentiate itself from other fast food restaurants; thus, forcing McDonald’s to compete on price rather than features. This is an internal weakness because price wars reduce a company’s gross margin, which results in deteriorating profits. McDonald’s other internal weaknesses include: Declining market share, disgruntled franchisees, quality and taste of products, slowed revenue and income growth.

External Opportunities & Threats:

McDonald’s is in the unique position to rebrand itself by offering healthier menu options and increasing its corporate social responsibility. In 2006, McDonald’s newly redesigned logo and restaurant layout are being credited for 8-9% sales growth. Furthermore, McDonald’s has the unique opportunity to be the first fast food restaurant to source 100% of its ingredients from sustainable production. Younger generations are very conscientious of the impact their purchasing habits have on the environment.

The aforementioned opportunities can be done still pursuing a low growth strategy. But, McDonald’s still has opportunities for growth. Economic research suggest that China’s middle class is on pace to grow from six percent of its population to fifty percent of its population by 2020 (Business Insider, 2014). McDonald’s has historically targeted middle class families, so there is plenty of opportunity for growth in China. If McDonald’s is able to make a more localized menu and provide an atmosphere that can strike the right accord with the Chinese culture then McDonald’s has the opportunity to flourish in China.

Among McDonald’s greatest threats are the growing segment of health conscience consumers and the strength of competition. The health conscience consumer, a growing segment of society, poses both a threat and opportunity for McDonalds. The change in customer’s habits represents new needs that must be met by McDonald’s. In an attempt to cater to this market, McDonald’s has added salads, fruit, and oatmeal to their menu. Additionally, they have eliminated trans-fat oil- a product blamed for the nations obesity. Other areas of concern are the threat posed by Starbucks, which plans to offer a breakfast and lunch menu. McDonald’s strongest competitor remains Yum! Brands- owner of popular fast food chains: Taco Bell, Pizza Hut, KFC, and Wing Street [see appendix: 1.1. Other external threats include: saturated market, macroeconomic factors.

Recommendations

The central strategic decision that needs to be addressed is whether McDonald’s will commit to rebranding itself so that it is seen not only as an economical food destination, but as an appealing high quality one as well. The societal shift to a more health conscience consumer provides McDonald’s such an opportunity. Alternatives to Strategic Decision Making

McDonald’s has three viable options for continued success. The first two, allow McDonald’s to continue it’s low growth strategy. First, McDonald’s can create and promote an attractive menu that that will grab the attention of health conscience consumers. Second, it can focus on the stronghold it’s gained in the coffee space, as this could be an interesting new endeavor to follow (i.e. a new SBU). The third option would be to pursue a growth strategy for Asia, especially China. However, it must be noted that the growth strategy may burden the company with debt to pay for capital-intensive expenditures, but should it be successful McDonald’s revenues and profits could reach new ceilings.

It would behoove McDonald’s to fill the need of the health conscience consumer by adopting and promoting a healthier menu. This can be done without abandoning their staples (e.g. Fries, Big Mac, Happy Meal, and Egg McMuffin). If McDonald’s is able to meet the changes in customer’s needs and habits, there is no reason why they shouldn’t continue to experience growth in sales. I believe that this is the best option because it is not capital intensive, yet it could allow McDonald’s access to a new segment of the market. Furthermore, McDonald’s number of locations provides the health conscience consumer with convenience.

Implementation Evaluation and Control

The following steps are keys to a successful implementation of a strategic marketing plan: 1. Who are we? Who are our customers? What do our customers want? 2. Set strategic marketing goals: Assess internal strengths and weaknesses then compare your vision/mission to the reality of your external environment. Once you have identified the areas of need, choose specific goals to address those areas. 3. Establish strategic marketing activities/plan of actions: Once specific goals have been set, identify various activities to utilize resources and choose the best course of action to implement.

4. Establish timeline to execute goals and plan of actions: By having a clear understanding of your strategic marketing goals then you can establish common understanding of when such action plans can be reasonably accomplished. 5. Review and re-evaluate progress: By consistently reviewing and re-evaluating progress in implementing or instituting plan of actions, you can take a proactive approach in making adjustments due to changing business climate, environment, external threats and opportunities that may arise in everyday business decisions.

References
Brumley, James. (April 23, 2014). McDonald’s Is About To Tap Into A Huge Growth Opportunity. Retrieved from: http://www.businessinsider.com/mcdonalds-expanding-international-2014-4

Horovitz, Bruce. (April 30, 2014). McDonald’s sets 2020 sustainable goals. Retrieved from: http://www.usatoday.com/story/money/business/2014/04/30/mcdonalds-sustainability-fast-food-social-responsibility-restaurants/8513245/

Statista. (February, 2015). Retrieved from: http://0-www.statista.com.leopac.ulv.edu/topics/1444/mcdonalds/

McDonald s Rebirth Through a Low Growth Strategy Essay

Policy and Strategy in Global Competition Essay

Policy and Strategy in Global Competition Essay.

Discussion Question 6.1: What are some drawbacks and risks to a broad generic business strategy? To a focused strategy? The two generic business strategies are differentiation and cost-leadership strategies, and they are fundamentally different from one another, both with their own drawbacks and risks (Rothaermel, 2013). These strategies are referred to as “generic” because they may be used by any type of organization (Rothaermel, 2013). The drawbacks and risks of a differentiation generic strategy is its viability “is severely undermined when the focus of competition shifts to price rather than value-creating features” (Rothaermel, 2013, p.

155). This tends to occur when there is a level of acceptable quality which has emerged as a standard (Rothaermel, 2013). Organizations pursuing this strategy also need to ensure that they are not adding features which add cost but no “perceived value in the minds of consumers” (Rothaermel, 2013, p. 155). The drawbacks and risks of a cost-leadership strategy are that new entrants may erode the low-cost leader’s margins because of the “loss in market share while it attempts to learn new capabilities” (Rothaermel, 2013, p. 154).

Also, the converse of the differentiation strategy issue applies, in that organizations need to ensure that the “focus of competition shifts from price to non-price attributes” (Rothaermel, 2013, p. 154). The organization needs to also be careful not to allow the value of the product or service to fall below the low-cost at which the product or service is offered (Rothaermel, 2013). A focused strategy applies the same concepts as the generic strategies above, but the focused strategy utilizes a more narrow competitive scope than the generic strategies (Rothaermel, 2013). The competitive scope refers to the market segment at which the product or service being offered is aimed (Rothaermel, 2013). An example would be the broad market of wristwatches to the more focused market of luxury watches (Rothaermel, 2013).

Discussion Question 6.4: Create examples of value chains for three firms: one using cost leadership, another using differentiation, and a third using an integration business-level strategy. A value chain is the process in which “a firm engages when transforming inputs into outputs” (Rothaermel, 2013, p. 95). It is made up of primary activities, which add value directly, and support activities, which add value indirectly (Rothaermel, 2013). Primary activities include production phases, sales, marketing, and customer service (Rothaermel, 2013). Support activities include research and development, “information systems, operations management, human resources, finance, accounting, and general management” (Rothaermel, 2013, p. 96). Cost leadership firm: As discussed above, a cost-leadership strategy involves maintaining the lowest price of a particular service or product (Rothaermel, 2013). A prime example of a cost-leadership firm would be Walmart (Rothaermel, 2013).

Walmart’s value chain would begin with its supply chain, which is made up of suppliers with whom Walmart has negotiated the lowest price possible, at a volume sufficient enough to fill its shelves (Rothaermel, 2013). The next link in the value chain would be Walmart’s distribution and operations. Walmart has been able to reduce packaging and mileage, allowing for significant cost savings (Porter & Kramer, 2011). Walmart’s sheer size creates significant savings through economies of scale (Rothaermel, 2013). Lastly would be marketing, sales, and service, in Walmart’s value chain. Walmart focuses on “Saving people money so they can live better”, and continues to take innovative steps to do so (Walmart, 2015). The company has even created a mobile app called the “Savings Catcher” which allows customers to scan their Walmart receipt to capture savings that they would have missed otherwise (Walmart, 2015). This is a marketing effort which impacts sales and services in a major way.

Differentiation: Apple is an ideal example of an organization utilizing a differentiation strategy (Rothaermel, 2013). Apple seems to be able to “create customer needs (even if customers are initially unaware of the need)” (Rothaermel, 2013, p. 155). Apple’s value chain will differ from Walmart, and other cost-leadership strategy firms, in that it will have a greater focus on the development of their products and in its marketing and customer service. It will focus on product development in an effort to ensure their products continue to set the bar in their respective categories (Rothaermel, 2013). Apple will also focus on marketing and customer service to ensure that new and current customers are aware of the products’ areas of superiority (Rothaermel, 2013).

Integration Business-Level: Hewlett Packard (“HP”) is an example of an organization that is using the integration business-level strategy, which is a combination of the differentiation and cost-leadership strategies (Rothaermel, 2013). HP utilizes this strategy because Apple holds the differentiation position while Dell holds the cost-leader position in the mobile devices market (Rothaermel, 2013). For this reason, HP must seek to implement both the cost-saving strategies in supply chain management, like Walmart, and the differentiation strategies in product design, like Apple (Rothaermel, 2013). There are differences, however, in the value chain between HP and the two companies above. HP has sought to cut costs by trimming its workforce, thereby helping in its cost-leadership strategy (Rothaermel, 2013). In regard to its design efforts, HP has improved “the differential appeal of its product and service offerings” (Rothaermel, 2013, p. 162).

Chapter 7

Discussion Question 7.1: What strategy might the firm use to unseat Windows in this market? Although the small firm has developed a new product, it is a product which will be introduced into an industry which is most likely in the growth or maturity stage of the industry life cycle (Rothaermel, 2013). As such, the small firm’s best strategy would be to employ a cost-leadership strategy (Rothaermel, 2013). This is the best option because both the differentiation and cost-leadership strategy are viable options during the growth stage, but firms that adopt the cost-leadership strategy which dominate during the maturity stage (Rothaermel, 2013). The small firm’s new product is likely considered a process innovation, as it seeks to accomplish the same tasks in a more efficient manner (Rothaermel, 2013). Discussion Question 7.2: How does the industry life cycle affect business strategy? Detail your answer based on each stage: introduction, growth, maturity, and decline.

During the introduction stage of the industry life cycle, the companies which tend to be, and stay successful, are innovative and tend to be few (Rothaermel, 2013). As such, the strategy used during this stage is likely the differentiation strategy, since firms are seeking to establish the uniqueness of their products’ features (Rothaermel, 2013). The growth stage tends to allow organizations to be a little freer to decide which strategy would work best for them (Rothaermel, 2013). It is during this stage that a dominant design, or standard, is established, which means that firms may choose to differentiate their product, or choose to attempt to offer the same type of product at a lesser cost (Rothaermel, 2013). The maturity stage begins to see less design changes and more process innovations within the industry (Rothaermel, 2013). For this reason, it is cost-leaders that tend to succeed during this stage (Rothaermel, 2013).

The decline stage differs from those above, as it introduces four strategic options for firms to pursue: (1) exit, (2) harvest, (3) maintain, and (4) consolidate (Rothaermel, 2013). The exit strategy is precisely as it says: it involves the firm choosing to leave the market to pursue other endeavors (Rothaermel, 2013). The harvest strategy means that the firm will still sell the product or service, but will reduce the level of investment in its maintenance and development (Rothaermel, 2013).

The maintain strategy is also exactly what it sounds like: the firm continues offering the product or service at the same level as it has been, despite the declining demand (Rothaermel, 2013). The consolidate strategy involves the purchasing of rivals in an effort to shrink the industry, which provides firms employing this strategy to reach near-monopolistic status (Rothaermel, 2013). Discussion Question 7.4: Why are standards important in many industries? As standards get adapted and become dominant, how does this process influence the competitive nature of the industry?

Standards are important in many industries because the firm whose product becomes the standard “tends to capture a larger market share and can persist for a long time” (Rothaermel, 2013, p. 175). Once the standard is adopted, the market tends to focus more on process innovation than on product innovation (Rothaermel, 2013). This means that firms are focusing their R&D efforts “on process innovation in order to improve efficiency” (Rothaermel, 2013, p. 177). Since the standard tends to be set during the growth stage, either the differentiation or cost-leadership strategy is used, for the reasons discussed above (Rothaermel, 2013).

Chapter 8

Discussion Question 8.1: When Walmart decided to incorporate grocery stores into some locations and created “super-centers,” was this a business-level strategy of differentiation or a corporate-level strategy of diversification? Why? Explain your answer. Walmart’s incorporation of grocery stores into some locations represents a corporate-level strategy of diversification, as opposed to a business-level strategy of differentiation. While business-level strategy typically involves individual markets, corporate-level strategy encompasses decisions which impact multiple markets and industries simultaneously (Rothaermel, 2013). Diversification occurs when a firm seeks to increase “the variety of products or markets in which to compete” (Rothaermel, 2013, p. 216). By incorporating grocery stores into some of its locations, Walmart made a corporate-level strategy decision to diversify the products offered in its stores, and the markets within which it chose to operate (Rothaermel, 2013).

Chapter 9

Discussion Question 9.1: List some specific advantages of this acquisition for Live Nation. Do you see any downside to the merger? Some advantages to the acquisition of Ticketmaster by Live Nation include: a reduction in competitive intensity, lower costs, increased differentiation, and access to new markets and distribution channels (Rothaermel, 2013). While these are some possible advantages for Live Nation, mergers and acquisitions do not result in a competitive advantage the majority of the time (Rothaermel, 2013). Shareholder value is usually destroyed after a merger and acquisition, and it is only the shareholders of the acquired company that tend to benefit (Rothaermel, 2013).

Chapter 10

Discussion Question 10.1: How might your relationship change as the MNE moves from Globalization 2.0 to Globalization 3.0 operations? Globalization is the process of increasing “integration and exchange between different countries and peoples worldwide” (Rothaermel, 2013, p. 271). Globalization 2.0 refers to growing business globally from 1945 to 2000 (Rothaermel, 2013). It involved large foreign direct investment, with the state-side corporate headquarters directing strategic goals and resource allocation (Rothaermel, 2013). Globalization 3.0 covers the time period from 2000 to the present (Rothaermel, 2013). Tremendous strides in technology allow for less need of foreign direct investment, and this stage has allowed the MNE to reorganize as a “global enterprise with centers of expertise” (Rothaermel, 2013, p. 273).

As a small firm supplying a product or service to an MNE, the degree of change which would arise in our relationship, as the firm moved from Globalization 2.0 to Globalization 3.0 operations, would depend heavily on the location and type of services or product provided. The MNE would likely become more dependent on technology for telecommuting and would seek to operate twenty-four hours a day, year round (Rothaermel, 2013). As such, if our service or product was related to the technologies being implemented by the MNE, then the firm would become a larger player in the MNE’s operations. However, if the MNE was able to tap into its own knowledge-base to provide the services or product our small firm provides, then we would no longer be needed by the global giant.

References
Rothaermel, F. T. (2013). Strategic Management. New York: McGraw-Hill/Irwin. Walmart. Our story. Retrieved on January 25, 2015, from http://corporate.walmart.com/our-story/

Policy and Strategy in Global Competition Essay

Compensation and Benefits Strategies Recommendations Essay

Compensation and Benefits Strategies Recommendations Essay.

In this scenario, Team A has agreed to work with a small business, Landslide Limousine. Bradley Stonefield is our client whom we must develop some compensation and benefit recommendations. Landslide Limousine is a small business with approximately 25 employees that is located in Austin, Texas. First, Team A will conduct a market evaluation by researching what companies in the relevant market are providing to employees from a total compensation perspective. Second, recommend a compensation structure. Third, recommend the position in the market.

Fourth, create a total compensation and benefits strategy. Fifth, consider the use of performance incentives and merit pay to recognize and engage employees. Lastly, identify laws related to the benefits and pay program.

Market Evaluation

On account of the tight competition in Austin Texas, it will be challenging as a small business owner starting out to be competing with the larger companies in the market. Luckily, Austin’s average pay for a limousine driver is 6% lower in this city than the national average which will be a benefit to Landslide Limousines.

Austin has over 400 different competing companies in the area so having an upper hand on the total compensation of its employees will be highly beneficial. When looking at the area of competitors many do not offer health insurance or offer very little coverage to its employees. Between these companies very few allow the drivers to take all of their tips or compensation for these services.

Along with these lacks of benefits, problems that could also occur in this market is the high turnover rate due to low wages. By offering these additional benefits that other competitors are not, it allows Landslide Limousines the ability to find the best drivers and retain them. Over time, retaining drivers will save the company a significant amount of money not having to train new employees from constant turnover. In addition, being able to retain those that are experts in their fields, the customer satisfaction for the company will continually bring in new business allow the company to expand to 25 employees in the near future.

Recommendation for Compensation Structure

Based on the Bureau of Labor Statistics, the average pay for a limousine driver in Texas is $10.95 a year or $22,770 based on a full time. This standard includes tenured and new drivers. The minimum wage is for Texas is $7.25 or $15,080. After looking at these statistics, it is recommended that you come up with a hiring structure based on experience and duties for the role. Also consider offering a premium pay for peak or late night hours. Keep in mind if it is decided to provide health insurance it is recommended to keep the wage slightly lower than if it were not to be offered. A business needs to keep a financial balance and by offering both a higher wage along with health benefits it could put Landslide Limousines in more than the fifty thousand in debt than expected.

Since the company decided to allow drivers to keep ninety percent of their tips, it is recommended that the starting pay for the driver with 5 years’ experience be slightly below the Texas average given all the additional benefits the driver will receive. By giving drivers the ability to have ninety percent of their compensation pay, it gives them a high incentive to work at their best. It also allows the company the ability to track their best/most profitable drivers. Using this data will be significant when offering annual reviews and raises.

Recommendation for Position in Market

When looking at compensation and benefits one must look at their main competitors. Knowing one’s competition gives a view of whom in their market might sway or temp employees to the said organization. Landslide’s main competition is Big as Texas Limousine service and Austin Black service. These companies are currently operating in the Austin, Texas marketplace and are a large competitor. In addition, the market can easily offer skilled workers and great benefits.

Landslide must offer a benefits package to keep up with their competitor, and if they wish to stay in business, keeping their employees satisfied amongst competition is a must. Team A recommends that Landslide must offer similar or improved benefits to their employees. Further, Landslide should offer a training program to entry level employees so that the service is exceptional and customers will continue to utilize their business.

Compensation and Benefits Strategy

When running an organization, managers and other members of leaders needs to take a look at the compensation and benefit strategy. A strategic plan for employee compensation determines how much you want to pay employees and what type of employees you want to attract. Your compensation plan entails a variety of aspects including pay scales, reward programs, benefits packages and company perks. A successful strategic compensation plan allows your business to compete in the market for the best employees in your industry (“Strategic Plan for Employee Compensation and Benefits”, 2014). Here are a few recommendation I would make to help with the creation of a compensation and benefit strategy plan.

Attracting Quality Employees

Your strategic plan for compensation plays a large role in attracting competent employees. Paying wages at or above the prevailing wage in the market for your company’s industry allows you to demand workers with more experience and positive work histories. Employing more qualified workers leads to better results, including higher productivity and customer service interactions. This can increase your company’s revenue and help your business establish its identity with consumers (“Strategic Plan for Employee Compensation and Benefits”, 2014).

Rewards for Performance

A compensation strategy may also include rewards for employees based on workplace performance. This may include a commission-based system that rewards employees for total amount of sales or for consistent positive feedback from customers. A reward system should be easy for employees to understand and attainable enough at its lower levels to encourage employees to work harder to reach higher goals. A reward system with performance levels too high for employees to reach early on in the process won’t encourage harder work because employees will simply ignore it (“Strategic Plan for Employee Compensation and Benefits”, 2014).

Perks and Benefits

Perks and benefits can make or break your company’s ability to attract the best and brightest in your industry. Offering health insurance benefits to full-time workers should be a goal of your strategic compensation plan. You can combine health insurance with other company perks, including paid holidays and guaranteed paid vacation time, to attract more qualified workers to your business. Your decision to offer these benefits is also contingent on the success of your company. You may choose to add health care coverage and paid time off to your benefits package only after your company is showing profitability or makes it past the first year (“Strategic Plan for Employee Compensation and Benefits”, 2014).

Incentives and Merit Pay

Subsequently as this is a new limousine service, primarily driven by customer satisfaction. We must consider how to engage staff, by introducing performance incentive plans that support the key business objectives of the Limousine Service; motivating staff into achieving the goals set by management and providing cost-effective rewards for performance. Helm and Holladay (2007) stated, “Effective performance management involves a complete system of goal setting, training, communication, and ongoing feedback from a practice” (p. 4). Considering the current performance management strategic plan for the business, we will have 25 employees to begin the infrastructure. So we can reasonably consider implementing annual, quarterly annual, and end of year special incentives in addition to merit pay for every employee based on the company’s performance rating. Where the individual performance appraisal is described as “an important means to achieve goals set by the company’s top management, not just a way to change wages,” (Robbins & Judges, 2013, p. 254).

The company will outline the quarterly objectives on the 3rd day of the first month of each quarter based on categories such as, leading happy people and driving out risk. Notably each department will have concrete and measurable key performance indicators(KPI)that will align with the Limousine company’s goals; also some defined employee’s will be responsible for multiple areas, and will have specific KPI’s or management by objectives( MBO) unique to their position. The annual portion of the incentive plan will be based on the execution of targets in the following categories; profit before taxes, customer service (gallop score) and service level scores, also marketing our stuff which the total percentage of all groups equaling 100%. Additionally, an individual incentive will be paid to individuals that exceeded expectations in the customer service.

Plus all the regular full-time and part-time employees are eligible, and those working less than 40 hours will receive prorated payments for all plan types. But in order to remain eligible to participate in the incentive scheme, employees must be given a performance rating of ‘fully met expectations’ and nothing less on their annual appraisals under the corporate performance evaluation program. Considerably, the implementation of incentives plans in addition to the performance management plan will create success for the company, and bred a culture of happy people.

Related Laws to Benefits/Pay Program

Team A has put together a few laws that pertain to Landslide Limousines. These laws will assist in the protection of business assets, employees, and customers. Understanding the laws and what one needs to do to stay in compliance is extremely vital in the success of a business. Otherwise, it can become a detriment and soon it will become the ultimate downfall of one’s brand and company. Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 If an employee terminate employment or reduce their hours of employment, they will usually have the right to temporarily continue their health and dental coverage through their employer.

This law requires that most employers sponsoring group health plans offer employees and their families the opportunity for a temporary extension of health and dental coverage (called “COBRA coverage”) at group rates in certain qualifying instances where coverage under the plan would otherwise end. If you are an employee of CWRU and are covered by one of the group health and dental plans, you have a right to choose COBRA coverage if you lose your group health coverage because of a reduction in your hours of employment or the termination of your employment (for reasons other than gross misconduct on your part) (“Laws Affecting Benefits”, 2011).

HIPAA Privacy Rule

The Office for Civil Rights enforces the HIPAA Privacy Rule, which protects the privacy of individually identifiable health information; the HIPAA Security Rule, which sets national standards for the security of electronic protected health information; the HIPAA Breach Notification Rule, which
requires covered entities and business associates to provide notification following a breach of unsecured protected health information; and the confidentiality provisions of the Patient Safety Rule, which protect identifiable information being used to analyze patient safety events and improve patient safety (“Health Information Privacy”, n.d).

Women’s Health and Cancer Rights Act of 1998

Also known as “Janet’s Law,” the WHCRA requires health care benefit plans to provide certain coverage following a mastectomy. The law also requires annual notification to all plan participants and their covered beneficiaries (“Laws Affecting Benefits”, 2011).

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay, which affect most private and public employment. The act is administered by the Wage and Hour Division. It requires employers to pay covered employees who are not otherwise exempt at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay. For nonagricultural operations, it restricts the hours that children under age 16 can work and forbids the employment of children under age 18 in certain jobs deemed too dangerous. For agricultural operations, it prohibits the employment of children under age 16 during school hours and in certain jobs deemed too dangerous (“Summary of the Major Laws of the Department of Labor”, n.d).

Conclusion

In closing, Team A’s recommendations for Landslide Limousines will assist in the success of the company as Bradley Stonefield strives to become the top competitor in the market. Team A has put together a market evaluation. In addition, Team A has provided recommendation for compensation structure and position in market. Further, an outline of compensation and benefits strategy and a merit pay structure for employees. Lastly, laws that pertain to Landslide Limousines that can ultimately protect small businesses, their employees, and customers.

References
Bureau of Labor Statistics. (2013, May). Retrieved from Occupational
Employment Statistics: http://www.bls.gov/oes/current/oes533041.htm Cascio, W. F. (2013). Managing Human resources (9th ed.), New York, NY the McGraw-Hill Companies, Inc.

Experienced Limo Driver Salary in Austin, Tx. (2014, December 6). Retrieved from Indeed: http://www.indeed.com/salary/q-Experienced-Limo-Driver-l-Austin,-TX.html

Health Information Privacy. (n.d). Retrieved from http://www.hhs.gov/ocr/privacy/ Laws Affecting Benefits. (2011). Retrieved from http://www.case.edu/finadmin/humres/benefits/laws.html#hippa Strategic Plan for Employee Compensation and Benefits. (2014). Retrieved from http://smallbusiness.chron.com/strategic-plan-employee-compensation-benefits-15613.html Summary of the Major Laws of the Department of Labor. (n.d). Retrieved from http://www.dol.gov/opa/aboutdol/lawsprog.htm

Compensation and Benefits Strategies Recommendations Essay