Why is Mcdonalds such a successful company? Emphasis on India China

Why is Mcdonalds such a successful company? Emphasis on India China 1. Introduction In the present day we all lead a very hectic lifestyle cramping our lives with endless things to do and accomplish. Gone are the days when meals were cooked and served in households three times a day, instead, the youth live on pre-cooked micro waved meals and fast food. We want food and we want it fast. This was essence for the rise of Mcdonalds From humble beginnings in 1954, when Raymond Kroc who was a salesman had a vision of getting the best food in the shorted possible time to people across America was the birth of the fast-food chain that we know as McDonalds. What he did as a pioneer in the fast food industry is akin to the accomplishment of Henry Ford in the automobile industry. The same concepts of Henry Ford were applied of ensuring timeliness, proper disclipine and production efficiency were utilized. In this instance, to French fries, milkshakes and Hamburgers. Today, McDonalds is a brand that is recognized in every corner of the world. A testament to the accomplishment of this fast-food chain is the endorsement by the economist in the world who compare the official exchange rate with that of the Purchasing Power Parity (PPP) as the Big Mac Index to gauge if the currency is undervalued or overvalued. In this globalised world, how is that McDonalds managed to reach the heights that it has today with 30,000 outlets in 120 different countries spread across the globe in so many different societies with different cultures, different tastes and different economies. What are the factors that have allowed the managers in McDonalds to succeed in these countries? This paper is an attempt to address these issues. 2. International Business (Multi National Corporations) Today the world is a globalised world and increasingly becoming like a single market place. The barriers of international trade are considerably reduced. Businesses are forced to develop effective management teams and policies that can operate in different national environments. â€Å"Globalization is necessary for success and survival in the worldwide market; however, global competition is not easy† (Bateman Scott, 2004). At the onset of the twenty first century, the list of fortune 500 companies century are increasingly companies that are global (Global Capitalism, 2005) and McDonalds is part of this group. This trend gives rise to an important question in a service organisation about service quality how can multinational firms in the service industry obtain a competitive advantage over local industries and succeed? With over 30,000 restaurants operating in 120 countries and with over 1m employees McDonalds is a truly global success. But, what has made the company successful during one of the toughest economic environments for decades? The past 18 months have been a very testing time for companies across the globe. Many have succumbed to the economic turmoil caused in the US housing markets, many have changed their strategy going forward and many have changed their senior management however, McDonalds has seen an astonishing growth in its sales over the past few months. From the study of McDonalds, we identify three key factors: Embracing globalisation Adapting to local culture 3. Strong company core values (culture) The first factor globalization, has allowed between different parts of the world to come closer together, provides opportunities of exchange and expands the consumer base. Among the factors that have allowed these organisations to succeed in the global market place has been their ability to harness the cross-cultural issues and the benefit that a diversity brings to the organisation. The final factor is strong company core values that it disseminates across all aspects of its business across the globe. McDonald Corporations uses these factors to conduct business around the world. 3. Research and Findings (Primary Secondary) To any society, food is an important cultural ingredient. â€Å"Food is the oldest global carrier of culture.† (Britannica 2007). People believe that we become what we eat and impact our behaviour. Changes in its preparation has the potential to alter the traditional beliefs of people, so how could McDonalds succeed even in such an environment? In todays intensely competitive marketplace for fast food services, maintaining a competitive advantage puts a heavy premium on having a highly committed or competent workforce. â€Å"Increasingly it is being recognized that competitive advantage can be obtained with a high quality workforce that enables organisations to compete on the basis of market responsiveness, product and service quality, differentiated products and technological innovation†. (Chew, I. Horwitz, F. Case study findings). The Fast food industry like other service industries has many characteristics. When taken in context of India and China, the following are the main ones; Liberalisation of the economies of China and India Vast population Changing consumer behaviour Highly competitive environment Strong traditional food culture. Looking at these individually, the liberalisation of trade and investment in China and India has allowed for the proliferation of many international fast-food outlets in these countries. As these countries enjoy economic prosperity, a large working population means that the per capita and household disposable incomes have grown. More and more woman now work in these countries hence the fast-food/take-away and home delivery markets have grown phenomenally in India and China. Gone are the days when McDonalds enjoyed competitive advantage simply because of their unique product line. Besides the national restaurants, there are other western fast-food organisations like Burger King and KFC that pose tough competition to McDonalds by offering similar product lines. 3.1 Critical Success Factors Interview sessions were held on a number of consumers across various regions of Hong Kong. Some critical factors of success of McDonald were identified. Product line Lower Prices Sales Promotion Service Quality Adapting to Local taste Convenient Location Seating space Cleanliness The survey results gave the following results that are depicted on the chart below: If one were to look at a threshold of 80%, we find that convenient location, lower prices, service quality, cleanliness and adapting to local taste are the critical factors that consumers rate when walking into a fast food outlet and McDonalds rates high on them. 3.2 SWOT Analysis Porter (1985) suggested that the manner in which a firm puts its strategies into practice will define the sphere that it operates in be it cost leadership, differentiation or focus strategy. According to him, competitive advantage stems from not just one activity that the time does but from many discrete activities. These could be the marketing, designing, delivering or even supporting its product or services. A SWOT analysis is a good starting place in order to identify potential competitive advantages. If a quick SWOT analysis is done on McDonalds the results can be summarised as follows; 3.3 McDonald as an Employer Employees perceptions about McDonalds could be demonstrated by Hewitts â€Å"2009 Best Employers China Study†, according to which, McDonalds(China)company Ltd. has been regarded as the 3rd best employers in China. Hewitt is one of most widespread professional studies which have most impact force and influence. McDonalds figure shows a Employees engagement of 75%, which is about 26% above the average. In general, employees in â€Å"The Best† such as McDonalds speak more positively about the company (Say), more willing to serve the company (Stay) and contribute more to the company (Strive). Engagement Behaviours The Best Employers including McDonalds also shows lower turnover rate than the rest across all levels. Employees Turnover Rate Leaders of McDonalds drive a strong message that employees are highly valued assets of the organization. Employees hold strong positive perceptions of their leaders with respect to range of organizational relationships Employee View of Senior Management  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  The BestTheRest I see strong evidence of effective leadership from senior management  Ã‚  Ã‚  68% 46% Our senior leaders remove barriers to create effective cross-department teams  Ã‚  68% 49% Our senior leaders develop relationships at all levels within the organization  Ã‚  70% 51% Our senior leaders requires continuous improvement from all parts of the organization  77% 57% Our senior leaders create excitement about changes  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  76% 56% Our senior leaders fill me with excitement for the future of this organization  Ã‚  Ã‚  66% 44% Our senior leaders treat employees as this organizations most valued assets  Ã‚  Ã‚  69% 47% Our senior leaders consistently demonstrate the organizations values in all behaviors and actions73% 51% 3.4 Position of McDonalds When we analyse the competing fast-food chains in China, we find that till the end of 2008, KFC opened over 2300 restaurants in China, while McDonalds only has 1100 restaurants. In a questionnaire which investigatesâ€Å" The Most Impressive Restaurant in Guangzhou† shows that Mcdonalds with a proportion of 23.5% is leading other fast-food restaurants including KFC and some other local restaurants. Proportion of Impression of Fast-food restaurants in Guangzhou Research also reflects that McDonalds major consumers are young people aged between 15 and 25. By calculating we can infer that this group of people goes to McDonalds every 2.82 weeks with 60% of them going there because of the fashion image given by McDonalds while 33.3% of them go there because of its conveniences. However, convenience is cited by 53.5% for people aged between 25 and 40 as the reason for going to McDonalds. Proportion of different aged people take a meal at McDonalds at different frequencies consumer aged between 15-25 Consumer aged between 25-40 Motive of consumption During the survey, questions were asked about which promotion method most influences the interviewee the main source that people use to acquire information being 1) TV advertising and 2) friends. These are 74% and 65% respectively. Mean while, when asked about the impact of advertising,75.5% of interviewee express that they are frequently attracted by TV advertising which are quite innovate. 24.5% of interviewees say that they are occasionally interested but no one has ever been attracted nor seen the TV advertising. (diagram) Consumers sensitivity of TV advertising 4. Analysis In spite of being an American firm that is built around the Hamburger model, McDonalds has become a part of the lives of people in Asia. Consumers in countries like China, India, Japan, Indonesia, Malaysia, Singapore, Taiwan and Thailand, where the staple diet is mostly rice or noodles have still embraced this fast food chain. It has even managed to penetrate in India, where cows are considered sacred. 4.1 Globalisation and Glocalisation There have been widespread campaigns about the ill-effects of globlasition there are a few that are pro-globalisation and postulate that globalisation enhances culture rather than adulterate it. Where it not for globalisation, it would have been unlikely that McDonalds would have had developed as a brand. â€Å"Researchers have coined a term, glocalisation, to refer to the interactions between local influences and actors and global forces† (Smith Guarnizo, 1999). Large multinational firms, particularly in the services sector, have taken steps to adapt to local values, traditions and cultures. In some instances, there have been large scale protests when a multinational firms sets up its operation overseas. McDonalds had to bear the brunt of protests when it first started in India. Radley Balko (2003), states that â€Å"In most communities, the McDonalds has conformed to the local culture not the other way around. The McDonalds corporation notes that most of its overseas franchises are locally owned, and thus make efforts to buy from local communities. McDonalds also alters its regional menus to conform to local taste.†. For example, in India, the non-vegetarian menu includes chicken and fish items only. Beef is not on the menu in India because are considered sacred. 4.2 Contribution of Culture to their Success People bring an organisation alive. Using a more diverse description, fish feels the need for water only when it is not in it. Culture is like what water is to fish. It sustains us. We live and breathe through it. â€Å"McDonalds commitment to diversity is established on the foundational belief that diversity is not just a moral and ethical issue, but also a business issue† (McDonalds, 2005). Due to the sheer number of outlets in 120 different countries, McDonalds has no choice but to embrace diversity. What is means is that almost every culture, every ethencity is represented in McDonalds. Internal management policies dictate that local suppliers are promoted. This is an extension of their policy on diversity. the use of local suppliers and based on their policies of diversity. When the individual outlets are examined, at the managerial level, there exists a task/occupational sub- culture.†A task culture is job or project oriented culture and emphasis is placed on completing a specific task†. Coles, M. et al.,(1999). The members have strong recognition for the skills of one another and respect each other. They need each other for the organisational success. Culture is itself not visible, but is made visible by actions or if one does something weird and people will come up and tell you that it is not the done thing. McDonalds realizes that having diversity as an asset greatly enhances the profitability of the company. Diversity is a direct reflection of a companys interpersonal relationships. McDonalds leadership encourages diversity through their policies and programs. McDonalds proven success with leveraging the advantages of diversity can be attributed to their core value of ethics. When I characterise the people of McDonalds on the basis of Herzbergs Motivation hygiene theory, Mullins,L.J.(2002), it is easy to appreciate and seems readily applicable. However when looking at it deeper, certain factors emerge questionable Money is a complicated motivator, it satisfies peoples need in a variety of ways, a set of people in McDonalds, money was important as they needed to fulfil their basic physiological need, there were others who needed money to throw parties (a social need) and the customer relations manager wanted it to buy a house (esteem need). People cut right through the way in which th ey prioritised money. 4.3 Management Practices There is a saying, â€Å"You can take the horse to the water but you cannot make it drink.† It will drink only if it so desires. People will also do what they want to do unless motivated, whether on the shop floor or in the ivory tower. This can be done intrinsically or by external stimulus. Watson (1997) mentioned that â€Å"McDonalds focuses on standardization of its products, as consistency and predictability are important keys to the companys worldwide appeal. It was also indicated that one key to McDonalds success was the constant push to speed up production without sacrificing consistency. McDonalds had created a system that depends upon standardized procedures in everything from sandwich assembly to advanced management training at Hamburger University†. In the 600-page â€Å"Operations and Training Manual† production guide, McDonalds ensured that nothing is left to chance; photo layouts showed where the sauces should be placed on the bun, and the exact thickness of sliced pickles was specified. All equipment at McDonalds restaurants must be purchased from approved suppliers, and the architectural design of both interior and exterior is carefully controlled. It can be said that McDonalds preaches uniformity and consistency with the fervency of a relig ion. 4.4 Core Values bind across cultures A growing belief that one of the major sources of potential competitive advantage for businesses is the effective management and development of people. For example, Sparrow et al covered in their study over 2000 organisations across the globe and their report concluded that â€Å"an organizations people provide the only realistic basis for achieving a sustainable competitive advantage†. A good example of the manner of dissipation of the core values is in the form of bonding at the shop floor. For example, the employees of McDonalds are collectively called the crew of the restaurant. This is the term used at all McDonalds restaurants. It means the same in every country and every outlet of McDonalds all belong to the same family. McDonalds senior team put the companys resilience down to an on-going investment to its customers including improving the restaurant experience and expanding its menu. The company has also maintained a massive commitment to its people and their training, which includes making apprenticeships available to all eligible employees and a cohesive and comprehension management, leadership and coaching programme. David Fairhurst, Senior Vice President People at McDonalds UK said: â€Å"In these challenging economic times, it is more important than ever for employers to invest in their staff.† Carole Williams, Corporate Training Manager for McDonalds UK, said a key component of its success is through strong leadership and communication. 4.5 Managing the Customer Experience In our personal lives, most of us would like to believe that the more someone knows us, the more that person will like us. As the old saying goes, to know me is to love me. Interestingly enough, this is also the essence of customer service. Without product differentiation, its the service that that will develop customer loyalty. Crainer (1995) in his book â€Å"The Real Power of Brands† identified McDonalds as a brilliant international exercise in uniformity. He wrote, â€Å"Wherever you go in Europe or the world, a McDonalds restaurant appears very similar and its products are uncanny reproductions of each other. It is homogeneous, uniform and highly successful. That is a McDonalds formula.† Crainer also mentioned that â€Å"McDonalds restaurants are clean; the food is consistent; the service is good. In effect, the very uniformity of the brand is the crucial differentiating factor.† In today competitive environment, customer service is not merely a means to drive sales. McDonalds has created a a niche for itself by raising the bar of competition by providing customers a unique experience. They have accomplished this is through their employees. As the competitive bar goes up, they ensure that the quality of their employees goes up too. Adapted from Mulins .J â€Å"Employee Relations and business performance† 5. Lessons Learnt In addressing the issues relating to developing effective international management teams it appears that the following areas should be considered: Identifying the nature and implications of national cultural differences within the team. Establishing a basis for building understanding and awareness of cultural differences and how they may be managed. Formulating a framework for developing a high performing team which takes account of cultural differences and leverages the diversity present in an international team. It is useful to identify clear framework for analysing and understanding national cultural differences. Such frameworks have been developed by researchers and consultants such as Hofstede and Trompenaars. While the respective merits and drawbacks of different frameworks are widely discussed and are rather helpful in illustrating the major issues which need to be considered. 6. Conclusion In conclusion, there are no simple answers on how management and management practice drive organisation success. Of all the resources available, in the International arena, the human resource is clearly the most significant, but also the most difficult to manage. The models mentioned earlier are only the basic strategies, though the final mix will vary from situation to situation. The key to competitiveness for Mcdonalds is quality and quality depends more on the commitment of individuals; more on the way these individuals behave; their team spirit than on the passive execution of orders received. People create the future through what they do and dont do. More importantly through what they can and cannot do. The value of companies stems from the people who work there, the skills they possess and their potential to transform.

Land of the Free Because of the Homeless

LAND OF THE FREE BECAUSE OF THE HOMELESS In this article by Shaunna Miller, We learn about the American service members who have unfortunately committed suicide. Yearly, more than 6,500 service members lose their lives due to suicide cases. What most individuals fail to realize is that the number by far exceeds that of those soldiers killed in both Afghanistan and Iraq combined over the last six years. Even those who are against the idea of committing suicide are at high risks of meeting another ill fate.Despite their efforts of fighting for a noble cause, most veterans of America are today homeless. According to estimates of the Census Bureau of the United States, there are over 470,000 homeless people every night. When an analysis is carried out regarding the plight of the homeless veterans, the numbers are devastating. Of the adult population of the country, only about 11 percent are veterans, yet on any given night, veterans make over 154,000 of those individuals who are homeless . This represents over 33 percent of the homeless population.This implies that one third of those persons who are homeless are those people who at one time served this great country. It is not uncommon to find Vietnam War veterans holding placards in streets begging for food. More than 335,000 veterans were reported to be homeless in 2006 alone. According to studies, about 44,000-64,000 of this homeless population is categorized as being chronically homeless. The big question remains why are individuals who served our country left to suffer alone.The major reason that has been given to explain why there exist so many homeless people among the veterans is Post Traumatic Stress Disorder. Statistics from PTSD National Center reveal that this psychiatric disorder normally presents itself after an individual has been through events that are life-threatening. â€Å"Life changing monster† is the name that the disorder has been given by experts. Individuals who were once healthy sudd enly become impulsive, detached, anxious, and sensitive to noise and light.This implies that they become prone to regular emotional outbursts, and even doing simple problems becomes a hard ask. With time, these difficulties alter the functional ability of the individual, as well as their family and social life. Consequently, the disorder creates parenting difficulties, divorces, marital problems and occupational instability. When the PTSD related ailments become to severe, they will consequently result in lack of social support, and when the veterans lack support from their friends and family, they inevitably become homeless.Web postings reveal that the two wars in Afghanistan and Iraq have resulted in the loss of 4,848 lives as of April 14, 2009. This is proof that American troops are exposed to a lot of traumatic events, most of which result with PTSD for those who survive. Of every five troops that successfully return home, one gets diagnosed with either depression or PTSD. A Mil itary medicine article reveal that of the more than 8 million who served their country in the Vietnam War, about 30 percent suffer from PTSD. The current population that is homeless is predominantly made of war veterans.Of the batch that is currently deployed to Afghanistan and Iraq, more than 300,000 have been diagnosed with PTSD. They are even becoming homeless at rates that are much higher than their Vietnam War counterparts. The solution that could effectively address this is to give it our time. During 2007 85,000 volunteers saved the VA 218 million dollars. When people become volunteers their time allows other funds to be used to further treatment for PTSD. So it is in giving our time that we hope to decrease homelessness in our veterans and increase their ability to cope. Qs:Central Idea: After not choosing to take their life the plight of our homeless veterans is that of depression and post traumatic stress syndrome; but the volunteering of our time can help decrease the 33% of the homeless population they represent. The main points are: 1. Suicide numbers for American Veteran. 2. How veteran Homelessness and its numbers are associated with depression and PTSD. 3. The volunteering of citizens time is requested as a solution over money

Backsourcing Pain

When an individual from the United States nowadays calls the customer support center of a business organization, chances are the customer support representative is one who resides another country. Globalization has opened opportunities for businesses to outsource their IT and customer relations department to other countries, usually in Asia. Although offshore outsourcing is a relatively recent trend, companies outsourcing their IT needs to other countries in the United States have been going on for a very long time. Such was the case of JP Morgan Chase.This paper would provide a brief summary on the outsourcing venture with IBM in 2002 as well as the reasons for the premature termination of the venture between the two companies and whether the company’s decision was in full diligence in terms of the agreement between the two companies. It would also discuss the pros and cons of bringing back IT functions of JP Morgan Chase which were outsourced to IBM. Definition of Backsourci ng In order to full comprehend the decision of JP Morgan to backsource their IT functions, the definition and process of backsourcing should be first discussed.Companies have begun to look into outsourcing their Customer Relations and IT functions to other companies in order to acquire high quality services while cutting back expenses that the company would have to deal with if these were done in-house. However, once these operations are outsourced, it becomes more difficult to monitor the quality of service being provided. Because of this, many companies have decided to bring back these operations in-house through a process they have called â€Å"backsourcing† (Overby, 2005b; Tadelis, 2007).While this process may be the ideal choice for many companies who are unsatisfied with the services provided by the outsourcing company, many companies would rather choose to work thing out with the outsourcing companies as opposed to backsourcing the operations that have been originally outsourced because of the expenses that concur along with backsourcing so much so that out of the 70% of executives that have stated their disappointment in the quality of service being provided by outsourcing companies, only 25% of them have decided to backsource the operations that have been originally outsourced to other companies.These expenses include the reestablishment of all of its own systems, employees and operating procedures in order to realign these with the corporate structure and strategies of the company (Overby, 2005a). Backsourcing Endeavor of JP Morgan Chase Stephanie Overby’s (2005a) article â€Å"Outsourcing – and Backsourcing – at JP Morgan Chase† provides a look into the events surrounding the decision of the senior executives of JP Morgan Chase to outsource and ultimately backsource their IT functions to IBM.Since 2001, news started to circulate among the employees of JP Morgan Chase that the company was looking into outsourcing mo st of its IT functions to IBM. The venture was announced through a press release on December 20, 2002. The venture was to last seven years and had cost JP Morgan Chase $5 billion. In the contract between the two companies, IBM was to handle the data centers, helpdesks, distributed computing and data and voice networks of JP Morgan Chase. Thomas B.Ketchum stated in the press release that the venture would create an environment that will promote efficient growth of the company, acceleration of the innovation of the technology used of JP Morgan Chase, increase the service quality provided to the shareholders and customers of JP Morgan Chase and provide career opportunities for the employees of the IT department of JP Morgan Chase while reducing the expenses that the company would otherwise have to face (Overby, 2005a). Unfortunately, this was not the case.Many employees of JP Morgan Chase have stated that once the venture was underway, they had to first be re-interviewed by the executi ves of IBM for the same position that they were employed in prior to the outsourcing of the IT functions to IBM by JP Morgan Chase. Many of the employees have been laid off as a result. Those who were retained experienced salary cuts of as much as 20% (Overby, 2005a). On September 15, 2004, JP Morgan Chase had announced through a press release that they were prematurely ending their outsourcing venture with IBM.Austin Adams, CIO of JP Morgan Chase, stated in the press release that the decision was reached after the senior executives of the company believed that managing their own IT functions was the best options for the company in order to attain its long term goals since it would provide competitive advantages and more efficiency in the level of service being provided. Another reason for the decision was the completion of the merger between JP Morgan Chase and Bank One which was finalized on July 1, 2004.Because Bank One had previous experiences in backsourcing their own IT functi ons, the merger between Bank One and JP Morgan Chase would ensure a smoother backsourcing transition (Overby, 2005a). Diligence of JP Morgan Chase’s Backsourcing Just like all backsourcing projects of different companies, many analysts have viewed that the outsourcing and subsequent backsourcing of the company’s IT functions were both costly and challenging despite its senior executive being noted to state that the transitions were smooth.This was supported by the lack of diligence the senior executives placed on the morale and security of its employees as well as its selection of the outsourcing company (Overby, 2005a). In the past three years, IBM has made a mark in being an outsourcing company so much so that the company’s outsourcing activities, handled by IBM Global Services, was accountable in increasing IBM’s revenues from $36. 3 billion to $46. 2 billion between 2002 and 2004.During the time that JP Morgan Chase entered in an outsourcing venture w ith IBM, IBM has already been handling the outsourcing services of many multibillion dollar companies which included American Express, Deutsche Bank and Michelin. This impressive clientele would initially make any company looking into outsourcing their IT functions make IBM a viable choice (Overby, 2005a). However, the senior executives of JP Morgan Chase have failed to look more closely into the quality of service and performance provided by IBM to its outsourcing clients by doing more background research.Many financial experts including Schonenbach and Dane Anderson, program director of Meta Group, have actually noted that while IBM may continuously be catering to multibillion dollar companies, the most recent deals closed by the company have been significantly smaller and only lasting for a short period of time. This sudden shift on the contracts and deals closed by IBM resulted in the fact that multi-billion dollar deals are initially not lucrative on the part of the outsourcing companies.Hence, they would try to compensate for their losses by charging their clients for services which they would consider to be not included in the original contract signs. Oftentimes, the corporate clients would resist in paying for these added services and improvements in spite of them agreeing that these are necessary, severely hampering the IT functions needed by the corporate client (Overby, 2005a).Another shortcoming committed by JP Morgan Chase when deciding the outsourcing company they selected was to take into consideration of the experience of Bank One with IBM when they outsourced their IT functions that caused them to pull out their IT functions and return the operations in-house a few years prior to the completion of the merger between the two banks. In their experience, Bank One viewed that outsourcing their IT functions to IBM caused a stagnation of their entire IT staff.Once the venture between Bank One and IBM, the venture failed to meet the bank’s goa l to provide a competitive advantage as far as technology was concerned because the technology used was not updated during the venture and new projects were not looked into. Bank One also noticed that there were a number of things that were some things that were not accomplished as a result of the vagueness of the contract between the two companies. This provided a loophole for IBM to charge for services that were not previously done by the bank when the IT functions were still in-house.As a result, these additional services were not completed unless Bank One would pay more. One example of this was the need to add or remove user of a particular account, this would mean that the IT department would need to update all 1,500 servers being used by for the needs of the company manually. Although a Tivoli module was introduced that could allow the updating of the banks databases and servers faster and more efficiently, this was never implemented by IBM since Bank One refused to pay for th e additional costs that IBM was charging them for this module (Overby, 2005a).As a result of the failure of the executives of JP Morgan Chase to look more closely into these factors, the company not only experienced the same challenges that Bank One faced when it outsourced its IT functions to IBM, but also experienced a decrease in the morale of their employees as well as their level of trust towards the company. Employees no longer believe in anything that the senior executives would say or do (Overby, 2005a).Moreover, the executives failed to take into consideration the work and effort that would be needed in the backsourcing process. Jeff Kaplan, senior consultant with the Cutter Consortium’s Sourcing and Vendor Relationship Advisory Services and the managing director of ThinkStrategies, stated that there were seven steps that every company who is considering to backsource IT functions that have been outsourced to another company must take in order to ensure a smooth tran sition in bringing back the IT functions in-house.Among these steps, Kaplan mentioned that the company must first establish a schedule and plan for the backsourcing process which should include provisions in order to ensure that the outsourcing company would be able to support the client until such time that it is able to reassume complete control of its operations. The company must also be able to determine the staff rearrangement and responsibilities at the soonest possible time in order to minimize the decrease in the productivity and morale of the employees (Overby, 2005b).Unfortunately, this was not the case as clearly seen in the problems that JP Morgan Chase had to face during the backsourcing process. During the period when IBM handled the outsourced IT functions of JP Morgan Chase, employees were unable to get their jobs done because they did not feel that they were secure in their respective positions regardless on whether they were permanent employees of JP Morgan Chase o r contractual.Because they were unsure on whether they would be relocated to IBM, retained in JP Morgan Chase or laid off altogether, employees began to become hesitant in committing to new projects, resulting to JP Morgan Chase’s revenue to decline. More and more of the ongoing projects of JP Morgan had begun to also slow down in terms of its development and completion, causing an increase in the pent-up demands for IT services (Overby, 2005a). Things did not improve during when the backsourcing process was underway.JP Morgan Chase now had to reverse all the reorganization done in order to support its IT function. This caused disruptions in the normal operations of the company because both managers and staff members to re-establish the systems and operating procedures back into the company. On top of this, JP Morgan Chase had just completed a merger with Bank One. This resulted to a re-shuffling of the employees of the two companies based on the different staffing levels, cu rrent skills, budget and working assignments.In the end, more employees were laid off and more projects piled up (Overby, 2005b). Key Lessons from JP Morgan Chase’s Outsourcing Venture The decision to backsource or to switch vendors is becoming increasingly common as firms vie for ways to continue to IT costs and improve IT service levels (Whitten & Leidner, 2006). The outsourcing venture and subsequent backsourcing of the IT functions of JP Morgan Chase provides companies who are looking into outsourcing their own IT functions to other companies whether within the United States or overseas.While it is true that in the long run, outsourcing IT functions are able to minimize the expenses that a company would otherwise incur should the IT function remain in-house, companies should understand that these does not happen immediately. As such, executives of the company should first perform an operations audit and needs assessment in order to evaluate and weigh whether outsourcing t heir IT functions is indeed the most viable venture that the company should invest in. Indeed, deciding hastily on an outsourcing venture expected on instant improvements would lead to higher unit costs in the long run (Hummerston, 2007).Another lesson that could be gathered from the case of JP Morgan Chase is the amount of diligence that executives should put into with regard to the contract between the client and the outsourcing company in order to ensure that not only both parties would benefit from the venture, but would ensure that the client would be able to terminate the contract and regain control of the venture in the event that after careful evaluation, the outsourcing venture is not meeting up with the expectations of the client.While it can be assumed that JP Morgan Chase had ensured that there were such provisions allocated in the contract that they have signed with IBM regarding their outsourcing venture, the experiences and challenges JP Morgan Chase had to overcome d uring the short period of time that IBM handled its IT responsibilities.Aside from experiencing similar instances that had occurred with Bank One, many employees of JP Morgan Chase have stated that the situation between JP Morgan Chase and IBM was so dire that even the most trivial everyday activities were not accomplished because of contract obligations, which included the restocking of office supplies that are needed such as batteries for pagers, and reams of bond paper (Overby, 2005a; Overby 2005b).Ironically, the best time to think about backsourcing a company’s IT function is during the period when the company is just considering in outsourcing its IT functions. The reason for this is for the company to ensure that the expenses and the time to be allotted in both the outsourcing and backsourcing would not have an adverse effect not just on the morale and level of trust the employees of the company have, but also the overall productivity and financial standing of the comp any (Overby, 2005b).

Grocery retailers competition in the UK - Free Essay Example

Sample details Pages: 10 Words: 3078 Downloads: 5 Date added: 2017/06/26 Category Economics Essay Type Analytical essay Did you like this example? Introduction à ¢Ã¢â€š ¬Ã…“Demand for food and drink remained relatively stable during the recent economic slowdown. Prices of food have not experienced any major changes, and in fact have been rising steadily. A major trend in food retailing has been the move towards convenience and towards premium products, which has been a feature of many of the major sub sectors and a driver of product development, as well as sales and marketing strategy.à ¢Ã¢â€š ¬Ã‚  (Global Market Information Database, October 2004) The move towards convenience and premium products has been fuelled by various aspects of the competitive environment, thus a PEST analysis of the grocery market will be undertaken to determine these factors. Equally, despite the strong performance of the sector as a whole, Sainsburys has been experiencing relatively poor performance for several years now and thus Porterà ¢Ã¢â€š ¬Ã¢â€ž ¢s models and theories will be used to analyse why this might be the case. Finally, this piece intends to look at the role and purpose of scenarios in helping organizations to manage uncertainty, and the extent to which scenarios can be used for this purpose. Analysis of the competitive environment of the grocery retailing sector in the UK Politically, the main impact on the grocery sector is on the so-called à ¢Ã¢â€š ¬Ã…“functional foodsà ¢Ã¢â€š ¬Ã‚  (Global Market Information Database, December 2003) sector, which covers organic foods, fresh foods and similar types, and which, in the UK, has for most of its existence had relative freedom away from legislation. Whilst functional food has been subject to the same regulations regarding standard food, the sector has been able to make health claims on its packaging which has previously been unregulated by independent bodies. This has now changed significantly, and EU legislation has lead to much tighter controls over what manufacturers can claim, with all health claims made needing to be bac ked up by scientific research. For some smaller manufacturers this is making producing these foods increasingly cost prohibitive, particularly if the active ingredients in their functional products are herbal and therefore difficult to prove scientifically. Another political impact, of potentially even greater importance, is that the fruit and vegetable sub sector received powerful backing in the form of supermarket promotions, echoing the governmentà ¢Ã¢â€š ¬Ã¢â€ž ¢s health message about eating five pieces of fruit and vegetables each day, in order to increase intake of essential nutrients necessary to maintain health and protect against cancer and heart disease.. As a result, sales of fruit and vegetables grew solidly between 1999 and 2003, with vegetable sales increasing by over 38%. (Global Market Information Database, December 2003) Pre-packed vegetables and salads, in particular, have become much more popular recently, with a greater variety on offer, including more exotic foreign types; however this is more of a social effect, similar to those covered below. Economically, in terms of basic food commodities, meat continues to be popular in the UK, with beef having recovered from the downturn caused by the BSE crisis around the end of the 1990s. The supply of lamb was, however, hit hard in 2001 by the foot and mouth crisis in British farming, and has yet to recover fully in terms of supply and consumer demand. A similar but less severe problem exists in the pork market, while poultry sales are currently being threatened by cheaper imports. On the whole, however, value has been maintained despite drops in volume, and more recently the sector has benefited from increased uptake prompted by the popularity of the Atkins diet. Sales of dairy products have also been boosted by the Atkins diet, which advocates a high intake of eggs, in particular. According to industry sources, sales of eggs rose by 4% in 2003, compared with only 1% in the previous yea r. (Global Market Information Database, December 2003) However, in general, economic effects have minimal impact on grocery retailing in the UK, occasionally leading to changes in supply, but generally not significantly affecting the size of the market as much as other effects. (Morrison, 2002) In particular, social effects had major impacts, with the largest growth rates from 1999 to 2003 being evident among prepared foods, as increased sophistication and awareness of food quality, combined with a need for meals requiring minimum preparation, drove the market for these types of products. British consumers are now the largest eaters of ready made food in Europe, with chilled food sales seeing rises of over 90% between 1999 and 2003. (Global Market Information Database, December 2003) Sales of biscuits and bakery products also showed healthy growth, with biscuit sales growing by 5% a year, according to industry sources, (Global Market Information Database, December 2003) as cha nging lifestyle attitudes among women: fewer are fulfilling the traditional full-time wife and cook role, have contributed strongly to this growth, as well as the tremendous prepared food growth. Equally, the increasing number of single person households makes cooking a lonely option, and increased ownership of microwave ovens is also an important factor. In all, retailers are enhancing the image of ready meals with premium ingredients and packaging, and pushing up value in the sub sector in response to the social changes. One final social change is the growth of the organic food industry in Europe, with great changes brought about by the entry of supermarkets; however this sector is still limited by problems in the production of organic foods, and complying with legislation. (Sahota, 2004) As such, these social effects are greatly overshadowed by the drive towards convenience. The UK retail environment is currently extremely competitive, forcing retailers to constantly develo p and enhance both their offerings and their technology. Probably the most significant changes taking place are coming from not the products being sold themselves, but rather when, how and where they are being sold. For example, new technologies such as the Internet, electronic kiosks and digital television are opening up new opportunities for retailers through remote purchasing and delivery. Thus, major UK grocery retailers are now using the Internet to create value for their users over and above that which is offered by bricks and mortar stores, and the growth of internet shopping is seen as the largest technological development in the industry since the advent of refrigeration. (Bevan and Murphy, 2001) Analysis of J Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s market position and segmentation in 2005 The idea that successful companies should pursue only one strategy and avoid being à ¢Ã¢â€š ¬Ã‹Å"stuck in the middleà ¢Ã¢â€š ¬Ã¢â€ž ¢ between several strategies, originally articulated by Mi chael Porter, has become an important tenet of corporate strategic thinking. It is sometimes interpreted as advice about market positioning in a narrow sense; it is sometimes presented as prescribing broad strategic clarity; and it is sometimes viewed more descriptively as a scheme for classifying firms by strategic outcomes. When interpreted narrowly as referring to the appeal of a product to its target buyers, the proposition that firms should not be à ¢Ã¢â€š ¬Ã‹Å"stuck in the middleà ¢Ã¢â€š ¬Ã¢â€ž ¢ has often been taken to imply that companies must be down market or up market, but nothing in between. (Johnson and Scholes, 2003) Such a view was previously belied by the evident success of Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s, which traditionally made substantial revenue in a mid market position in the grocery sector. As such, Porter can he interpreted more broadly as suggesting that firms need strategic clarity and that they will do better to pursue one or other of cost or quality object ives than to seek a mix of the two. However, Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s has since fallen far behind Tesco, and even Asda, in grocery retailing, and this can be analysed, using Porterà ¢Ã¢â€š ¬Ã¢â€ž ¢s model, as being a result of lack of strategic clarity. In 2004, a retail food analyst issued a stark warning to the company that putting its store image ahead of a price focused marketing strategy was damaging its market share. Goldman Sachs Co. executive director of food retail Nick Jones said although Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s had reduced the cost of 150 products by 2% since 2001, research by the investment bank found that 23% of shoppers thought value for money had got worse, while 57% said it remained the same. (Barne, 2004) However, Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s has now refocused its marketing on improving its value perception, and thus is looking to improve its performance amongst its middle class target segment. Consumers will not come into large stores unless it is primarily to buy groceries. As a result, the multiples are expected to continue focusing the majority of their retail space on food. Other value increases, where they do occur, will continue to be achieved through an emphasis on convenience: takeaway food, higher quality gourmet ingredients, and premium snack items. Equally, the dominance of the big supermarket retailers is set to grow: many supermarkets can now undercut specialist greengrocers and butchers in the sale of basic commodities, although, as retailers consolidate their control of the UK food market, this price erosion may stabilise. As a result of this, Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s is gearing itself up to focus intensively on the revival of its UK supermarkets business during the period from 2004 to 2008, having streamlined its business and announced the introduction of a price-cutting policy. Such activity will be necessary for the company to meet the challenges presented by the aggressive discounting strategies of t he UKà ¢Ã¢â€š ¬Ã¢â€ž ¢s two leading supermarket chains, Tesco and Asda, and the increased threat resulting from Morrisonà ¢Ã¢â€š ¬Ã¢â€ž ¢s takeover of Safeway. Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s more aggressive approach to growing sales and its new, streamlined structure, which makes it more flexible and better adapted to the demands of the modern market are expected to underpin sales growth during the 2004-2008 period. Turnover is forecast to rise by 14% over 2004-2008 in constant value terms. (Global Market Information Database, October 2005) Critically evaluate the role and purpose of scenarios in helping organisations to manage uncertainty. In general, the future is uncertain, with the only certainty being that it will definitely be different from the past, however we have no knowledge in what way the future will be different from the past or the present. It is this uncertainty which makes decision making such a difficult task, although decision making lies at the basis of eve ryday life; every businessperson, government, household and company have to take decisions in certain points in time. The starting point for making these decisions is information about the possible choices, and only when information is valid and complete, may we assume that the à ¢Ã¢â€š ¬Ã‹Å"rightà ¢Ã¢â€š ¬Ã¢â€ž ¢ choices will be made. Unfortunately, existing information is often incomplete and sometimes not valid, and it is this lack of information needed, leads to a certain amount of uncertainty. To reduce these uncertainties, decision makers need decision support tools, and one way to deal with uncertainty is to construct several scenarios and examine the way that the different options perform in each of them. A scenario is a description of a hypothetical future state of the world, including consideration of major uncertainties encountered in moving far into the future. Scenarios are neither predictions nor forecasts about the future, nor do they represent the most likely fu ture developments; rather they tell us what might happen. Wright (2005) undertakes a critical consideration of the role of scenarios as prospective à ¢Ã¢â€š ¬Ã‹Å"sensemakingà ¢Ã¢â€š ¬Ã¢â€ž ¢ devices through the dual theoretical perspectives of social constructionism and narrative. Primarily, the scholarly literature in the fields of strategy and scenario thinking, à ¢Ã¢â€š ¬Ã‹Å"sensemakingà ¢Ã¢â€š ¬Ã¢â€ž ¢, social construction and narrative are analysed and critically discussed, with their major contributions to the debate identified. The main findings of this research suggest that transformational change is observed to occur through inductive strategising at the organizations periphery, in contrast with deductive strategy making at its centre, thus supporting the view that scenarios will provide realistic views of the more uncertain parts of organisations. Wrightà ¢Ã¢â€š ¬Ã¢â€ž ¢s theory proposes that adopting a scenario outlook and developing the capacities that comprise à ƒ ¢Ã¢â€š ¬Ã‹Å"sensemakingà ¢Ã¢â€š ¬Ã¢â€ž ¢ should enhance the abilities of the inductive strategist. This, in turn, should enable strategists to better anticipate uncertainty, and thus react better to it when it does occur. Through this, managers are more open to the unexpected and are able to construct meaning from uncertainty and ambiguity, laying the foundations for transformational strategising, and managing said uncertainty. Of course, all organizations and communities are strongly influenced by factors and events that lie outside their boundaries. A shared understanding of these environmental influences: in the past and the present, has been an important aspect of popular large group decisions and management techniques. Traditional scenario planning has long been a way of confronting uncertainty and complexity about the future of environmental influences, and large group scenario planning is an adaptation of traditional scenario planning. Meeting for two or three days, a c ritical mass of an organisation or a community can use scenarios of the future environment to move beyond their natural tendency to think of the future as an extrapolation of the past, and thus manage uncertainty on large scales. (Steil Jr. and Gibbons-Carr, 2005) Scenarios may in fact be conceived of as imaginary future case studies, given that they neither claim realism nor predictability: they are just pictures of the future which map out hypothetical potential occurrences. Case studies, in general, aim to enable people to acquire generalized or transferable knowledge with the purpose to understand complexity, thus for scenarios, they help understand a complex and uncertain future world in order to create a reference framework for action or obtain a communication tool for decision making under uncertainty. (Nijkamp et al., 1998). In recent years scenarios have become a more popular scientific instrument to explore uncertain futures than conventional forecasting models, such as statistical extrapolation or mathematical simulation models, especially in situations with many degrees of freedom and of uncertainty regarding the future (Masser et al., 1992). Equally, Nijkamp et al. (2000) claim that, as the future effects of globalization on transportation and the environment are not certain, and it is difficult to predict which developments are likely in the future and why this is the case, scenarios are vital to predict how the globalization process will develop. Rienstra et al. (1996) distinguished five functions of scenarios, including the à ¢Ã¢â€š ¬Ã…“signalling functionà ¢Ã¢â€š ¬Ã‚ : where scenarios provide better insight into uncertain situations and the à ¢Ã¢â€š ¬Ã…“communication and learning functionà ¢Ã¢â€š ¬Ã‚ : where scenarios stimulate thinking about alternative futures. According to these functions, scenarios can be a useful tool to analyse possible futures, and enable us to compare strategies and facilitate discussions on possible fu ture events. They are a tool for exploring the uncertain future, and, for example, policy scenarios will provide us with information on the consequences of different policies and may contribute to the quality of decision making. Conclusion and Future Developments The competitive environment in the UK grocery sector is likely to continue to be determined by the dominance of the big supermarket retailers: many supermarkets can now undercut specialist greengrocers and butchers in the sale of basic commodities. In the short term, Morrisonsà ¢Ã¢â€š ¬Ã¢â€ž ¢ increased power in the marketplace through its acquisition of Safeway could put further pressure on prices, especially as Morrisonsà ¢Ã¢â€š ¬Ã¢â€ž ¢ ownership of subsidiary food manufacturers, which gives it lower operational costs than other retailers. Equally, Tesco is increasingly sourcing produce from Eastern Europe, in an attempt to main its market leader position. These trends may, however, be offset by the growth of inter est in higher quality organic produce, an interest which is likely to develop in different directions over the forecast period. Local sourcing by supermarkets of organic meat, vegetables, and even manufactured or convenience products will become more evident, and this new emphasis could encourage consumers to spend more as they aspire to a healthier lifestyle. As for Sainsburyà ¢Ã¢â€š ¬Ã¢â€ž ¢s market position and segmentation, the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s brand is focused strongly on food, with the weekly grocery shop the prime reason why customers visit its stores. In future, one would expect a traditional focus on fresh and private label products to be increased, in order to restore the retailersà ¢Ã¢â€š ¬Ã¢â€ž ¢ reputation for innovative and quality products at fair prices. In particular, through sub brands like à ¢Ã¢â€š ¬Ã‹Å"Taste the Differenceà ¢Ã¢â€š ¬Ã¢â€ž ¢ and à ¢Ã¢â€š ¬Ã‹Å"Be Good to Yourselfà ¢Ã¢â€š ¬Ã¢â€ž ¢, premium and health ranges appear to be being increasi ngly marketed as a significant point of difference between the company and other mass-market operators, and product ranges have also been reviewed to make them more relevant to all Sainsburys customers. All stores now carry the same core product offering, with a à ¢Ã¢â€š ¬Ã‹Å"good, better, and bestà ¢Ã¢â€š ¬Ã¢â€ž ¢ hierarchy, allowing the company to focus its targeting on its traditional middle class customer base, whilst still having economy (à ¢Ã¢â€š ¬Ã‹Å"goodà ¢Ã¢â€š ¬Ã¢â€ž ¢) and premium (à ¢Ã¢â€š ¬Ã‹Å"bestà ¢Ã¢â€š ¬Ã¢â€ž ¢) offerings to widen its appeal and broaden its target segments. As for the role and purpose of scenarios in helping organisations to manage uncertainty, this is hampered by the fact that scenarios cannot be used in all situations. This means that it is necessary to justify their use, in terms of fulfilment of various criteria. In general, scenarios can be used if uncertainty about the future is high, historic patterns are shaky and it is very likely that the future will be influenced by events which did not exist before. One thing we can be sure about is that scenarios will always be wrong to some extent; however, scenarios may give us insight into possible ways to deal with serious problems that might occur in the future. As such, scenarios are vitally important to organisations seeking to manage uncertainty and should be used wherever possible, however it is important that organisation recognise the limits of scenarios, and use them only to extrapolate and hypothesise, rather than make concrete predictions and decisions. References Barne, R. (2004) Sainsburys image slated. Marketing (UK); p. 14. Bevan, J. and Murphy, R. (2001) The nature of value created by UK online grocery retailers. International Journal of Consumer Studies; Vol. 25, Issue 4, p. 279. Global Market Information Database (December 2003) Functional Food and Beverages in The United Kingdom. Euromonitor International. Global Market Information Database (October 2004) Retailing in The United Kingdom. Euromonitor International. Global Market Information Database (October 2005) J Sainsbury Plc: Retailing; Company profile. Euromonitor International. Johnson, G. and Scholes, K. (2003) Exploring Corporate Strategy, 6th Edn. Prentice Hall. Masser, I., Wegener, M. and Sviden, O. (1992) The Geography of Europes Futures; London, Belhaven Press. Morrison J. (2002) The International Business Environment. Basingstoke Palgrave. Nijkamp, P., Pepping, G. and Vleugel, J. (1998) Transportation Planning and the Future; New York, John Wiley. Nijkamp, P. Van Delft, H. Geerlings, H. and Van Veen-Groot, D. (2000) Transportation between Globalization and Localization. Innovation: The European Journal of Social Sciences; Vol. 13, Issue 1, p. 11. Rienstra, S., Smokers, R. T. M. et al. (1996) Scenarios in Decision-making; Amsterdam, Vrije Universiteit, Petten, ECN-Policy Studies. Sahota, A. (2004) Changing Retail Landscape for Organic Products. European Retail Digest; Issue 44, p. 50. Steil Jr., G. and Gibbons-Carr, M. (2005) Large Group Scenario Planning. Journal of Applied Behavioral Science; Vol. 41, Issue 1, p. 15. Wright, A. (2005) The role of scenarios as prospective sensemaking devices. Management Decision; Vol. 43, Issue 1, p. 86. Don’t waste time! Our writers will create an original "Grocery retailers competition in the UK" essay for you Create order