Some more generalised (can’t promise interesting) business stuff......

 To continue on the key aspect of the business model, the value proposition, we've gone on to look at the means through which we can improve the alignment of the crucial drivers:

v  Cost (management of cash flow, making use of lean ‘made on demand’ resources, debit/ credit control)

v  Innovation (cultural context, knowledge & skills, ethos, risk-taking)

v  Execution (operation management, quality control , speed, effectiveness, performance targets)

v  Relationships (suppliers, customers, stakeholders)

v  Channels (marketing & operations, accessibility, logistics, speed

v  Brand (image & promotion, brand values, authenticity, employee involvement (internal engagement), reputation)

Clear tactics are required in order to improve these factors in order to take educated risks based on probabilities not possibilities. A common misconception is in order to improve business value we should focus on cutting costs, but instead the focus should be on improving quality, efficiency & effectiveness as lower costs will be a positive repercussion of this, as well as generating higher customer revenue as this leads to better delivery within the long term. On the other side to this, it is also a misapprehension that merely growing your business by 10% will not necessarily increase profits by 10% thus the decision expansion must be considered carefully and realistic in terms of the overall company aims and value.

ü  Cutting Cost- Squeezing suppliers (have them on demand, negotiate prices), use resources more efficiently, invest in new technology for efficiency, improve speed.

ü  Improving Innovation- New means of guessing the future, utilizing market research, investing in greater skill sets (buy in from external sources)

ü  Quality- Invest in operations, quality control tools & processes, improve consistency.

ü  Support- Work more closely with customers & meet requirements for information, responsiveness & value for money (improved communication networks)

ü  Availability- Identify opportunities to sell services & products, create distribution arrangements

ü  Reputation- Build image through external engagement, learn initiatives & citizenship.

If you are too short of resources in order to implement your model, it is crucial to form strategic alliances with perhaps other businesses(‘share’ option), with suppliers (‘borrow’ option/ ‘vertical integration’ by buying in a supplier chain) or with external investors through sacrificing a stake of the company (‘buy/sell’ option).

Business Model

An organization is a community dedicated to the maintenance and development of a value creating system, which is at once both a socio-system (people) and a techno-system (technical processes), split into the follow sub-divisions:

Operations: Delivery of value proposition.

Finance: Funding & financial management of the business.

H R (Human Resources): Management of people factors.

Marketing: Communication, sales & promotion.

Business is based around sustaining strong relationships due to the fact that innovation requires a strong sense of collaboration & trust. As a manager it is important to sometimes think as a psychologist in order to gain an understanding and empathise with how other people around you work and think. This involves and objectiveness in order to take a step back and observe the bigger picture without falling into the trap of micro-management.

                Within a set of employees it’s vital to find sense of balance within people and their motivations whether these be intrinsic (passion, desire) or extrinsic (tangible rewards). The aim is to create a positive disposition amongst your staff, understanding that this can be shifted negatively very easily due to the fragility of people.

Culture

The company culture dictates the organizational structure (in relation to decision making systems, dress code, how employees relate to one another, levels of socialising, boundaries of behaviour, formality vs. informality).  If behaviours of employees is negative this self enforces a negative culture therefore positive work practices are imperative in order to deliver the business value successfully and create a ‘safe space’ where people can take risks and feel they can be innovative & creative.

There are multiple structures that can an organisation can take:

v  Hierarchical structure- Traditional business model of clearly defined rankings. Can slow down decision making process as information has to be in a sense ‘passed up’ the channels. Also runs the risk of causing disconnection from the top to the bottom (particularly with the CEO and the customer & the shop floor).

v  Flat structure- Although ‘top’ is closer to the ‘bottom’, same problems can occur as in a hierarchical structure (can be worse as there are fewer slots to fill within senior management thus reducing competiveness as employees lower down on the scale accept the inevitability of their fixed position.)

v   Really flat (no defined authoritive figure) - only works in very small teams of individuals delivering specific projects. Based on having strong respect with those you’re working with.

v  Spider plant/ network (increasingly popular model in modern businesses)- segregation into smaller business units (semi-autonomous) which causes reductions in bureaucracy and increases flexibility & collaboration as team members can be rotated easily if necessary as well reducing the potential dictatorial atmosphere that can occur within more traditional hierarchical structure.

Some critical reflection.....

Just want to reflect on a few journal articles I’ve taken a look at recently in relation to business strategy and project management.  

A research piece entitled ‘How to Kill a Team’s Creativity’ by Rajesh Sethi, Daniel C. Smith & C. Whan Park,  reveals the misconceptions in the idea that within a project team should be a diverse range of people from contrasting skills sets with a cohesive bond within the team in order to achieve successful innovation. Their finding revealed that as ‘social ties intensify’ within a team actually suppresses people’s ability to be forthright in their opinions and leads them to be too willingly concurrent in order to maintain those relationships. It also causes people to feel too comfortable and familiar with their environment thus reducing the level of risk-taking required in order for creative ideas to flow. While more ideas can be generated with a more diverse team, too much ‘cross-functionality’ can cause problem-solving to be increasingly harder as well as being bogged down with too much information which prevents the project from being driven forward.  Essentially the key thing I take from this theory is the need to balance a ‘happy medium’ within a business team, both in terms the range of skill sets and character profiles as well as the level of social familiarity amongst the circle, which I believe can only be successfully obtained through regular, constructive (by this I mean not dictatorial) monitoring by the project manager, as opposed to a more laissez faire ‘hands off’ approach.

The next article entitled, ‘Cost Effective Service Excellence: Lessons from Singapore Airline’ by Loizos Heracleous, Jochen Wirtz and Robert Johnston, explains how this particular aviation business managed to achieve the ideal aim sought after by most, if not all companies, throughout its 30 year history. Sounds obvious but they attribute their success to fact that in a service- orientated culture the customer is the most important factor, an ethos often forgotten by many companies which become too internally focused. Any proposed innovation is carefully analysed on the balance of expected customer benefits with an awareness of the wider context that consumers don’t just compare their service to that of other airlines but subconsciously evaluate against many other industries on many factors. One example they give is when customers pick up a phone and call their reservations, they won’t come away saying ‘you have the best telephone service system out of all the other airlines I’ve called’, they will be comparing them to any time they have had to phone a company hotline to make a booking or enquiry (i.e. car rental, hotels etc).  Singapore Airlines business model is founded on five central ‘pillars’ which form the overall company values:

Ø  Ingrained profit consciousness across the entire employee network- thus reducing a sense of hierarchical structure in the sense that even those employees lower down on the system feel part of and can contribute to delivering the company ethos.

Ø  Strategic Synergies- forming business alliances to related operations such as catering, aircraft maintenance and airport management. This diversification within the company leads to strategic co-operation in terms of reliability of key inputs, high quality, transfer of learning (in sense that allies can learn from each other) and cost-effectiveness.

Ø  Total innovation- focuses 40 % of resources on training, 30% on review of process & procedures and 30% on creating new product & service ideas. However they believe in being a leader in terms of customer service and a follower in areas that are less visible from the customer’s point of view (i.e. believe in using proven technology rather than the latest technology which would not only be more expensive but carry a higher implantation risk.

Ø  Rigorous service design- department undertakes research, trials, time & motion studies, mock-ups assessing customer reaction, whatever is necessary to ensure that a service innovation is supported by the right procedures. Belief that underpinning continuous innovation & development is a culture that accepts changes as a way of life (use of educated risk).

Ø  Holistic staff development- Quoted that training in SIA is ‘almost next to godliness’ in the sense that everyone regardless of how senior undergoes a training and development plan. Camaraderie and team spirit are encouraged through employee leisure activities & societies with belief that this then rubs into the service the crew delivers in the air.

Many vital lessons to learn from when running a business: coherent innovation, happy committed employee, as well healthy profit margins. The article finishes with the reminder that SIA’s competitive advantage has been sustained for so long due to the fact that ‘while it is easy to copy single elements, it is much harder to reproduce an entire, self-reinforcing system. ‘

From crisis to control: New Standards for Project Management (Michael Stanleigh)

This business journal underlines the importance of the alignment between projects and overall corporate strategy. A study showed only 2.5 % of global businesses achieve 100% project success, and in the IT sector results revealed that 71 % of all projects are either “challenged” due to late delivery, are over budget or deliver less than the requirements or are “failed” because of being cancelled before completion or because the project developed is never used.  The article outlines four key strategies to prevent this from happening:

ü  Most importantly ensuring that all projects are strategically aligned with their organizations core strategies. This is achieved by first reviewing lessons from projects carried out previously, to determine by certain things did or didn’t succeed. Next determine a set of criteria by which all projects can be prioritized, demonstrating how each project’s successful execution will support the corporate/ and or departmental strategic plan.

ü  Create a culture that supports a project management environment by forming a cross-functional steering committee to develop the approach and process for creating corporate change, of greater structure around the management of projects and planning methodologies. Essentially it’s been proven that spending time in the initial phases will save time during the execution phase of the project.

ü  Implement strategic project management best practices- there should be a process by which previous and current projects are evaluated and reviewed in order to retain a sense of knowledge from one project to the next to prevent financial loss by the same mistakes being repeated. A “Project Close- Out” meeting should take place as soon as possible after a project is completed where reflective questions should be asked such as ‘What were the successes to ensure other projects follow a similar path ?’, ‘What were the challenges, issues, risks , etc that we could anticipate in advance of further projects and prevent?’

ü  Create a project-measurement system which aims to provide the senior management team with relevant information needed to make decisions affecting project completion. Project success measurement criteria should include:

·         Ability of the project to be managed specified quality criteria.

·         Ability to meet regulatory requirements.

·         Number of resources used versus the number of resources they thought they would use.

·         Ability of the project to meet its defined targets.

·         Ability of the project to meet all deliverables.

·         Successful management of all major issues.

·         Customer post-surveys indicate satisfaction with the product or service delivery from the project.

·         A successful and problem-free launch

·         Business case was proven through the rate of return.

The ‘take home’ points of this article were the need for forward planning prior to any endeavour to evaluate how it will generate added value to the business rather than potentially pouring large amounts of money into a project that has no real focus within the long term.

Taking by Storm: A Breakout Strategy (Thomas Lawton, Sydney Finkelstein and Charles Harvey)

‘Taking by storm is perhaps the purest form of breakout strategy. The intention is to win market share as quickly as possible through the launch of a value proposition so compelling that sales, revenues and free cash flow all move upwards before existing and potential rivals wake up to the fact that something special is happening’.  This article describes companies that have changed the competitive landscape by offering new products or services that aim to carve out new market spaces (‘blue oceans’) or take over parts of markets previously occupied by established suppliers.

It outlays the five practices that are required in order to successfully achieve this:

Ø  Create a workable vision by understanding needs and aspirations

Ø  Face customers with a value proposition that covers all the important bases.

Ø  Align what you do with what the customer really wants.

Ø  Balance the people and process sides of business to deliver on your promises.

Ø  Liberate through leadership, the energies and support of all key stakeholders.

One of the key players in this idea is that of internet search engine phenomena Google who epitomized the two hallmarks of breakout strategy: speed and surprise. They saw the potential for internet search long before mainstream players did and thus moved quickly to develop a one-stop search engine, with user friendly interface, sophisticated software and a range of different but related features such as Google Finance, Maps, Images & Video, Books, and online shopping, propelling them to the forefront of their market before competitors had any time to react.  

                Clearly a business tactic for the true risk-taking entrepreneur, but one which, when got right, can potentially be pure gold.

Stimulating the Potential: Creative Performance and Communication in Innovation Team (Jan Kratzer, Roger Th. A J. Leenders  & Jo M. L. van Engelen)

This research paper looks at the connection between the levels of communication within a team in relation to the effectiveness of project development.

                In terms of the frequency of communication, studies show that high levels of communication frequency can create ‘mutual production blocking’ and can lower group standards through causing a sense of complacency. Centralized communication (where all ideas etc have to be ‘passed through’ a central person), which is traditionally seen as one of the important ways to co-ordinate work teams is proven to inhibit the creative performance in terms of decision-making as it causes a senses of domination by individuals within the problem solving process with other members being reduced to ‘free-riding’. Dominators are prone to information overload, whereas dominees do not receive or receive too late the information necessary for their part of the product development task, thus having a negative and unbalanced effect on both parties. Both excessive and centralized communication can lead to the formation of sub group ‘cliques’ within the team causing communicational barriers preventing the sufficient flow of information.

                The conclusions of this study is that for the highest level of creative performance, frequency of communication must be kept low and computer driven communication should be utilized as it provides an accessible and transparent channel for the flow of information, with face to face meetings & discussions kept to a minimum in order to avoid the familiarity which causes sub grouping. While I agree that project teams should be continually ‘refreshed’ by the means of the newer ‘spider network’ management structure which enables the flexibility of group rotation as opposed to the traditional fixed hierarchical system, from my own experience I don’t believe the findings of this article to be credible as it is all proven through quantitative statistics which I don’t feel can effectively measure creative output. It is my opinion that when dealing with creative strategies, a more hands on, face- to-face approach is instead crucial, in order to maintain a suitable level of cohesion within the team. However these should be kept to a routine schedule so not to run the risk of becoming increasingly excessive.

Customer, Communication & Promotion......

“Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart”

The key aspect of marketing is to break down the barrier between consumer needs vs. wants; presenting a product or service which is not technically essential in such a way that manipulates you into believing it is a ‘must have’ (i.e. such as the latest piece of technology or a new cosmetic). The process involved within developing a marketing strategy is as follows:

ü  Consumer Analysis- Developing clear understanding of target markets & coherent customer profiles within this, appreciating the idea that each customer is unique with different wants & needs. Traditionally achieved through primary research such as market surveys.

ü  Market Analysis- Examining wider economics and circumstances that may affect promotional aspects of your business (PESTEL Analysis)

ü  Competition Analysis- Analysing competitive environment and their marketing strategies, making comparisons with the use of SWOT Analysis.

ü  Distribution Channels- Careful selection of how and where to market your business through developing the value proposition of where your business ranks within the market in relation to the key factors of Cost, Innovation, Execution, Relationships, Channels, Brand.

ü  Developing the Marketing Mix- From the information already gathered, create a strategy based around the 4 ‘Ps’ of Product, Price, Place, Promotion, considering what message each of these factors communicates to the customer. (i.e. the location of your store may communicate a sense of quality if it is situated within a high end section of  London)

ü  Evaluating the economies- A marketing strategy cannot ever be fixed due to the constantly markets and consumer trends so it’s imperative to continue to be innovative in your communication with your customer in order to achieve consistent loyalty, and adjusting strategies accordingly.

We then had a closer look at the Competitor Response Profile which attempts to tap into what drives the competitor (their objectives and assumptions) and what the competitor is doing or is capable of doing (their strategy and resources). This enables us to then identify and seize opportunities and deal effectively with threats thus exploiting strengths and remedying weaknesses within our own companies in relation to this.

From this we can then create a more effective marketing mix:

‘Primary 4’

Product:  how the designing and package communicate a level of expectation of value in relation to target market, the benefits that customers can expect, how the company plans to position the product within the market and what differential advantage will the product offer over competitors.

Pricing:  imperative that this is pitched appropriately in relation to the standards of what is being offered in order to set the right expectation for the customer as well as generating healthy profits margins.

Place: how an organisation distributes its products or services to the customer in order for it to be delivered at the appropriate place & time (could be focused on a physical location on the high street, a certain time of year when there is specific need, or types of channels which its delivered through such as e-commerce).

Promotion: means of communication appropriate to budget, type of product/service & target market (could be through social media & e-marketing, TV advertisements, direct mailing, flyers & posters, special offers, endorsements etc).

‘Extended Marketing Mix’

Physical environment: In relation to its physical headquarters/store etc (level of facilities provided, presentation & appearance of surroundings) and the messages that this communicates to the customer.

Process: Particularly relevant to the service industries, relates to how the core experience is ‘served’ and presented to the customer.

People: Company culture, levels of customer support, management structure all have an impact on how messages are communicated to the consumer.

Our task was to then produce a presentation analysing a communication strategy by a company of our choosing, identifying SWOT in relation to key competitors.

With the recent passing of one of key entrepreneurial innovators, Steve Jobs we chose to put his brand, Apple under the microscope.   Their key business strategy is to break away from this idea that technology and computing are only for the elitist experts and savvy business types and instead show how it can be user-friendly and beneficial to the everyday consumer; thus turning something that was once a somewhat niche market into a mass phenomenon. Their strengths lie in their simplistic but distinctive design and accessible functions in their vast range of products as well as their strong overall company culture of a commitment to excellence and continuous innovation instilled by founder Steve Jobs.

Their promotional materials focus on a sense of storytelling; connecting people and communicating on a more emotive and personalised level as opposed to more traditional campaigns from competitors such as Microsoft.  Apple’s famous online ‘Mac Vs. PC’ campaign which consisted of multiple short episodic dialogues between two personified characters of Mac & PC, utilizing comedy to communicate short bursts of information which emphasised the weaknesses of the PC (portrayed as slow & old fashioned) in comparison to the new, fresh alternative of the Mac. According to the Apple QI report as a direct result from this campaign sales of Mac doubled from 2006 to 2010 with a market share growth of 70%, thus proving the vital need for creativity & new thinking within business communication.

 

However, we identified a clear contradictory factor in their communication strategy in terms of their pricing. Despite trying to appeal to the everyday user, they are the most premium brand within the market; a risky strategy considering the technology itself is not actually unique with many competitors producing similar products. For example, Apple’s ipad (currently holds 75% market share of the tablet computer) is priced at £499, whereas its soon to be released rival by Amazon, the Kindle Fire, will retail at £129 with the business strategy of selling each individual unit at a loss which will then be compensated through the large volume sales. For the average buyer, this is a huge saving in price and particularly during this economic climate, consumers with less disposable income may look past the hype and brand reputation of Apple in favour of cheaper alternatives. Also according to 2010 rankings of brand value, Microsoft who specialise only in operating software are ranked 3^rd in the world at $60 billion in comparison to Apple who choose to be a ‘technological biosphere’ in the different types of product they produce are only worth $21 billion, suggesting that attempting to be a ‘master of all trades’, so to speak, may not actually be all it’s cracked up to be and that a more focused, specialist approach to business may be the way forward in terms of generating more revenue.

                This being said though, much more so than its rivals, Apple is very aware of the crucial core experience that is being presented to its customers; that is not so much about selling products, but rather a new way of thinking. Let us hope that they can continue to deliver this ethos despite the loss of their driving figure.

Week 3- Down to Business.....

                This week’s research methods lecture was a continuation of looking in a broad sense at different approaches and techniques.

                Deduction is focused around the positivist approach thus is more scientific in method, moves from theory to data and tends to generalise results by sufficient quantitative samples, explaining casual relationships between variables.   Induction on the other hand is linked to interpretivism and focuses on the meanings that people attach to certain contexts by the researcher placing themselves within the process of qualitative research and being flexible by adjusting their perceptions accordingly as their findings progress.

                I undertook literature reviews of two journals demonstrating each approach with these questions in mind:

Ø  What is their research question?

Ø  How have they achieved this?

Ø  What are their conclusions?

Ø  What are their weaknesses? (could be their method, theory, data etc)

Ø  What are their strengths?

Ø  How much is it relevant to my own research?

Ø  What is the source?

Deductive Example: How Green Should You Be: Can Environmental Associations Enhance Brand Performance (Journal Advertising Research: Francisco Javier Montoro-Rios)

Research Question?-  Due to environmental concern, much has been said about the advantages of including environmental information in marketing strategies. Article looks at whether ethical brands do actually increase business turnover based on statistical fact as opposed to generalisations of select public opinion.

How?- Lays out three factors to consider involving environmental associations which could prove an advantage & the means of communicating this to the customer.

·         Analysing customer evaluation process, on environmental benefits of a brand & whether these environmental associations improve customer attitudes towards brand. Tests showed that ‘the more eco friendly the product the closer the product is to the customer’s ideal brand.’

·          Environmental claims must have creditability for the customer otherwise this can have reverse effects. Key problem is that consumers interested in ecological products generally are sceptical of commercial advertisements & note lack of scientific knowledge in advert campaigns. One technique around this is to gain approval from individual environmental organisation (i.e. Greenpeace) and use labelling ‘approval’ systems.

·         How consumers process this information- consumers must have high motivation towards environmental issues which would then analyse information in an advertisement & ‘peripheral route’ (indirect) messages.

Researcher then comes to the overall hypothesis that the higher level of involvement with the decision to buy and higher the familiarity with the brand =  the greater the importance of beliefs about ecological performance of the brand in formation of overall attitudes towards the brand.

The article then proceeds in greater detail to prove this theory through experimental designs, using three variables with differing emphasis on environmental issues then analysing purchase results.

Conclusions?- shows an absence of effect of environmental information with or without independent certification on brand attitude. However environmental association significantly influence attitudes towards brands when customers process information through a ‘central’ route (i.e more direct form of advertising rather than interpretative) and it is product of high involvement and high purchase frequency for the consumer.

Weaknesses?- Only examines select products & select profile of people in Spain (women over the age of 18 as statistically these buy groceries & home products). Conclusions state that future studies should include durable goods and services.

Strengths?- Clear use of facts and data (even justifies use of profile group through statistics i.e.    78 % of women in Spain buy all home products for house). Clear hypothesis & context set out at start which is uses experiments in order to prove.

Maybe useful within ethical studies for data references as well as for example of method when examining consumer attitudes to brand presentation and advertisement.

Induction Example: The Supermalt Identity: How Brixton-Based Afro- Caribbean Consumers Construct a Danish Malt Beer Brand as One of Their Own (Centre for Research on Customer Relations in the Food Sector: Tino- Bech-Larsen)

Research Question?- Examining brand identity of Supermalt brand of beer for niche target market of Afro- Caribbean consumers on a limited marketing budget utilizing ‘blue ocean strategy’ and understanding the reasons behind the success which even the brand itself could not make sense of.

How?- References two research perspectives within marketing of brand identity: the managerial construction of “brand identity” & consumer construction of brands as a part of their “self identity”. These ideas have merged in recent years into the idea of cross-cultural marketing, and the differing aspects that affect identity.

                The article discusses how brand identities can be expected to be more prominent within ethnic minorities due to the special characteristics of self identity of these individuals.

Their pursuit of this is perhaps more important than that of the Western world, as they are attempting to keep the identity of their origins within a foreign land. It’s stated that ‘man is what he eats- and nothing more’ emphasising the importance of food and beverage in the construction of identity as culinary preferences are a huge aspect of culture.

The researcher used interviews with 14 Brixton based Afro-Caribbeans, with questions sub divided into three distinct sections focused on:

·         Target consumers self-identity construction (how people construct own identity)

·         Role of food & beverage in construction of consumer identities.

·         Construction of brand identity.

Conclusions?- that an effort made to understand the culture of minority customers & through this creating new market space, proven to be a more effective business strategy than more traditional ‘in your face’ brand tactics, and also requires fewer resources. However, this said, having a strong association with minority culture has the advantages within that specific profile but makes it harder for the extension of the brand into mainstream markets.

Weaknesses? - Study does not properly assess whether the success of Supermalt was a ‘lucky strike’ or whether this case involves credible lessons that can be used to guide other brands. The conclusions therefore seem to state the obvious and talk in generalisations.

Strengths?- Useful research within the cultural industries and examination of external factors that must be taken into consideration with the formation of business strategy (PESTEL- particular emphasis on social in this specific case), but too smaller sample is used so the number of interviews conducted would have to be increased or this should be supported by further means of primary research.

Our lecture also covered the use of documentary analysis, most specifically applying semiotics when examining visual materials (most notably marketing/promotional tools), in order to answer these questions in order to determine its target audience, literal, interpretative and latent (underlying) meanings.

One example of advertisement analysis I did.....

Who?  Male drivers, 30-50 years old approx.

Literal?  Cars are well built, tough & resilient

Interpretation?  It’s a car for ‘real’ men, will help to re-establish image and masculinity. Use of blue colouring associated with male gender. Use of red lettering asserting a sense of danger, fire power, living on the edge.

Latent?  Car is reliable regardless of the terrain thus has almost ‘heroic’ like qualities, can open up new experiences and possibilities that other cars would unable to handle.

This got me onto to considering the most lucrative brand on the market, Coca Cola, which, according to rankings conducted at the end of 2010, is worth over $70.4 billion ahead of the technological marvels, Google ($43.5 billion) and Microsoft ($60.8 billion) as well as being a far cry from its direct product rival Pepsi ($14 billion). This poses the question, what is the secret of success behind this global phenomenon, which, let’s face it, specialises in churning out flavoured fizzy water, not to mention it’s repercussions of worldwide tooth decay. Clearly a product neither desirable nor groundbreaking when presented in this light.  So how have they managed it?  The answer to this lies purely within the smoke & mirrors of their communication strategy and it is this which I intend to investigate further within my research topic for this module; attempting unravel how they are able to continually connect with their consumer so successfully within a consistently saturated market.   After all, if fizzy water can manage it there’s hope for us all.

A look at business strategy....... (Week 2 cont.)

“Vision without action is daydreaming, action without vision is chaos”.

The last couple of weeks of our Management Imperative module have been based upon this idea in terms of the starting point of business development. The overall aim behind this is of obtaining a clear understanding of your position within the competitive environment as well as your own organisation in terms of its core competencies and key USP points, thus mitigating venture risks.   The strategic element is vital in order to take control of the future of your business rather than merely reacting to just the immediate circumstances and in effect just ‘treading water’.  The key to this is the ability to step outside of your business and be ‘coldly’ objective, something which many working within the creative industries often fail to do due to being completely succumbed by passion.

                At the fore of this is what known as the value proposition, a tool used to rank all the factors and model drivers in relation to competitors which then enables us to establish the company’s market position.  These are Price (Cost), Features (Innovation), Quality (Execution), Support (Relationships), Access (Channels), Reputation (Brand) which can each be ranked on a 1-5 scale (1 being the highest) The price is then the leading force which sets the customer expectation for the other factors thus dictates to what standard these should reach. For example, if the company is targeted at the high end of the market, offering the most premium products, a customer would then expect highly innovative, original products, excellent quality, exceptional personal customer support & service, a sense of restricted access in terms of the fact that the products/ service is not readily available elsewhere thus is unique with the reputation of the brand being highly established. The key aspect to this theoretical model is that all factors must be consistent and aligned as in the case of this particular example, customers will only be prepared to pay the higher price if this is justified by high standards across the board. This is also a key tool to ensuring the basic ethos of capitalism which has been defined as the ‘equitable exchange of goods and services between other service organisations & customers’ with the crucial term here being “equitable”; that the customer input (in the form of money) is fairly balanced with the level of output (service/product) they receive. However on the flip-side to this if you set your prices lower (thus creating lower expectations from your customer) it gives you much greater means to manoeuvre within the scale. The value proposition model when dealing with B2B practice varies slightly, just focusing on the efficiency aspects of Cost Saving, Productivity, Risk Reduction, Reputation.

Common characteristics & strengths of successful strategies include:

ü  Strong sense of vision

ü  Flexible, adaptive but persistent (market is constantly changing environment, constant modifications have to be made)

ü  Create capacity to deliver (i.e. ensuring we have the right resources, skill set from workers etc)

ü  Manage change & maintain momentum

ü  Attract allies, supporters & ‘friends’ (i.e. the press, suppliers, alliances with competitors to perhaps ‘share’ resources, increasing network base)

ü  Must never test patience of your customers (can’t assume loyalty when business is not delivering expected standards)

ü  Keep value proposition at forefront

ü  Contain effective strategic reflection- assessing core competencies, capabilities & motivation

Personal Strategic Reflection involves asking yourself some key questions as to the direction of your business in relation to your own honest strengths and weaknesses.

      What do you really want to do?

      What motivates you intrinsically or extrinsically?

      What causes you stress & aggravation or happiness?

      What work scenarios are positive/negative for you?

      What are your personal goals and vision and are they realistic?

      What are your key core competencies? (What are you good at knowing?)

      What are you core capabilities? (What are you good at doing?)

Then we have some broader questions to ask in relation to the business and your target market as a whole.

      How do we compete as a business, now & in the future within the competitive environment?

      Why do customers come to me or go to the competition?

      Why do potential customers not engage with my industry?

      How can we create new market space?

All these questions are designed to ensure that you examine the wider context and implications of business endeavours as well enabling to you to be critical of why or not you are not having commercial success in order to improve on weaknesses before it’s too late or gain further capitalisation on your strengths.

                When assessing the competitive environment we must look at ‘Porter’s Five Forces’ centred around the idea of the ‘degree of rivalry’: Buyer Power, Supplier Power , Threat of Substitutes, and Barriers to Entry.

v  Buyer Power- in a saturated market, customers have the advantage. Businesses have to deliver competitive prices, working on margins. Has the advantage in that you know there is a market for your product.

v  Supplier Power- If it’s a unique product, businesses can drive down on the price of components from the supplier. However if your new in the line of business, suppliers have the power as you may not be seen as a priority so put them in the position to charge higher costs of manufacture.

v  Threat of substitutes- Risk of competition producing something similar that’s perceived as better. Very prominent in the technological business, products can quickly become obsolete. People’s constant need for change means you must have ability to predict the future.

v  Barriers to entry- Assessing risks of failure, complying with copyright laws, considering legality such as trade laws etc.

 These differing ‘types of power’ vary in accordance with where your business situates in relation to the following categories:

Ø  Original- ‘one of a kind business’- must have to consider barriers to entry (copyright laws etc) as the business potentially breaking ‘new ground’ (i.e. Dyson, Cirque du Soleil)

Ø  Revolutionary- a business which starts a new trend- must consider the threats of substitutes as a product cannot stay unique forever, thus has to be constantly innovative (i.e. Apple, Google, Amazon, Ebay)

Ø  Specialist Competitor/Leader- offers a specialist service but competes with others similar within the market- power most likely lies with supplier. (i.e. BMW)

Ø  Broad Market Competitor/ Leader- competing within the mass everyday market- power often lies with both the customer and supplier. (i.e. Tesco, Walmart)

Ø  Follower- Echoes competition, operates on tight margins thus potentially not in control- gives power over to buyers & suppliers (i.e. Sainsburys known to have fallen into this trap in previous years in relation to its rival Tesco.)

All this is what must be considered prior to even starting to devise your business model... no one said making a million would be easy!

Week 2- Reality begins to hit home.....

As well as looking at the various methodologies published in my last blog, our research methods this week covered a number of different areas all based around the crucial rationale of examining arguments from differing perspectives, a skill which can prove vital in business as it can enable you to put yourself in the customer/ client profile’s shoes in order to understand their needs. After all, there is not point leaping headfirst into a new business venture because you personally think it’s a good idea when in reality there is no market for your product/service etc to generate sufficient revenue.

                We first considered what could be classed as a ‘profile’ when considered within the context of a company. What we quickly discovered was, despite it being a commonly used piece of terminology for a ‘type’ or ‘category’, opinions differed when it came to defining what information should be included when constructing a profile.   We narrowed it down to the approximate points of:     

• Ø  Type of industry/sector?
• Ø  What the company stands for? Key aims/values?
• Ø  Size of company? (i.e small localised business/ mass global scale)
• Ø  Target Market?  (relating to age, salary, gender, lifestyle etc)
• Ø  Products? Value Proposition/ USP?
• Ø  History of the company/ Reputation (how established within industry?)
• Ø  Rate of growth/future projections?

This led us to consider the challenges faced when developing specific customer profiles and the external themes and factors of influence that may have to be taken into consideration when developing coherent marketing strategies.   This led onto a discussion of some of the following, as potential thematic areas for research:

      Developments within the digital economy. Ability to foresee future through more advanced trend & forecasting analysis.

      Intellectual Property Rights (IPR) and how this could perhaps inhibit creative licence.

      Effects of economic climate on social culture (creative industries tend to rely on disposable income)

      Comparing and contrasting differing consumer needs (i.e geographical locations rural/city, age groups , wealth etc)

      Issues of 21^st century multi-culturalism and idea that ‘one size no longer fits all’- growth of individualism thus people no longer fitting into demographic groups, difficult to establish what the ‘norm’ and mass market actually is.

      Customer psychological dilemmas of quality vs. price.

      Environmental issues affecting business- do consumers have higher opinions of brands/companies that are more ethically aware? What are cost implications for consumer & business?

      Effects of social media in reaching new markets.

 I recently read an article in the guardian online dated 2009 with the headline ‘all the world is a screen’ (a pun on Shakespeare’s famous quote of ‘all the world is a stage’), discussing the effect of the growth of technology and digital media on the arts and whether this has had a positive or negative effect. One of the arts council’s key aims is to utilize this new medium in order to increase young people’s involvement in and attendance at cultural and artistic events with the belief that the future of the creative industries depends upon this. On the one hand this could be successful due to the fact that technology has enabled new strategies such as e-marketing and promotion via websites and social media thus allowing arts organisations to reach wider audiences, particularly that of the newer generation who are familiar with such tools. However, technology also could be seen as a lethal competitor towards the business of live events as it provides a sense of free ‘in-house’ entertainment (i.e. online film streaming) and thus a deterrent from people going out to spend their money, particularly within the current economic climate, to see the ‘real thing’. It got me thinking how this compares perhaps to the links made between the explosion of the gaming industry to the rise in childhood obesity; how video games have seemingly replaced the more traditional forms of outdoor activity.  Has technology become such a hold over our everyday lives that this shift is now not plausibly reversible?

I had a look at a couple of theorist books this week that epitomise the contrast between positivist and interpretivist approaches.  The first was the ‘Structure of Scientific Revolutions’ by Thomas S. Kuhn, who discusses the problems with scientific historians persistently drawing on secondary sources from the past to merely compare a scientific theory to that of it time to test its integrity, as opposed to using the permanent contributions of older science to explain how this can be used to our present day advantage.  He identifies some of the major turning points of the scientific revolution as the work of Copernicus, Newton and Einstein stating that what has set these apart from their predecessors was the ability not to simply reject other theories in favour of their own incompatible with them but instead use what has gone before and expand on this thus ‘transforming the scientific imagination and the world within which scientific work was done’, demonstrating the fact that even science, which is based around fact and quantitative data,  is inter-disciplinary and didn’t develop in the methodical ‘clear cut’ sense that many would believe.  There are two points I take from this to apply to my own work, the first being the importance of applying any research of past disciplines into a contemporary context. While I believe it is important to analyse the strengths and weaknesses within previous business strategies, it’s important to always relate these to our present day circumstances in order to progress forward. The other is the idea of not completely discarding business competitors, but instead identifying their weaknesses and capitalising on these.

I also had a look at the ‘Phenomenology of the Social World’ by Alfred Schutz, who discusses the underlying idea that all concrete social phenomena should be stripped and traced back to the modes of individual behaviour, that ‘sociology is no longer the philosophy of human existence. It is the particular science of human behaviour and its consequences.’ He also states that the social world is ‘far from homogenous’ and is instead given to us in a ‘complex system of perspectives’ thus implying that world is constructed from differing interpretations of each other’s subjective experiences.  This theory emphasises for me the importance of primary research within business; that you can only really understand target markets and consumer needs through taking a more ethnographic approach by placing yourself within the research (whether this be through observation, face to face interviews & focus groups etc) as opposed to merely relying solely on traditional secondary sources which can cause you to become externally distanced from that which you are researching, unless used as a means to support your own primary findings.  It also serves as a reminder to what I mentioned in my introduction to this blog post, that there is never just one answer to any investigative problem and that everything should be examined from multiple standpoints.