Chap - 14 Strategies for Change

© The Institute of Chartered Accountants in England and Wales, March 2009 629

Contents

chapter 14

Strategies for change

Introduction

Examination context

Topic List

1 The need for change

2 Strategic change in organisations

3 Change and the individual

4 Project management

Summary and Self-test

Answers to Self-test

Answers to Interactive questions

Business strategy

630 © The Institute of Chartered Accountants in England and Wales, March 2009

Introduction

Learning objectives Tick off

Explain the levels of change in a business and the approaches used at each level, usingappropriate examples

Describe the key stages in a change management project

Identify in a given situation the key issues which should be addressed by the management of abusiness during the planning and implementation of a change project, including projectmanagement

Specific syllabus references for this chapter are: 3h, k, l.

Practical significance

Successful business strategies rarely involve 'leaving things as they are'. The business environment changes andtherefore so must the business.

Change affects people inside and outside the business and it is essential to avoid resistance from significantgroups who might derail the changes. These could include major investors, key groups of organised labour orsignificant clients.

Stop and think

Earlier chapters have explained the increasing challenge from globalisation, opening new markets and also newcompetitors. One reputable source states that Chinese labour costs, after adjustment for short term exchangerate effects, are 25% to 40% of US costs. Its per capita income may overtake the USA's within 35 yearsaccording to some estimates. What changes will be needed in US and European firms to cope with this andhow will they implement them? Conversely how will the Chinese population be affected by theseopportunities?

Working context

Changes in organisation affect internal controls and can be a source of audit risk. For example rapid growth orrestructuring often leaves staffing stretched and segregation of duties compromised.

Syllabus links

This chapter involves the implementation of the strategies discussed in the preceding 13 chapters. It has notbeen covered in the syllabus of previous examinations.

STRATEGIES FOR CHANGE


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Examination context

Exam requirements

Previous chapters concentrate on identifying the need for and the direction of change if an organisation is toremain successful. This chapter looks at the issues which need to be addressed by an organisation during theplanning and implementation of such changes.

In exams, candidates should be careful not to make the common mistake of providing a generic answer,repeating elements by rote from the learning materials. In the Business Strategy paper it will be important tofocus on applying the concept of change management to the scenario, tailoring a discussion to the changes thathave been identified.

Business strategy


1 The need for change

Section overview

The sources of change are both internal and environmental.

The range of impacts of a 'change trigger' will be felt as shock waves through the organisation and willaffect staff and management at all levels.

Change must be handled carefully to avoid the organisation being overwhelmed.

1.1 The need for an organisation to change or develop

The need for an organisation to change or develop could be caused (or 'triggered') by a number of factors:

Changes in the environment: These could be changes in what competitors are doing, what customersare buying, how they spend their money, changes in the law, changes in social behaviour and attitudes,economic changes, and so on.

Changes in the products the organisation makes, or the services it provides: These are made inresponse to changes in customer demands, competitors' actions, new technology, and so on.

Changes in technology and changes in working methods: These changes are also in response toenvironmental change such as the advent of new technology and new laws on safety at work.

Changes in management and working relationships: For example, changes in leadership style, andin the way that employees are encouraged to work together. Also changes in training and development.

Changes in organisation structure or size: These might involve creating new departments anddivisions, greater delegation of authority or more centralisation, changes in the way that plans are made,management information is provided and control is exercised, and so on. Organisation re-structuringwill be made in response to changes of the types discussed above.

Post–acquisition: Incoming management will wish to improve and integrate the firm into the newparent's structure and systems. This will involve visible change to names and signage but also deeperchanges to organisational structures, culture, job roles, staff numbers and management systems.

Case study: Ford Motor Company

'The Ford Motor Company could lose as much as $9bn (£4.8bn) this year as it undergoes a huge restructuringin a desperate attempt to halt its ongoing loss of market share in the US.

Ford announced yesterday [15 September 2006] it would cut a third of all salaried employees – 14,000 jobs –and offer voluntary redundancy to all of its 75,000 hourly paid workers. It also announced it would close twomore manufacturing plants by the end of 2008, on top of 14 closures already announced this year.

Ford, which hopes the cuts will save it $5bn in operating costs, also admitted it would no longer reachprofitability in 2008 as it had expected.

'These actions have painful consequences for communities and many of our loyal employees,' said chairman BillFord, who this month stepped down as chief executive of the company founded by his great-grandfather, HenryFord. 'But rapid shifts in consumer demand that affect our product mix, and continued high prices forcommodities, mean we must continue working quickly and decisively to fix our business.'

The situation at the Michigan-based carmaker could be even worse than it admitted yesterday. The Detroit Newsreported on Thursday that an internal company report dated September 6 and prepared by chief finance officerDon Leclair's office projected that its worldwide automotive operations' losses would be nearly $6bn this year.Once restructuring costs were included, the report said, Ford's 2006 pre-tax loss could be between $8bn and$9bn.



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The central cause of Ford's problems is that Americans are increasingly buying their cars from Japanesecompetitors such as Toyota. Ford has lost market share in the US for 10 successive years. It now has a share ofonly 16%, and said yesterday it expected that to drop to between 14% and 15%. Above all, it has been hit byfalling sales of pick-up trucks such as the F-150 and sports utility vehicles (SUVs), once best-sellers thatgenerated the bulk of profits, as petrol prices have hit $3 a gallon.

Ford yesterday revealed details of new, smaller, more fuel-efficient models that it hopes will help it to regainmarket share. It announced the launch of a new 'crossover' (a cross between an SUV and a car). But analystsremain sceptical.

The problems faced by carmakers were underlined yesterday when DaimlerChrysler announced losses of$1.2bn for the third quarter, double previous forecasts.

Under Ford's previous restructuring plan announced in January, titled the Way Forward, Ford planned to cut25,000–30,000 manufacturing jobs and close 14 plants by 2012. It has now decided to bring forward the plansby four years and complete the cuts by the end of 2008.

The voluntary redundancies at Ford are similar to a plan by General Motors earlier this year that succeeded incutting 34,000 workers – or about a third of the hourly workforce – from the payroll. GM now employs95,000 hourly workers, 39% of the number it employed 10 years ago.

Ford announced last month that it plans to sell Aston Martin, and there has been speculation about sell-offs ofother parts of its Premier Automotive Group, which includes Land Rover and Jaguar. But it insisted yesterdaythat it had no plans to dispose of Jaguar. 'Jaguar is not for sale,' Mark Schulz, executive vice-president, said.Ford's announcement of its restructuring plans came days after Mr Ford stood down as chief executive. MrFord admitted at the time of his move that he was overwhelmed by the job, and he had been 'wearing toomany hats'.

In his place he appointed Boeing's head of commercial aircraft, Alan Mulally, who is known as a turnaroundexpert. Mr Mulally was not involved in the plan announced yesterday, and whether the company will have toput together yet another restructuring once he has got his feet under the table remains to be seen.

'We know our work is far from over,' he said yesterday.'

Source: The Guardian Saturday 16 September, 2006

Case study: Tesco goes global

'Tesco Ltd today [9 February 2006] announces that it intends to enter the United States through thedevelopment of a new convenience format, beginning on the West Coast in 2007.

The development of the business will be through organic growth, with initial planned capital expenditure of upto CU250 million per year, which will be funded from existing resources, with break-even expected by the endof the second full year of operation. Tim Mason, currently our Marketing and Property Director, will move tothe US to run the business, remaining on the main Board.

The new format is designed for the American market, following extensive consumer research and modelled onTesco's highly successful and innovative Express concept, which we now operate in five countries, with over800 stores serving around eight million customers every week.

International growth forms a key element of Tesco's four part strategy and the business currently trades in 12countries outside the UK, mainly in Asia and Central Europe. Over half of Tesco's selling space is now outsidethe UK. Today's announcement represents a strategic move into another developed market, complementingour entry into the emerging Chinese market in July 2004. It will allow us to build our position in the world'slargest markets, and brings the population of markets we operate in to 2.1 billion people, contributing over55% of global GDP.'

Source: Tesco Press Release 9 February 2006

Business strategy


1.2 Types of change

Change itself may be divided into two types, incremental and transformational, and so may themanagement approach to change be divided into reactive and proactive.

Definitions

Incremental change is characterised by a series of small steps. It is a gradual process.

Transformational change is characterised by major, significant change being introduced relatively quickly.

Step change describes an unexpected jump (upwards) or drop (downwards) in the pace of change. The stepis caused by an unexpected event (e.g. environmental disaster, unexpected change in government etc).

Planned change involves following a series of pre-planned steps.

Emergent change views change as a series of continuous open-ended adjustments to the environment.

Johnson, Scholes and Whittington suggest the model of change shown below:

The importance of proactive management is that it implies that organisational change may be undertakenbefore it is imposed by events. It may, in fact, result from the process of forecasting and be a response toexpected developments. Forced change is likely to be both painful and risky.

Interactive question 1: Types of change [Difficulty level: Easy]

Classify and explain the following changes using Johnson, Scholes and Whittington model.

Ford Motor Company turnaround strategy

Tesco's entry into the US and Chinese markets

See Answer at the end of this chapter.

1.3 Levels at which change efforts may focus

There are three main levels to which organisational development and change efforts may be directed:

Individual level where the focus is on improving individual skill levels, attitudes and motivation.Techniques employed could include education and training, management development, coaching andcounselling, team building activities, inter-group activities, role analysis, job re-design, planning andobjective setting activities and process consultation.

Organisation structure and systems level: The characteristics of the organisational situation in whichpeople work (e.g. job redesign, reward systems, setting clear objectives) that help achieve organisationalgoals.



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Organisational climate and interpersonal style levels: The improvement of social and otherinformal processes among organisation members by creating a system with a wide climate of highinterpersonal trust and openness and a reduction in the negative consequences of excessive social conflictand competitiveness.

2 Strategic change in organisations

Section overview

Change management involves management of people's expectations and attitudes. This can rangefrom the willingness of an operative to learn a skill or change a shift up to the willingness of theBoard to authorise the necessary resources.

Therefore most change models seek to describe stages of psychological transition.

These stages may be the focus of planned change management initiatives.

2.1 Change processes

For an organisation to be innovative, and continually responsive to the need for change, a systematic approachshould be established, for planning and implementing changes.

Although each situation should be considered individually, the following general steps can be identified in amajor change initiative.

Step 1Determine need or desire for change in a particular area.

Step 2Prepare a tentative plan. Brainstorming sessions are a good idea, since alternatives for change should beconsidered.

Step 3Analyse probable reactions to the change.

Step 4Make a final decision from the choice of alternative options. The decision may be taken either by groupproblem-solving (participative) or by a manager on his own (coercive).

Step 5Establish a timetable for change.

'Coerced' changes can probably be implemented faster, without time for discussions.

Speed of implementation that is achievable will depend on the likely reactions of the people affected.

Identify those in favour of the change, and perhaps set up a pilot programme involving them. Talk with anyothers likely to resist the change.

Step 6Communicate the plan for change. This is really a continuous process, beginning at Step 1 and going through toStep 7.

Step 7Implement the change.

Step 8Review the change. This requires continuous evaluation.

Business strategy


2.2 The three-stage approach (iceberg model)

The Lewin/Schein three-stage model of change identifies key steps as unfreeze, move and refreeze.

UNFREEZEExisting behaviour

MOVEAttitudinal/behaviouralchange

REFREEZENew behaviour

Step 1Unfreeze is the most difficult (and in many cases neglected) stage of the process, concerned mainly with sellingthe change, with giving individuals or groups a motive for changing their attitudes, values, behaviour, systems orstructures.

Unfreezing processes require four things:

A trigger

Someone to challenge and expose the existing behaviour pattern

The involvement of outsiders

Alterations to power structure

Step 2Move is the second stage, mainly concerned with identifying what the new, desirable behaviour or norm shouldbe, communicating it and encouraging individuals and groups to 'own' the new attitude or behaviour. This mightinvolve the adoption of a new culture. To be successful, the new ideas must be shown to work.

Step 3Refreeze is the final stage, implying consolidation or reinforcement of the new behaviour. Positivereinforcement (praise and reward) or negative reinforcement (sanctions applied to those who deviate from thenew behaviour) may be used.

2.3 Adaptive change approach

Adaptive change occurs when an organisation's environment changes slowly. It is change in little stages, andthus has the advantage of minimising the resistance faced at any one time.

2.4 Crisis management

An external change that endangers the company's survival is a crisis.

Crisis has the effect of inducing panic – which managers must do what they can to minimise – but it can alsopromote an immediate willingness to change: it can be the necessary 'unfreeze' process before anorganisational change.

If there is a crisis on the horizon, there are three options:

Convince the others of the crisis and prepare preventative measures.

Accept that the crisis will happen anyway and prepare to capitalise on it by acting as saviours.

Trigger an early artificial crisis, 'usually by inventing an 'external enemy' who threatens survival of the firm.(sometimes called the 'burning platform' approach, implying that it is not possible to stay where we arenow). This is an approach which has been used by political leaders throughout history.' Artificial crisesreduce resistance, and perhaps build up support for recovery.



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2.5 Coercive change approach

Coercive change is enforced without participation. Change of culture and power structures is left to theend of the change process. There are several problems with a coercive approach:

Underestimation of the forces of resistance Failure to muster forces in favour Failure to attack root causes of resistance Management shift their attention too quickly elsewhere Failure to ensure implementation

This approach is necessary in situations of crisis where there simply is no time to consult, or where decisionsneed to be taken quickly. An example is a sudden environmental shock.

Most of the time, a mixed approach between coercive change and adaptive change is suitable.Adaptive change may be too slow, whereas coercive change is often resented and therefore not accepted.

2.6 Change agents

A change agent is an individual (sometimes called a Champion of Change), a group or external consultancywith the responsibility for driving and 'selling' the change.

The role of the change agent varies depending on the brief they are given. It may include:

Defining the problem Suggesting possible solutions Selecting and implementing a solution Gaining support from all involved

To be effective a change agent should have the following skills and attributes:

Communication skills Negotiation and 'selling' skills An awareness of organisational 'politics' An understanding of the relevant processes

Worked example: ASDA

One company that exemplifies successful combinations of change styles is ASDA, the UK grocery chain. ArchieNorman took over as CEO of ASDA in December 1991 when the retailer was nearly bankrupt. Norman laidoff employees, flattened the organisation, and sold off loss making businesses – acts that usually spawn distrustamong employees and distance executives from their people. Yet during Norman's eight-year tenure as CEO,ASDA also became famous for its atmosphere of trust and openness. It has been described by executives atWal-Mart – itself famous for its corporate culture – as being 'more like Wal-Mart than we are'. With hisopening speech to ASDA's executive team Norman indicated clearly that he intended to apply both soft andhard strategies in his change effort. He said: 'Our number one objective is to secure value for our shareholdersand secure the trading future of the business. I intend to spend the next few weeks listening and forming ideasfor our precise direction. We need a culture built around common ideas and goals that include listening,learning, and speed of response, from the stores upwards. [But] there will be management reorganisation. Myobjective is to establish a clear focus on the stores, shorten lines of communication, and build one team.' Ifthere is a contradiction between building a high-involvement organisation and restructuring to enhanceshareholder value, Norman embraced it.

In 1992 Archie Norman appointed Allan Leighton, from Mars' Pedigree Petfoods division, to the role of GroupMarketing Director. Allan Leighton was appointed ASDA CEO in 1996. Leighton pioneered the idea of'huddles' at ASDA in which teams of managers and staff, would get together to discuss the daily issues and findways to resolve them.

In June 1999 ASDA was bought by Wal-Mart for £6.7bn having been worth only £500m five years earlier.Leighton was appointed Chairman of the Royal Mail in 2002 with a brief to turn it around.

Business strategy


The champion of change model recognises the importance of change being led by a change agent, whomay be an individual or occasionally a group.

Step 1Senior management are the change strategists and decide in broad terms what is to be done. There is a needfor powerful advocacy for change at the strategic apex. This will only occur if senior management arethemselves agreed on the need for change. This is a role requiring a clear vision of what the change is toachieve.

Step 2They appoint a change agent to drive it through. Senior management has three roles:

Supporting the change agent, if the change provokes conflict between the agent and interest groups in theorganisation

Reviewing and monitoring the progress of the change

Endorsing and approving the changes, and ensuring that they are publicised

Step 3The change agent has to win the support of functional and operational managers, who have to introduce andenforce the changes in their own departments. The champion of change has to provide advice and information,as well as evidence that the old ways are no longer acceptable.

Step 4The change agent galvanises managers into action and gives them any necessary support. The managers ensurethat the changes are implemented operationally, in the field. Where changes involve, say, a new approach tocustomer care, it is the workers who are responsible for ensuring the effectiveness of the change process.

It is important to realise that successful change is not something exclusively imposed from above. There is asense in which middle and junior managers are change recipients in that they are required to implement newapproaches and methods. However, they are themselves also change agents within their own spheres ofresponsibility. They must be committed parts of the change process if it is to succeed.

2.7 The Gemini 4Rs framework for planned strategic change

Management consultants Gouillart and Kelly describe a four-dimensional process for business transformation intheir book Transforming the Organisation. Known as the Gemini 4Rs framework, this approach aims to cover allthe important components of the organisation's identity.

Reframing involves fundamental questions about what the organisation is and what it is for:

Achieve mobilisation: Create the will and desire to change. Create the vision of where the organisation is going. Build a measurement system that will set targets and measure progress.

Restructuring is about the organisation's structure, but is also likely to involve cultural changes:

Construct an economic model to show in detail how value is created and where resources should bedeployed.

Align the physical infrastructure with the overall plan. Redesign the work architecture so that processes interact to create value.

Revitalising is the process of securing a good fit with the environment:

Achieve market focus. Invent new businesses. Change the rules of competition by exploiting technology.

Renewal ensures that the people in the organisation support the change process and acquire the necessaryskills to contribute to it:

Create a reward system in order to motivate. Build individual learning. Develop the organisation and its adaptive capability.



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Worked example: UK Royal Mail

'Royal Mail [17 May 2005] today announced a record £537 million profit on its operations for 2004–05 withquality of service to customers now hitting the highest levels in a decade.

Royal Mail's Chairman, Allan Leighton, said: 'Postmen and women have achieved a fantastic turnaround. Theywill now deservedly get a 'Share in Success' payment of £1,074, amounting to £218 million of the company'sprofit. It's one of the biggest profit shares with employees in UK corporate history.'

But Mr Leighton warned: 'There is still a huge amount to do. Transforming our operations, cutting our costsand, above all, winning the support of our people for the modernisation plan with its top priority being toimprove customer service, has been Royal Mail's greatest achievement in decades.

But competing successfully in an open mail market is going to be even more difficult. We've a mountain toclimb and we've only reached the base camp.

The greatest challenge now is to bring about a complete culture change in Royal Mail. We need everyone in thecompany focused on ensuring that we consistently deliver high quality, value-for-money services that customersneed and want. Competition has arrived and customers have a choice; so we need to prove that Royal Mail isthe best and our people are key to that' said Mr Leighton.

The company, he said, was also facing other daunting hurdles:

Royal Mail will have to generate sufficient profit to pay millions of pounds into its pension fund to tackle the£2.5 billion deficit, the 14,609-strong network of Post Office branches made a loss on its operations last year of£110 million. Its rural network of 8,037 branches is fundamentally uneconomic and needs an injection of £3million a week to survive. However, with the current annual Government funding of £150 million due to end in2008, Post Office Ltd cannot be expected to absorb extra costs at this level.

Royal Mail lags behind its major rivals in automated sorting technology. It needs to make a several billion poundinvestment if it is to compete successfully and that means being more profitable in order to invest. However,the 8.6% return on its domestic letters business last year compares with the 16.4% Deutsche Post makes in itshome market, and 22.2% made by TNT Post Group.

Royal Mail's Chief Executive, Adam Crozier, also stressed the challenges ahead.

He said Royal Mail had made good progress against each of the priorities set in 2002 when it launched itsthree-year renewal plan:

Make Royal Mail 'a great place to work', Improve customer service Return to profit Generate a positive cash flow.

'We're delivering on all our objectives,' said Mr Crozier.

'The huge task now facing Royal Mail is to make the cultural change needed to succeed as a commercialbusiness and to become the postal operator of choice for customers in an open competitive market.

Our vision remains to be demonstrably the best and most trusted mail company in the world. With thededication and commitment of our people, we are confident we can achieve our goal. '

Source: Royal Mail Press Release 17 May 2005 (extract)

Business strategy


Interactive question 2: Transforming the Royal Mail [Difficulty level: Intermediate]

Consider the cultural change described in the final paragraphs of the Royal Mail example above and the stepsthat have been taken so far.

Requirement

Apply the activities of the Gemini 4Rs approach to this change. Suggest additional actions that managementneeds to consider.


3 Change and the individual

Section overview

Understanding the implications of change for the individual is essential to a change agent or otherwould-be 'midwife' of change.

The way the individual views the change will be influenced by the manner of its introduction and theforces driving it and restraining it.

3.1 How change affects individuals

Change may affect individuals in several areas.

Physiological changes: Pattern of shift-working, location of place of work

Circumstantial changes: Unlearning previous knowledge and learning new ways of doing things, newwork-mates, using new IT/IS

Psychological changes: Feelings of disorientation, insecurity, changing relationships etc

3.2 Reactions to proposed change

The importance of staff support during a change programme should not be underestimated. We look here inmore detail at the barriers to change they may cause to arise.

3.2.1 Cultural barrier

Structural inertia is the cumulative effect of all the systems and procedures the organisation has installed overthe years to ensure consistency and quality. These act as barriers to change. For example, selection processessystematically select certain kinds of people; promotion processes regularly reward certain kinds of people.

Group inertia may block change where changes are inconsistent with team/departmental norms, or where theythreaten to make skills and expertise of a particular professional or skill group less important or evenredundant.

Power structures may be threatened by the redistribution of decision-making authority or resources, or there-routing of lines of communication.

3.2.2 Personnel barriers

In addition to cultural barriers, there are also barriers which affect individuals and result in them seeing thechange as a threat.



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Habit, because habitual ways of work are hard to change, and the new and unknown is oftenuncomfortable.

Security is almost inevitably threatened – job security and the security of familiarity.

Effect on earnings may be considerable: impact on promotion and income.

Fear of the unknown reduces people's willingness and interest in learning new skills and processes; theymay lack the confidence to take on a new challenge.

Selective information processing results in employees choosing what to hear and what to ignore; they canthen use their selected information to justify their position and ignore management argument for change.

3.2.3 The psychological contract

The psychological contract is the 'deal' between employer and employee. It covers the full set of expectationseach party has of the other.

On either side of the contract, there are offers and wants.

EMPLOYER

OFFERS:

Certain pay levels.

Certain benefit levels.

Job design which offers particularopportunities for responsibility andlearning.

Availability of promotion.

Working conditions of a certain quality.

Opportunities for close relationships.

Style of management.

WANTS:

Certain pay levels.

Certain benefit levels.

Particular opportunities for responsibilityand learning.

Access to promotion/or not.

Desire for particular level of conditions.

Desire for close working relationships.

Style of being managed.

EMPLOYEE

WANTS:

Particular skills, experience, attitudes.

Particular level of commitment.

Particular quality of contribution.

OFFERS:

Particular skills, experience, attitudes.

Capacity level of commitment.

Capacity for contribution.

Match?

Match?

The contract works if offers and wants match. The selection process is the means both parties use to assessthe initial match. The promotion process is the means used to check the ongoing match. In addition, bothparties continuously monitor the match. The model is dynamic, any change in one part triggers changes inothers. If a change programme threatens any item listed under employer offers, the employee will reconsiderwhat they offer as their part of the deal. If the employee believes that their offers will be made wholly orpartially redundant by the changes, they will anticipate that their wants will no longer be satisfied.

Business strategy


3.2.4 Identification of pressure points

Two important pressure points can develop in the psychological contract during times of change.

Lack of appropriate skill levels: This can happen if the employer fails to reconsider how employeewants will alter as a result of changes, or if the employer fails to redesign their offers to ensure theseattract and encourage the right kind of people needed in the new set-up.

Declining staff morale: The driver of employee performance is the human emotions which underlieemployee wants. These wants express personal motives, desires, ambitions and needs and determinepeople's commitment to the changes.

A change programme must be preceded by a review of:

New competences and qualities required Selection processes to ensure they identify the above Promotion processes to ensure they identify the above

A change plan must include a staff development plan covering:

Communication of implications for jobs Communication of required skills Discussions about individual development needs/options Learning and training opportunities Opportunities for making a contribution to changes

Worked example

It is interesting to set side by side the comments of Sainsbury's Director of Personnel and a senior official ofthe shop worker's union regarding the introduction of Sunday working . It isn't difficult to tell which is which!

'I have taken a close personal interest to ensure that in every branch the people who are working onSundays are those who volunteered. Not working on Sunday is not going to affect promotion prospects, itis not going to affect people's pay, and it is not going to affect our attitude to them.'

'Retailers have ways of making Sunday working become the norm. Employers work through the ranks.First they approach the weakest, the people who have less than two years' experience and who have norights for unfair dismissal, then they pick the starry-eyed people who think they are going to be managingdirector, then they pick the people who work low hours and need a few bob. Then they come to theresolute minority and say: 'You are out of step'.'

3.3 Introducing the change

Three factors for managers to consider when dealing with resistance to change

The pace of change The manner of change The scope of change

3.3.1 Pace

Given time, people can get used to the idea of new methods – can get acclimatised at each stage, with aconsequent confidence in the likely success of the change programme, and in the individual's own ability tocope.

Presenting the individuals concerned with a fait accompli may short-circuit resistance at the planning andimmediate implementation stages. But it may cause a withdrawal reaction (akin to 'shock'), if the change isradical and perceived as threatening, and this is likely to surface later, as the change is consolidated –probably strengthened by resentment.



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Timing will also be crucial: those responsible for change should be sensitive to incidents and attitudesthat might indicate that 'now is not the time'.

3.3.2 Manner

The manner in which a change is put across is very important: the climate must be prepared, the need madeclear, fears soothed, and if possible the individuals concerned positively motivated to embrace the changes astheir own.

Resistance should be welcomed and confronted, not swept under the carpet. Talking through areasof conflict may lead to useful insights and the adapting of the programme of change to advantage.Repressing resistance will only send it underground, into the realm of rumour and covert hostility.

There should be free circulation of information about the reasons for the change, its expectedresults and likely consequences. That information should appear sensible, clear, consistent and realistic:there is no point issuing information which will be seen as a blatant misrepresentation of the situation.

The change must be sold to the people concerned: People must be convinced that their attitudesand behaviours need changing. Objections must be overcome, but it is also possible to get people behindthe change in a positive way. If those involved understand that there is a real problem, which poses athreat to the organisation and themselves, and that the solution is a sensible one and will solve thatproblem, there will be a firm rational basis, for implementing change. The people should also be reassuredthat they have the learning capacity, the ability and the resources to implement the plan. It may even bepossible to get them really excited about it by emphasising the challenge and opportunity by injecting anelement of competition or simply offering rewards and incentives.

Individuals must be helped to learn, that is, to change their attitudes and behaviours. Few individualswill really be able to see the big picture in a proposed programmed of change. In order to put across theoverall objective, the organisation should use visual aids to help conceptualise. Learning programmes forany new skills or systems necessary will have to be designed according to the abilities of the individualsconcerned.

The effects of insecurity, perceived helplessness, and therefore resentment, may be lessened if thepeople can be involved in the planning and implementation of the change, that is, if it is not perceived tohave been imposed from above.

3.3.3 Scope

The scope of change should be carefully reviewed. Total transformation will create greater insecurity –but also greater excitement, if the organisation has the kind of innovative culture that can stand it – thanmoderate innovation. There may be hidden changes to take into account: a change in technology maynecessitate changes in work methods, which may in turn result in the breaking up of work groups. Managementshould be aware of how many various aspects of their employees' lives they are proposing to alter – andtherefore on how many fronts they are likely to encounter resistance.

3.4 Force field analysis

There is a technique developed by Lewin to visualise the change process called force field analysis. It is basedon the idea that in any group or organisational situation there is an interplay of restraining and drivingforces that keeps things in equilibrium.

Lewin's force field analysis maps the forces that are pushing toward the preferred state and therestraining forces, which are pushing back to the current state. They can then be presented in a chart.

The example below describes a public sector organisation whose management are introducing a performancereview system. A group of workers are producing at 70% of the efficiency that might be expected on purelytechnical grounds. Their output can be visualised as a balance between two opposing sets of forces, i.e.driving forces which are propelling their output upwards and restraining forces which are preventing itfrom going beyond the 70% level.

Business strategy


The role of change management is to help

Weaken the resisting forces Strengthen the driving forces

The Lewin/Schein 3 step (iceberg) approach is one way to do this.

Arrow sizes denote the relative strength of the forces.

Interactive question 3: Gerrard, Dudek & Smicer [Difficulty level: Intermediate]

Gerrard, Dudek & Smicer are a small long established firm of solicitors. They have recently appointed Eva, anew business development manager. She has suggested that the firm introduce electronic diaries as staff oftendon't know where to find each other. Secretaries also struggle to book meetings as the partners often keeptheir agendas with them, which has annoyed some key clients. However, the partners are extremely reluctantto consider such a departure from their current methods.

Using Lewin's force field model, analyse the above situation and suggest how the new manager could bringabout the change she wants.




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Stakeholder Their needs What they want to know How to communicate

Shareholders Reassurance That there is well thought-throughstrategy. How the strategy willbenefit them

The pressFinancial statementsAGMWebsite

The press A good story What is happening, the rationale,and whether the changes are undercontrol

Briefings

Suppliers Information How the changes will affect theirworking relationship

Meetings face-to-facewith major suppliersLetters/ e-mail to smallsuppliers

Customers Motivation That the service will continueuninterrupted

The pressAdvertisements

Seniormanagers

Acknowledgementand involvement

How they will be involved andopportunities in the new structure.Reassurance over employmentpositions

One-to-one meetings

Staff Help to adapt Training and supportJob security

BriefingsOne-to-one with linemanager

Line managers Involvement Opportunities to be involved andopportunities to learn

BriefingsOne-to-one with seniormanager/HR

4 Project management

Section overview

Project management is a distinct management skill which must combine the soft elements of managingthe human side of change with the harder aspects of budgeting and scheduling activities.

The project manager is a key figure in this process who must show the right balance of skills.

The project life cycle provides a general framework for the management of projects.

4.1 What is a project?

Definitions

A project is 'an undertaking that has a beginning and an end and is carried out to meet established goals withincost, schedule and quality objectives'. (Haynes, Project Management)

Resources are the money, facilities, supplies, services and people allocated to the project.

In general, the work which organisations undertake involves either operations or projects. Operations andprojects are planned, controlled and executed. So how are projects distinguished from 'ordinary work'?

Business strategy


Projects Operations

Have a defined beginning and end On-going

Have resources allocated specifically to them, althoughoften on a shared basis

Resources used 'full-time'

Are intended to be done only once (e.g. organising the2008 London Marathon – the 2009 event is a separateproject)

A mixture of many recurring tasks

Follow a plan towards a clear intended end-result Goals and deadlines are more general

Often cut across organisational and functional lines Usually follows the organisation orfunctional structure

Common examples of projects include:

Producing a new product, service or object Changing the structure of an organisation Developing or modifying a new information system Implementing a new business procedure or process

4.2 What is project management?

Project management is the combination of systems, techniques, and people used to control and monitoractivities undertaken within the project. It will be deemed successful if it is completed at the specified level ofquality, on time and within budget.

Definition

Project management is the combination of systems, techniques, and people used to control and monitoractivities undertaken within the project. Project management co-ordinates the resources necessary tocomplete the project successfully.

Objective Comment

Quality The end result should conform to the project specification. In other words, theresult should achieve what the project was supposed to do.

Budget The project should be completed without exceeding authorised expenditure.

Timescale The progress of the project must follow the planned process, so that the 'result'is ready for use at the agreed date. As time is money, proper time managementcan help contain costs.

Projects present some management challenges.

Challenge Comment

Teambuilding The work is carried out by a team of people often from varied work andsocial backgrounds. The team must 'gel' quickly and be able to communicateeffectively with each other.

Expectedproblems

Expected problems should be avoided by careful design and planning prior tocommencement of work.

Unexpectedproblems

There should be mechanisms within the project to enable these problems tobe resolved quickly and efficiently.



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Challenge Comment

Delayed benefit There is normally no benefit until the work is finished. The 'lead in' time tothis can cause a strain on the eventual recipient who is also faced withincreasing expenditure for no immediate benefit.

Specialists Contributions made by specialists are of differing importance at each stage.

Potential forconflict

Projects often involve several parties with different interests. This may leadto conflict.

Project management ensures responsibilities are clearly defined and that resources are focussed on specificobjectives. The project management process also provides a structure for communicating within andacross organisational boundaries.

All projects share similar features and follow a similar process. This has led to the development of projectmanagement tools and techniques that can be applied to all projects, no matter how diverse. Forexample, with some limitations similar processes and techniques can be applied whether building majorstructures (e.g. for 2012 London Olympics) or implementing a company-wide computer network.

All projects require a person who is ultimately responsible for delivering the required outcome. This person(whether officially given the title or not) is the project manager.

4.3 The project life cycle

The life cycle concept can be useful in the management of projects, since it breaks the whole down into moreeasily manageable parts. This is particularly applicable to the allocation and management of resources,since their type and quantity vary from phase to phase.

Maylor (Project Management) describes four phases or stages: this is the 4D model.

Stage in project lifecycle

Component Activities

Define the project Conceptualisation

Analysis

Produce a clear and definitive statement ofneeds

Identify what has to be done and check itsfeasibility

Design the project Planning

Justification

Agreement

Show how the needs will be met

Compute costs and benefits

Obtain sponsor agreement

Deliver the project(Do it!)

Start up

Execution

Completion

Handover

Assemble resources and people

Carry out planned project activities

Success or abandonment

Output passed to sponsor/user

Develop the process Review

Feedback

Identify outcomes for all stakeholders

Document lessons and improvements forfuture use

(1) Define the project

Larger projects are likely to involve the creation of a project brief or terms of reference fordiscussion. A project initiation document may be prepared, if it is decided to continue with theproject. This will include a statement of requirements, a statement of the vision for the projectand a business case.

Business strategy


(2) Design the project

There are several techniques used for scheduling and time planning, such as network analysis and Ganttcharts (diagram below). This stage also deals with the need to plan for cost, quality and risk usingtechniques such as risk assessment, resource budgeting, and cost budgeting.

MonthActivity w/c

Week

January February

1

2

3

4

7 14 21 28 41 2 43 5

PlanActual

Gantt chart

(3) Deliver the project

This is the operational phase of the project. Planning will continue as required in order to control agreedchanges and to deal with unforeseen circumstances, but the main emphasis is on getting the work done.

There are several important themes.

Management and leadership: People management assumes a greater importance as the size ofthe project work force increases.

Control: Time, cost and quality must be kept under control, as must the tendency for changes toproliferate.

Supply chain: All the aspects of logistics management must be implemented, especially withprojects involving significant physical output.

Problems and decisions: Problems are bound to arise and must be solved sensibly andexpeditiously. Complex problems will require careful analysis using the scientific tools of decisiontheory.

(4) Develop the process

Improve the way the organisation and project teams cope with projects:

Completion: All activities must be properly and promptly finished; care must be taken thatcontractors do not either leave small things undone or, if paid by time, spin things out for as long aspossible.

Documentation must be completed: This is important on any project but it is vital if there arequality certification issues or it is necessary to provide the user with operating documentation.

Project systems must be closed down, but in a proper fashion: In particular, the project accountsand any special accounting systems must remain in operation and under control until all costs havebeen posted but must then be closed down to avoid improper posting.

Handover must take place where the project has been managed for a client under contract: Atsome point the client must formally accept that the contract is complete and take responsibility forany future action that may be required, such as the operation and maintenance of a system.



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Immediate review is required to provide staff with immediate feedback on performance and toidentify short-term needs such as staff training or remedial action for procedure failures.

4.4 The role of the project manager

Definition

Project manager: The person who takes ultimate responsibility for ensuring the desired result of the projectis achieved on time and within budget.

The role a project manager performs is in many ways similar to those performed by other managers. There arehowever some important differences, as shown in the table below.

Project managers Operations managers

Are often 'generalists' with wide-rangingbackgrounds and experience levels

Usually specialists in the areas managed

Oversee work in many functional areas Relate closely to technical tasks in their area

Facilitate, rather than supervise team members Have direct technical supervision responsibilities

The duties of a project manager are summarised below.

Duty Comment

Outline planning Project planning (e.g. targets, sequencing):

Developing project targets such as overall costs or timescale needed(e.g. project should take 20 weeks).

Dividing the project into activities and placing these activities into theright sequence, often a complicated task if overlapping.

Developing a framework for procedures and structures needed tomanage the project (e.g. decide, in principle, to have weekly teammeetings, performance reviews and so on).

Detailed planning Break work into pieces, scheduling, assessing resource requirements.

Obtain necessaryresources

Resources may already exist within the organisation or may have to bebought in. Resource requirements unforeseen at the planning stage willprobably have to be authorised separately by the project board or projectsponsor.

Team building Build cohesion and team spirit.

Communication The project manager must let superiors know what is going on, and ensurethat members of the project team are properly briefed.

Co-ordinatingproject activities

Between the project team and users, and other external parties (e.g.suppliers of hardware and software).

Monitoring andcontrol

The project manager should estimate the causes for each departure fromthe standard, and take corrective measures.

Problem-resolution Even with the best planning, unforeseen problems may arise.

Quality control There is often a short-sighted trade-off between getting the project out ontime and the project's quality.

Business strategy


Some of the skills required in a project manager are:

Type of skill How the project manager should display the type of skill

Leadership andteam building

A participative style of leadership is appropriate for much of most projects, but amore autocratic, decisive style may be required on occasion

Be positive (but realistic) about all aspects of the project

Understand where the project fits into the big picture

Delegate tasks appropriately – and not take on too much personally

Build team spirit through co-operation and recognition of achievement

Do not be restrained by organisational structures – a high tolerance forambiguity (lack of clear-cut authority) will help the project manager

Organisational Ensure all project documentation is clear and distributed to all who require it

Use project management tools to analyse and monitor project progress

Communicationand negotiation

Listen to project team members

Use persuasion to coerce reluctant team members or stakeholders to supportthe project

Negotiate on funding, timescales, staffing and other resources, quality anddisputes

Ensure management is kept informed and is never surprised

Technical By providing (or at least providing access to) the technical expertise andexperience needed to manage the project

Personalqualities

Be flexible: Circumstances may develop that require a change in plan

Show persistence: Even successful projects will encounter difficulties thatrequire repeated efforts to overcome

Be creative: If one method of completing a task proves impractical a newapproach may be required

Patience is required even in the face of tight deadlines. The 'quick-fix' mayeventually cost more time than a more thorough but initially more time-consuming solution

Problem solving Only the very simplest projects will be without problems. The project managermust bring a sensible approach to their solution and delegate as muchresponsibility as possible to team members so that they become used to solvingtheir own problems. By the nature of a project there is always uncertaintyand risk in a project. The project manager needs to be able to react to thesesituations fast, and adopt an efficient problem solving attitude so as not to holdup the project at key moments.

Change controlandmanagement

Major projects may be accompanied by the kind of far-reaching change that haswide-ranging effects on the organisation and its people. Here, however, we areconcerned with changes to the project itself. Changes can arise from avariety of sources (not least the intended end-users) and have the potential todisrupt the progress of the project. They must be properly authorised, plannedand resourced and records kept of their source, impact and authorisation if theproject is not to become unmanageable.



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Network or critical path analysis

Network or critical path analysis (CPA) may be defined as a diagrammatic representation of the interrelationover time of the activities involved in a project and the subsequent analysis of those activities in terms of time,cost and risk.

1 2

3

4 5fill

kettle

boilwater

get cup add coffee

addwater

Network for black coffee, no sugar

Figure above shows an extremely simple network diagram for making a cup of instant coffee. It shows thatsome activities logically follow others (boil water after filling kettle) and some can take place at the same time(getting cup and adding coffee while water is boiling).

Obviously in the case of a complex project there would be far more activities and a far more complexnetwork, but the principle is the same.

CPA allows the network to be analysed – in the first instance in terms of time, which enables the minimumproject time to be determined and the critical path, i.e. the longest path through the network. Any delays toactivities on the critical path delay the whole project. Subsequently the network can be analysed in terms ofcost, e.g. the effect on cost of accelerating activities.

The basic analysis assumes the times for each activity are known with certainty. Variability in activity times (i.e.risk) can be analysed using PERT (project evaluation and review technique) which can forecast likely outcomesand the probability of a particular outcome occurring. This is particularly useful when trying to assess theimpact of potential delays in terms of time and cost.

Business strategy


Summary and Self-test

Summary



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Self-test

Answer the following questions.

1 List the three levels at which organisational development/change efforts may focus.

2 'An organisation enjoying good profitability should not consider change.' TRUE or FALSE?

3 List the three stages of Lewin's model for changing the behaviour of individuals.

4 What is meant by 'refreezing'?

5 List three possible problems with coercive change.

6 What causes resistance to change?

7 What is force field analysis?

8 Fill in the following blanks.

C………………, c……………… and c……………… play important roles when introducing change toan organisation.

9 In the Lewin/Schein three-stage change management model, what general principle does management useto embed the desirable new behaviour?

10 List four areas that a project manager should be skilled in.

11 Herring Ltd is in crisis. Major changes in its culture, structure and working practices are needed if it is tosurvive. The effects of any changes made are highly uncertain. Identify the type of change involved forHerring Ltd and the best approach to managing such change.

12 Freddis Ltd has sold its single product in a single market segment for many years. It's only competitor hasjust brought out a technically superior and far cheaper version of the product. Outline the culturalbarriers to change which are likely to be present in Freddis Ltd.

13 F Steel

The recently-appointed Chief Executive Officer (CEO) of the F Steel Company is intent on making theorganisation more competitive. He has made it clear that he considers current operational performanceto be below acceptable levels. He recently stated, 'Costs are too high and productivity is too low'.

Demand for steel is growing, particularly in export markets such as countries in the Pacific rim, and theCEO believes F Steel should capitalise on this. To do this he believes some change to working conditionsat F Steel will be required. A reduction of import duty in some proposed export markets would also berequired for profitable trading.

The trade union that represents the steel workers in F Steel Company is well-organised and has promisedthe workers that it will defend their wage levels and working conditions.

Requirement

(a) List the forces for change and causes of resistance in the F Steel Company. Classify these accordingto whether they can be considered as deriving from internal or external sources. (5 marks)

(b) Recommend how the newly-appointed Chief Executive Officer in the F Steel Company might goabout managing the process of change. (5 marks)

(10 marks)

14 Plant Ltd

Plant Ltd has just finished implementing a major cost cutting project which involved automating a numberof previously paper processes across the whole company. The project did not go as well as had beenhoped and at one point the telephone ordering system was out of action for over a week as a result ofunexpected problems.

Explain how this type of change could be categorised. What kind of investigation is likely to be instigatedas a result of the problems that occurred? (2 marks)

Business strategy


15 Burgermania Ltd

Company background

Burgermania Ltd (hereafter Burgermania) is the world's largest fast food chain. The company has 30,000restaurants in over 100 countries, and has been committed to opening over 700 new restaurants eachyear in recent times. The company has benefited from consumers wanting quick and filling foodstuffs, andhas met this need with its style of product for both adults and children. The company has also had manytie-in arrangements with sports and films, to encourage consumers to buy its product range. The range isvery limited, focussing mainly on burgers, fries and soft drinks. There are occasional variations in somecountries. This approach has proved popular with consumers who have conservative tastes and are happyto know that the food will be of a consistent quality wherever it is sold.

The company operates mainly via a combination of owned and franchised restaurants. Franchisees sign a15-year deal in which they are given the right to use Burgermania trademarks, restaurant decor designs,formulae and specifications for menu items, use of Burgermania's inventory control systems, bookkeeping,accounting, marketing and the right to occupy the restaurant premises.

In return the franchisee agrees to operate the business in accordance with Burgermania's standards ofquality, service, cleanliness and value. The company is anxious to avoid any negative publicity, so itemploys 'secret shoppers' who randomly visit and assess restaurants on the above criteria. The companypays relatively low wages and has high staff turnover; this has prevented Burgermania being able to recruithigh calibre staff, as the image of the jobs offered is poor.

Recent events

The company has had stagnant profits and sales growth in the last two years. The main reasons for thisare increased health concerns in its major geographical markets. The company's products are high in bothfat and carbohydrate content, and stories in the media about preventable obesity, heart disease, diabetesand cancer have caused turnover to falter. Furthermore, new style diets, whilst promoting meatconsumption, have discouraged many consumers from eating bread or fries due to their highcarbohydrate content. Initially Burgermania claimed that its products were nutritious and healthy, but thispolicy was deemed to be a failure as it did not reverse the stagnation of sales. Some high profile legalclaims against the company from consumers claiming that Burgermania products caused health problemshave also had a negative impact on the company's image.

The company has decided at board level to respond to this deterioration in its financial performance byintroducing and promoting a healthier menu, with options that include burgers but no burger buns,chicken and fish based products, grilled rather than fried meats, salads, fruit and healthier drinks, as well asphasing out extra large portions of food on its menu. The directors want to give more autonomy toindividual restaurant managers to offer a wider range of products that will vary between differentlocations.

In addition, the board intend to change the company name to 'Eatwise' to move away from the associationwith burgers and fries. The cost of changing all the company, logos, livery, advertising campaigns andcooking equipment is expected to be massive. Staff will also will have to be trained to use the newequipment and promote healthy eating to customers. The company is uncertain how the public andfranchisees will respond to these changes in the business. Moreover, Burgermania is under pressure todeliver improved financial performance as its share price has underperformed that of the overall stockmarket by 20% in the last 18 months.



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Requirements

(a) Identify the type of change that Burgermania is considering. (2 marks)

(b) Outline the potential barriers to the proposed changes from:

(i) Franchisees(ii) Restaurant staff(iii) Customers (9 marks)

(c) Prepare a draft blueprint for submission to the board of directors of Burgermania that details howthe company will deal with the changes of menus and name. (7 marks)

(d) Suggest ways in which the company can communicate successfully the changes to customers,franchisees and shareholders. (3 marks)

(21 marks)

16 Timbermate Ltd

After a difficult few years trading, a new chief executive, Brian Parsons, has been appointed to the boardof Timbermate Ltd. A large divisionalised company, it specialises in the production of wood-basedproducts, from plywood and chipboard, to kitchens and conservatory windows.

Parsons in his initial press interview made it clear that the costs incurred by the business were far toohigh and that efficiency and productivity were unacceptably low. He has made clear his intention to turnthe business around. However, there have already been rumblings from the union to which most of theworkers belong. They are not prepared to negotiate over wages or working conditions.

Timbermate is a major importer of wood. Russian and Scandinavian joinery redwood, together withspruce from North America, make up a high percentage of imports. They also import from the BalticStates. Although sterling is strong against the dollar it has been struggling lately against the othercurrencies. There have been signs that some of Timbermate's overseas suppliers are consideringexpanding into Bangladesh directly. There has also been an increase in the popularity of UPVC alternativesin a number of Timbermate's core business areas.

A number of operational issues need addressing. Recently, complaints about quality and productspecification have become more common. Additionally the delivery fleet has become less reliable andseveral key customers have been let down. However many of the senior managers do not seem undulyconcerned. They often talk of the timber crisis of 1992 and how these problems are just part of thenature of the industry. They rarely stay at their desks after 5pm. There is little in the way of knowledgesharing and it is unusual for staff in any one division to even know the names of staff in the others.

One key pillar of Parson's plan is to introduce a fully integrated information system, covering (amongstothers) stock control and e-procurement, computer aided design and manufacture, resource planning andmanagement accounting. The system is to operate across all the divisions and allow potential cross-sellingand better customer management.

Requirements

(a) Analyse the forces for and against change at Timbermate Ltd. (6 marks)

(b) Recommend to Brian Parsons how he might best manage the change process. (8 marks)

(c) Suggest how the implementation of the information system could best be managed by the projectteam at Timbermate Ltd. (6 marks)

(20 marks)

17 C Hospital

The Executive Board of C Hospital needs to harmonise its payments systems. It wishes to introduce asingle pay scale for all employees of the hospital including nurses, physiotherapists, radiographers,technicians and support staff (i.e. cleaners, porters, and kitchen staff). The purpose is to achieve greaterrole flexibility, recruit and retain better staff and to reward people for their effort.

The hospital has twelve months to do this.

Business strategy


It has been decided that a project manager should be appointed and a project team set up. The HRmanager has said he will release some members of his HR team to be part of the project team, but statesthat designing a new pay system should not form part of the 'business as usual' work for the HRdepartment.

Requirement

(a) Describe the factors that distinguish the proposed project from 'business as usual' work.(10 marks)

(b) Outline the different stages in the project for a new pay and reward system. (15 marks)

(25 marks)

18 Wholesome Drinks Ltd (Sample paper)

Wholesome Drinks Ltd (WD) is a Bangladesh-based company, specialising in the production of 100% realfruit smoothies (a drink made from a blend of whole crushed fruit and fruit juice). The business is runfrom the 'Wholesome House' headquarters in Khulna, where the state-of-the-art production facility issited and where nearly all of the employees are located.

Company history and funding

The business incorporated and started trading on 1 January 20X4, with the entire shareholding being heldequally by the two founders, Spike Jones and Jemma Sharratt, who are also the only directors. Initialfinance was provided as follows:

Spike and Jemma had both made large bonuses in their previous employment and invested CU50,000each as equity

Bank finance was obtained in the form of a CU250,000 10-year loan carrying interest at 8% perannum, secured by personal guarantees on the directors' houses and a CU100,000 overdraft facility

In 20X5, Spike introduced a further CU100,000 as a long-term loan – money that had recently beeninherited. It was agreed that interest would be payable at 4% per annum.

The product

The majority of fruit drinks in the industry are produced from concentrated juices and most usepreservatives. This makes the production process faster, the drinks cheaper and because they last longer,facilitates distribution.

Wholesome's range of fruit smoothies consist of 100% pure fruit with no preservatives or additives.They buy fruit direct from the growers, squeeze it, bottle it and sell it. As a result, they have a relativelyexpensive product with a short shelf-life, although they use high tech containers to ensure the productlasts as long as possible (around 12 days for 250 ml bottles and 20 days for one litre cartons). As WD'sproducts are not subjected to ultra-high temperature (UHT) processing (as is the case with traditionalfruit drinks), all the production equipment has to be completely sterilised and the juice has to be keptchilled at every stage of the process.

Wholesome's fruit suppliers are located all over the world. All batches of fruit undergo strict testing toensure that only the highest quality ingredients are used by WD.

Wholesome tries to foster an entrepreneurial environment and welcomes new ideas and suggestionsfrom staff and customers. All new recipes are tested on family and friends and members of the publicpassing by Wholesome House.

Not all new ideas are implemented. WD's mission statement is 'to make juices that are healthy and thatpeople will enjoy drinking. They will be produced in as socially and environmentally friendly a way aspossible'.

So, as well as public approval, all new products have to fulfil the following criteria:

Great tasting Simple 100% pure ingredients Healthy



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To maintain their creative image, Wholesome have introduced the concept of 'seasonal blends,' each onlyavailable for three months. This allows them to appear innovative without having to sustain lots of newlines.

Pricing and packaging

Wholesome smoothies are currently available in two sizes: individual 250ml bottles and one litre take-home cartons. The initial target market was busy young professionals, working long hours and wanting aconvenient healthy drink option. The 250ml bottles retail between CU1.75 and CU2.00 and the take-home cartons between CU3.30 and CU3.50. Take-home cartons are only available in supermarkets.

The average price per drink charged by Wholesome to retailers in 20X6 was CU1.15 (250ml) and CU2.00(one litre).

The retail value of the Bangladesh smoothie market now stands at around CU46 million. Supermarketown-brand smoothies account for 29% of this value and Wholesome's nearest competitor, 'Frooty TootyDrinks' accounts for 27%. Frooty Tooty have a less exciting range of flavours than Wholesome and theretail price of their drinks is around 40p cheaper per 250 ml bottle because they use partly concentratedjuice.

WD does not currently produce drinks to be sold under own-brand labels for the supermarkets. Theseare made by Frooty Tooty Drinks and a number of other smaller producers.

Market information

20X720X4 20X5 20X6 forecast

Retail value of smoothie market CUm 23.75 32.4 46.1 69.7Wholesome market share

(based on retail sales price) 4.2% 10.7% 24.5% 38.2%

Sales information for Wholesome Drinks

20X7Average sales volume per week 20X4 20X5 20X6 forecast250ml bottles 10,000 35,000 80,000 185,0001litre cartons 0 0 20,000 50,000

Annual revenue (CU'000)250ml bottles 624 2,184 4,784 11,0631 litre cartons 0 0 2,080 5,200

Distribution

At the end of their first year they signed a deal with a young and growing coffee bar business, whichagreed to stock Wholesome drinks in their shops. Since then, Wholesome have experienced rapidgrowth and supply to the major supermarkets now accounts for over 60% of revenue. Their drinks arealso stocked across Bangladesh in some of the well-known chains of sandwich shops, coffee bars andrestaurants. Spike and Jemma have not forgotten their initial customers however and they are alwayscareful to keep their small independent shops happy.

As the business grew, WD were unable to distribute the product themselves and at the end of 20X5 theysigned a contract with an independent Bangladesh distributor, Chiller Solutions Ltd (CS), who specialise incold food and drink logistics. Once the drinks leave the Wholesome factory in Manchester, they aretransported by CS direct to the distribution centres of the supermarkets and larger chains, or to specialistwholesalers who supply the smaller delicatessens and independent sandwich shops.

Human resources strategy

Wholesome's attitude towards its staff is simple: 'We want Wholesome to be a fun place to work. All ouremployees are treated like one of the family and teamwork is one of our key values'.

To ensure their team is happy and motivated, Wholesome spends a lot of money on staff welfare andtraining.

Business strategy


Support for charity (NGOs) and the environment

From the outset, WD has tried to run its business in an ethical way.

Wholesome cartons and bottles are 40% recycled plastic, which is currently the most technology willallow, but they would prefer more. They encourage recycling with messages on their cartons andrecycling information on their website.

The company aims to minimise any negative impact on the environment. The company car is electric andthey use a 100% renewable energy supplier.

Wholesome gives away drinks to the homeless and sponsors holiday programmes for disadvantagedchildren in Bangladesh. In addition, they donate a proportion of profits (currently 10%) to various projectsin the developing world, particularly in countries where they source their ingredients.

Strategic plans

The directors share the same personal objectives. Their primary aim is to continue working forthemselves, doing something that they enjoy and believe in, which provides them with a comfortableliving. They are in the business for the long term and currently have no plans for an exit route.

Now they have had a taste of success, Spike is keen to open a chain of Wholesome juice bars similar tothe current coffee shops opening up in Bangladesh high streets.

Jemma is more conservative. She favours gradual growth, and has suggested that the company

Target other consumers in Bangladesh by introducing a wider range of drinks e.g. organicWholesome drinks, health drinks with added vitamins and minerals and smoothies for kids

Expand their sales into South-East Asia. Research suggests the smoothie market there is currentlyabout 4 years behind Bangladesh and is not yet served by any major brands

Both continue to share the same vision though:

'We don't want to be like the big companies. Whatever we do, we must stay true to our brand andcontinue to operate as an informal, open and ethical company. '

Appendix 1: Extracts of financial information

20X4 20X5 20X6CU CU CU

Sales 624,000 2,184,000 6,864,000Variable costs (580,320) (1,834,560) (5,491,200)Fixed costs (222,900) (317,700) (816,800)Profit pre-tax and pre-donations (179,220) 31,740 556,000Bank balance (94,358) (94,561) (4,116)Net assets (79,220) (50,904) 396,296

Requirements

(a) Provide an analysis of the smoothie industry in which Wholesome operates, under each of thefollowing from Porter's Five Forces model.

Power of buyers Power of suppliers Competitive rivalry

Explain clearly the implications for Wholesome's current position and future strategy. (9 marks)



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(b) Examine the influence that WD's ethical stance has on its mission and objectives and evaluate theimpact this has had on its competitive position and performance. (9 marks)

(c) Explain the issues that are likely to arise for the company as a result of the rapid expansion that isforecast for future growth. For this purpose ignore the three strategic plans. (8 marks)

(d) Write a report that critically evaluates the suitability, acceptability and feasibility of each of the threestrategic plans put forward by Jemma and Spike (i.e. juice bars, wider product range, European sales).

(18 marks)

(44 marks)

19 Harburry Hotels Ltd (Sample paper)

Harburry Hotels Ltd (HH) is a wholly owned subsidiary of a listed company, International Leisure Ltd.

Company history

HH is an autonomous venture, which was created in 20X1 as an off-shoot of its parent company and it ispart of a large leisure group. The vision was to set up an exclusive chain of 'boutique hotels', which are allsmall, select five-star establishments, and to develop 'Harburry' as a well-known, luxury brand within 10years.

Up to 20X5 International Leisure Ltd provided HH with enough finance to purchase and furnish hotelsand therefore to enable rapid expansion.

All the hotels are small, each having about 80 bedrooms. They have a culture of offering a luxury personalservice. The mission statement of HH reflected this as 'Excellence in everything'.

Hotels are located both in large cities and in the countryside. Sales are generated by:

Individual bedrooms – this includes leisure and business customers, although there is no separateanalysis of sales from each of these sources. This source generates about 50% of total revenue.

Business conference facilities – this includes specific conference rooms and food as part ofconference contracts.

Banquet sales – this relates to weddings and other celebrations including banquet halls and food.

Restaurant and bar sales – this includes sales in the restaurants and bars to individuals, includingboth residents and non-residents.

The hotel industry

Bangladesh hotel accommodation market generates annual revenue of about CU12 billion. Business salesmake up the largest share of revenue. Prices tend to be higher in this sector, and sales are generated notonly from accommodation, but also from the use of other facilities. These include conference and meetingrooms, with many of the major hotel groups having established separate brands to expand this sector ofthe market.

The luxury end of the market tends to be dominated by large chains operating large hotels butincreasingly, small 5-star hotels have been entering the market as consumer demand has risen for them.

Selective company and industry data

Harburry Hotels Ltd

20X4 20X5 20X6Total revenue (CUm) 170 191 191Profit before tax (CUm) 17 16 15Number of hotels operated 28 32 33Price per room per night (CU) 130 140 150Occupancy rate (%) 80% 73% 66%

Business strategy


Bangladesh hotel industry data

20X4 20X5 20X6Total revenue (CUm) 11,500 11,750 12,000Price per room per night:

2-star (CU) 52 56 603-star (CU) 76 80 844-star (CU) 90 95 1005-star (CU) 125 130 135Average (CU) 85 90 95

A strategic dilemma

In 20X6, International Leisure Ltd was acquired by a US company, Zodiac Inc. The terms of reference forHH were immediately changed. There would be no further finance available for acquiring additional hotels.Any further expansion would need to be financed from HH's own resources.

Zodiac undertook a business review of HH in order to establish a long-term strategy. It revealed thatcustomers and hotel guides believed excellent standards were being set which rated the company towardsthe top of its industry sector. One exception was the restaurants, where the food was described as 'veryordinary' in most cases. Another complaint was that accommodation prices were too high and that somenew competition in the boutique hotels sector was beginning to offer similar standards at prices that werelower than HH's, although still high for the industry generally.

New strategies

In order to respond to the new circumstances, HH set out two proposed strategies:

Proposal 1 – Outsourcing of the restaurants. The hotels' restaurants would be outsourced on five-year contracts to established chefs or other restaurant owners who were seeking premises. HH wouldreceive a fixed annual payment and 15% of the revenue generated. The restaurant operators would needto guarantee appropriate opening hours, menus and standards of service.

Proposal 2 – Sale and manage-back. Under this arrangement HH would sell its hotels to a propertycompany and manage them of its behalf under a long-term contract in return for a percentage of theprofits generated. The funds raised by this arrangement could then be used to lease new hotels anddevelop existing hotels.

Requirements

(a) Use the company and industry data provided, along with any other available information to evaluate:

(i) The strategic market position of HH; and

(ii) The performance of HH.

In so doing, identify any additional data that you would require, and which would reasonably beavailable. Explain how this data would assist in making a more complete evaluation.

Ignore the two proposed strategies. (11 marks)

(b) (i) So far as the information permits, evaluate the extent to which HH has been able to achieve asustainable competitive advantage.

(ii) Explain whether the two proposed strategies for HH may help it better exploit the company'score competences. (10 marks)

(21 marks)



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20 Trend Electricals Ltd (Sample paper)

Trend Electricals (TE) has made significant progress since it opened its first factory in Ishwarganj in 1951.It is now a major listed company that manufactures household electrical goods, which it sells throughoutthe world, generating annual revenues of about CU4.75 billion.

Company history up to 2002

TE initially manufactured low cost electric lighting but, as it grew, it developed a wide product range ofhousehold electrical appliances including fridges, cookers, televisions, DVD systems, and personalcomputers. All of these have a reputation for giving good value as basic, low-priced products.

Prior to 1995, TE had ten manufacturing sites, all located in Bangladesh. However, from 1995 to 2002 fourof these Bangladesh sites were closed and two new manufacturing sites were opened: one in SE Asia andone in South America. This transfer of manufacturing capacity enabled lower production costs and alsogreater proximity to TE's growing markets in South East Asia and South America. By the end of 2002, TEhad the following annual geographical distribution of sales by location of: (i) markets; and (ii) originalproduction (all at sales values).

Sales bySales by location ofmarket production

CUm CUmBangladesh 1,000 3,000Europe 2,500 –SE Asia 1,000 1,000South America 500 1,000

The company has had a centralised organisational structure with the group head office maintaining closeoperational and financial control over operating divisions. In order to control costs in very competitivemarkets, tight budgets were set by group head office and regular cost control programmes wereimplemented. Divisional performance was judged against achievement of detailed budget targets.

There was a separate division for each type of product, but head office also exercised functional control.Thus, for example, the financial controller of a division reported to the divisional head, but was alsoclosely monitored by the group finance director. There was a poor relationship between divisional headsand group head office management.

A dispute over organisational structure in 2003

In recent years there have been difficult trading conditions with cheap imports undercutting many of TE'sproducts on price in a number of its markets around the world. As a result of falling profits and a fallingshare price, the board of TE has been forced to reconsider its strategy. One of the key conclusions wasthat any new strategy, if indeed a new strategy would be appropriate, should be devised at local level byindividual divisions – not centrally by head office. As a consequence, the board has been willing to rethinkits organisational structure.

The chairman argued: 'We need to change the way we work. Centralisation is just too slow. We arenot adapting quickly enough to changes in technology and market conditions – decision-making needs tobe closer to the customer. By the time a division has put forward a proposal for strategic change to headoffice and we have approved it, our competitors have implemented similar changes and moved further on.We are always one step behind'.

The chief executive disagreed. 'We are a low cost producer and that means controlling costs and co-ordinating activities. This is best done centrally'.

The majority of the board supported the chairman. In January 2004, TE therefore made the followingfundamental changes to its group structure.

All manufacturing sites were to become separate divisions, which were to be run as subsidiarycompanies.

Each subsidiary was to become a strategic business unit (SBU) and to be operated as an investmentcentre.

Business strategy


Services such as marketing, R&D and administration would continue to be acquired centrally fromgroup head office at full cost, or they could be purchased from outside the group.

Finance would only be raised by divisions from group head office at an annual interest rate of 10%,which was intended to reflect risk.

The performance of divisions was to be measured by a combination of: (i) profit after interestcharges on capital (ii) sales growth; and (iii) average production cost per unit of output.

2004

During 2004 several problems became apparent with the new organisational structure. Some divisionalheads made several obvious strategic errors, but the group board was reluctant to intervene as theyconsidered it might damage the new culture of divisional autonomy.

Most divisions made very few purchases of central services from the group and, as a result, there weresignificant redundancies at head office. Most divisions took on additional administrative staff to assist in thenew divisional management procedures, instead of purchasing head office services.

Of even more concern to the group board, was that there was little investment in fixed assets or in R&Dby divisions. While 'profit after interest charges on capital' had improved in most divisions, there was afeeling amongst the group board that this was a short-term, tactical outcome and there was insufficientlong-term divisional planning and investment in the new regime.

2005

In order to encourage greater long-term investment, head office services would be offered to divisions atvariable cost, which was a very significant reduction from the full cost transfer pricing policy applied in2004. Also, cash could now be borrowed by divisions from external sources, but they would also beoffered finance from the group at 5% per annum.

Many of the divisional heads retired or were removed during 2005.

2006

The low cost of head office services meant that demand for these services increased significantly suchthat, towards the end of the year, head office staff numbers exceeded their pre-2004 level and head officewas being operated at a significant deficit.

Some views:

The group finance director summed up her view of the changes:

'This change in structure has been a disaster for us. We may have quicker decisions based on localknowledge, but there is no central co-ordination and, quite frankly, head office management were betterstrategic decision-makers than the divisional heads will ever be'.

The group marketing director agreed:

'There is now no co-ordination of marketing. We sell and produce worldwide and we need to co-ordinate our production and markets to a greater extent. Decentralisation has problems in delivering thisglobal co-ordination'.

Note: By the end of 2006 TE had the following annual geographical distribution of sales by location ofmarkets and by location of production (all at sales values).

Sales bySales by location ofmarket production

CUm CUmBangladesh 700 2,550Europe 1,900 –SE Asia 1,350 1,100South America 800 1,100



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Requirements

(a) Explain the strategic benefits and problems which are likely to have arisen from the process ofinternationalising production in the period from 1995 to 2002. In so doing, highlight any additionalinformation that might be needed for a more complete analysis of this decision.(Ignore the changes in organisational structure for this purpose). (12 marks)

(b) Write a memorandum to the board of TE which, so far as the information permits, criticallyevaluates the changes made by TE under each of the following headings.

The advantages and disadvantages to TE of centralisation and decentralisation in itsorganisational structure

Measuring the financial and strategic performance of the divisions

Assessment of how the change process was managed in 2004

Pricing head office services (23 marks)

(35 marks)

Now go back to the Learning Objectives in the Introduction. If you are satisfied you have achieved theseobjectives, please tick them off.

Business strategy


Answers to Self-test

1 Individual; organisation structure and systems; organisation climate and interpersonal style.

2 FALSE. Organisations should embrace change, and not wait until the obsolescence of their currentpractices leads to crisis.

3 Unfreeze, change (or move) and refreeze.

4 The final stage of the Lewin/Schein three-stage approach in which the desired new behaviour isconsolidated.

5 Underestimating resistance; not coercing hard enough or long enough; failure to ensure implementation.

6 Attitudes, beliefs, loyalties, habits and norms, politics.

7 Lewin's analysis of the driving and restraining forces which underlie any group or organisationalequilibrium.

8 Commitment, co-ordination and communication.

9 Reinforcement – both positive and negative.

10 Four of:

Leadership Team building Organisation Communication Technical expertise Personal qualities.

11 Revolutionary change

Approach – emergent, i.e. flexibility is essential.

12 Structural inertia – systems and procedures are likely to have been in place for many years.

Group inertia – production and marketing departments, for example, may resist change (probably used todoing things in the same way for many years).

Power structures – lack of pressure to change in the past may have resulted in clear lines of decisionmaking authority and/or control over resources.

13 F Steel

(a) Forces for change – internal

Forceful new CEO Poor operational performance High costs Low productivity

Forces for change – external

High export demand Only steady domestic demand for steel Customer complaints

Forces resisting change – internal

Long-serving managers' complacency The trade union's attitude



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Force resisting change – external

High import duties in some export markets

(b) Lewin suggests that after the forces for and against change have been established, effort should beput not only into breaking down those opposing it (which is a natural management response), butalso into building up the influence of those supporting it.

This process is the first or 'unfreeze' phase of the Lewin/Schein change model. The CEO will have toset up both a programme of education and support for the complacent managers and enter intoforceful negotiations with the trade union. The basic aim is to frighten both parties with evidence oflooming disaster. This is clear enough from the company's competitive situation.

The second phase of the Lewin/Schein change model requires action to change behaviour, layingdown new patterns and reinforcing them. Residual resistance should be confronted with freecirculation of information about plans for the future and why they are required. Individuals must behelped to change their attitudes and behaviours. An extensive programme of organisationaldevelopment is probably required for the F Steel Company. There should be proper application ofpositive and negative reinforcement in the shape of rewards and sanctions.

The final phase of the model is 'refreeze'. This prevents the staff from slipping back into their oldways and attitudes by a combination of exhortation, reward for good performance and sanctionsagainst the backsliders.

External forces are less susceptible to this treatment than internal ones. In the case of the F SteelCompany, representations could be made to government about both the exchange rate and theunfair competition, perhaps through a trade association or other umbrella body. However, it isnecessary to recognise that even if action is forthcoming, it is unlikely to be prompt.

14 Plant Ltd

The change could be categorised as reconstruction – it affects the entire organisation, but does notappear to require a paradigm shift.

A post-project audit would be required. It would be carried out by an independent team who wouldreview all elements of the project process in detail to identify why the problems arose.

15 Burgermania Ltd

(a) Type of change

Burgermania is undertaking a change in the business that would be deemed revolutionary in terms ofimpact on the business. Both the process and the underlying paradigm of the company will have tochange. The retraining and re-branding of the business suggests a low degree of predictability, as itwill be difficult to anticipate the reaction of stakeholders, especially customers, to the proposedchanges.

(b) Barriers to change

Franchisees

Franchisees will fear that new system is too radical and may have detrimental impact onrevenues of restaurants.

They may fear that costs of changing name and livery of the restaurants will be recovered byBurgermania in the form of higher franchise fees.

Franchisees will be reluctant to change to a new system of delivering food if they are happywith current products and procedures.

They may lack initiative when it comes to introducing new products that they can add to themenu.

Business strategy


Restaurant staff

Staff in fast food restaurants tend to be poorly paid and have short periods of employment.Therefore they may be reluctant to be retrained or adopt a pro-active policy with customers interms of promoting the new healthier food lines.

Staff may feel that if Burgermania is suffering then jobs may be lost – likely to causedemotivation.

Staff may fear that management will use the change as a means of introducing new workingpractices that could reduce income, overtime, bonuses etc.

Staff may lack the skills to adapt to the new nature of the business.

The decision is likely to be enforced by coercion if necessary due to Burgermania's poor recentresults, potential for conflict and resentment by staff.

Customers

Customers are more concerned with being fed quickly than with the quality of what they eat,so may choose to go elsewhere. Many people have conservative tastes and so will be reluctantto try the new products on offer.

They may feel that the new products are being forced on them and again vote with their feet byeating at other fast food restaurants.

(c) Draft blueprint

To Board of directors, Burgermania Ltd

From B. Cowie, consultant

Date Today

Subject Blueprint for menu and name changes

Action required

Introduction of healthier menus and local autonomy Launch of new name/brand for the company

Purpose

The objective of the changes is as follows.

– To reverse the decline in the company's performance.– To adapt to changes in consumer demands and tastes.– To promote the company as a family-friendly and healthy eating place.

Timing of changes

Given the nature of the company's products and positioning in the market, a national changewill have to be launched if it wants to maximise publicity for the changes. The company couldtry introducing the new menus on a trial basis in selected restaurants.

The transformation will be very time-consuming given the global nature of the company and itsproducts.

Responsibilities

A committee needs to be formed to co-ordinate the changes, headed by a seniormanager/director.

Evaluation

Market research needs to be undertaken to establish public reaction to both the menu andname changes.

Performance data can be produced to determine the popularity of the new food products on atrial basis in selected stores.



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(d) Communication of changes

Franchisees could be invited to a conference to see the new 'Eatwise' logos and product range.

A major PR campaign, with TV, radio and press adverts should take place to coincide with thechanges to advise customers. Perhaps special promotions relating to the new products could beused to encourage customers to try them out.

Shareholders could be briefed via e-mail and the company's website, together with pressreleases in the financial media.

16 Timbermate Ltd

(a) Forces for and against change

Forces for change

The forces for change in Timbermate appear to be both external and internal.

External factors would include:

Overseas competitors: Current suppliers may be able to undercut Timbermate if they set uptheir own operations in Bangladesh. It will be essential for them to bring down their own costbase to survive.

Exchange rates: Weakening sterling will make imports more expensive, putting upTimbermate's costs still further.

Growth in plastic alternatives may reduce demand in a number of key areas. Unless they canfight back, share will be lost, reducing economies of scale and brand strength.

Internal factors would include:

Brian Parsons' determination to make the changes needed.

Customers: Increasing dissatisfaction with the current standard of service has already given riseto complaint and may, if not addressed, lead to loss of current customers and brand image.

Shareholders: A period of poor results cannot have been satisfactory for the shareholderswhich is presumably why they have appointed Parsons.

Forces against change

Attitude of managers: The managers lack a sense of urgency and are therefore likely to resistany major change programme as unnecessarily disruptive.

Attitude of staff: It is likely that the laid back culture permeates the whole organisation and staffmay not understand the need for change. They will undoubtedly also be fearful for their jobs.

Unions have already expressed their intention to resist any changes to wages or workingconditions. This could lead to walk-outs and strikes.

(b) Managing change

A useful method of managing change was proposed by Lewin. This divides the process of change intothree stages, unfreezing, changing and refreezing.

Unfreezing

The forces for change must be used to encourage the change, and the forces against it must beweakened. Methods might include:

Carrying out a PEST analysis to identify the exact nature of the threats from the outsideenvironment (issues such as deforestation may also have potential impact and have beenoverlooked).

These issues and their consequences should then be stressed to the managers. Forecasts of marketperformance (and its impact on bonuses) if no change is made should be communicated. Workshopsto involve senior managers in the process may help them to appreciate the urgency of the situation.

Business strategy


Consultation and negotiation with the unions will have to be entered into. They will need to bepersuaded of the importance of change now to protect jobs in the future.

Change

The new information system must be introduced. Training in all aspects will be required – not just inhow to use the system, but in its potential benefits, so that staff start to identify ways in which itcould further improve business.

New working practices will need to be introduced. Some processes may need re-engineering.

Greater collaboration between different divisions needs to be encouraged.

Efforts must be made to change the culture of the organisation. Stories about problems being causedby economic cycles that can be ignored, rituals such as leaving work on the dot, and an organisationstructure so rigid that there is little or no horizontal communication suggests a 'jobs worth'paradigm where bureaucracy has taken on all its worst characteristics. Whilst education may startthe process, it may be necessary to remove those managers who are unwilling or unable to change.

Refreezing

This is the process of trying to ensure planned changes become the norm.

Reward systems should be developed to focus on issues such as cost management, customersatisfaction, productivity and innovation.

Continual training: The staff should be given regular training updates to deepen their understandingof the new system.

Communication: Interdivisional meetings should be scheduled on a monthly basis. The agenda shouldbe shared problem solving and sharing of best practice. It may be that major customers should beprovided with a single point of contact, who will then liaise with all divisions on their behalf (a matrixstructure within the divisional one).

(c) Managing the project

Objectives

One of the first things the project team will need to establish is the scope (what exactly the systemis expected to do), the deadlines (when it is intended to be fully operational and which areas are tobe given priority) and the budget available.

Tools

Once they have a clear set of objectives, the team can use tools such as network or critical pathanalysis to establish the order in which the various parts of the project (stock, production andaccounting) should be carried out, and whether the objectives can be achieved.

Given the current problems, Parsons will no doubt be very keen to see a speedy implementation,but since the budget is undoubtedly tight and the scope is extremely ambitious it is unlikely that allthe objectives can be achieved at once. A key stage review meeting will then be required with all thesenior managers to adjust scope, deadlines or budget to ensure the project plan is realistic.

Gantt charts to track project progress and resource histograms to monitor manpower usage willhelp to keep the project on target.

Reporting

Regular project reporting will then keep key stakeholders up-to-date. The e-procurement projectwill need significant liaison with the overseas suppliers and may involve overseas visits to ensure theproject is fully co-ordinated. Project reports in this area will therefore need to be more frequentthan those to shareholders for example.



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17 (a) C Hospital

Introduction

In general the work which organisations undertake may be classified as either 'business as usual' orprojects. Whether an activity is classified as a project is important as projects should be managedusing project management techniques.

A project has a number of attributes that distinguish it from 'business as usual'. Projects may beperceived as having a life cycle. This is commonly seen as commencing with the identification of aneed and progressing through the development of a solution, implementation and closure.

Project attributes

Projects have a defined beginning and end, have resources allocated specifically to them,although often on a shared basis and follow a plan towards a clear intended end-result. Theyare intended to be done only once and often cut across organisational and functional lines.

These distinctive attributes are reflected in C Hospital's project. It has a defined life of 12 months, aproject manager and project team are to be appointed to carry out the project and they have a clearobjective of designing and implementing a new pay and reward system within that period.

The project is clearly a 'one off' activity and the HR Director is adamant that the project team willbe cross functional rather than being drawn solely from his staff. It would seem sensible for theteam to include staff from the key areas involved: nursing, physiotherapy, radiography, technical andsupport staff.

(b) The life cycle of the project to design and implement a new pay and reward system for C Hospitalwill include the following four main phases:

Identification of a need

Projects start when someone becomes aware of the need for one. This can occur at any level and inany context, though more formal business projects of management significance will normally beoriginated within the area of responsibility of the sponsoring manager.

At C Hospital the need has arisen as a result of the need to respond to government requirements toreform reward systems. A key first step is to identify the goals and objectives of the project –why we are doing it and what we are seeking to achieve. At this early stage one of the mostimportant things to get under control is the scope of the project; that is, just what is included andwhat is not. A firm grasp of the agreed scope of the project must be maintained throughout its life.Government requirements in relation to reward systems will play a major role in shaping the scopeof the project.

The project team will also be assembled at this stage and should include representatives from HR,Finance and those who can speak on behalf of each of the employee groups affected. The projectmanager will take ultimate responsibility for ensuring the desired result is achieved on time andwithin budget. A person should only take on the role of project manager if they have the timeavailable to do the job effectively. Since that person is to be held responsible for the project, theymust be given the resources and authority to complete project tasks.

Development of a solution

Planning is a key duty of the project manager and the initial outline planning will include:

Developing project targets such as overall costs or timescales.

Dividing the project into activities and placing these activities into the right sequence.

Developing a framework for procedures and structures needed to manage the project – thiscould include weekly team meetings, performance reviews and so on.

Detailed planning may include use of techniques such as work breakdown structure and networkanalysis in order to produce a schedule of activities to be undertaken.

Business strategy


Implementation

This is the operational phase of the project. Planning will continue as required to in order tocontrol agreed changes and to deal with unforeseen circumstances, but the main emphasis is ongetting the work done.

There are several important aspects to this phase. Management and leadership assume a greaterimportance as the size of the project work force increases. Time, cost and quality must be keptunder control, as must the tendency for changes to proliferate.

Problems are bound to arise and must be solved sensibly and expeditiously. At C Hospital theobjective of the project, pay harmonisation, is potentially extremely contentious and it will be veryimportant to resolve employee concerns quickly without imposing an ongoing insupportable financialburden upon the hospital.

Completion

The final phase of the project is completion and review. This phase involves a number ofimportant but often neglected activities.

Completion itself is often neglected. All activities must be properly and promptly finished anddocumentation must be completed. This is particularly important on a payroll project whereaccuracy and timeliness of payment are of crucial importance.

At some point the HR department must formally accept that the project is complete and takeresponsibility for any future action that is required in relation to the new pay system, such as themaintenance of the system. The HR department will want to ensure that the project being handedover conforms to the latest requirements definition and project specification.

Completion will involve the disbandment of the project team. It is important for future projectsthat before the team members return to their previous roles there is a formal process that gathersthe lessons learned so that they are available to future project teams and help those projects toavoid any mistakes or difficulties encountered whilst developing the payment system.

Examiner's commentary – relating to questions 18, 19 and 20

Good candidates would be expected to identify most of the points listed in the marking plan. Markers arealways encouraged to use discretion and to award partial marks where a point is either not explained fullyor made by implication. More marks are available than could be awarded for each requirement. Thisallowed credit to be given for a variety of valid points made by candidates.

18 Wholesome Drinks Ltd (Sample paper)

General comments

This question examines a company operating in the competitive fruit drinks market that, due to its uniquepositioning, has been successful in building sales and market share to date. Unlike other corporates theyare taking a long-term view in their desire to be ethical /sustainable which translates into a short-termprofit/cash problem but has allowed them to create a niche market. They are proposing further rapidexpansion in their existing Bangladesh market in the short term and at the same time trying to make alonger-term decision about their future direction.



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(a) Five forces analysis

(i) Buyers

Demand for WD's product by the supermarkets, sandwich shops etc will be derived fromthe demand by the end consumer.

Individual consumers in a retail market will have low buying power/ influence in relation tothe size of the industry and brand loyalty seems high.

WD's corporate buyers will have more power:

– Large supermarkets will have greater power and more stringent requirements thansmall independents.

– With large supermarkets who are both buyers and competitors for own-brandproducts there is a danger that they may choose to promote own-brand productsrather than Wholesome's, e.g. by giving own-brand products more prominent shelfdisplay.

Implications for WD

WD has become increasingly reliant on large supermarkets, which now contribute 60% revenueand are the sole stockists for the one-litre take home market. As a result it will be important tofoster good relations with these buyers.

WD could strengthen the relationship and reduce the risk by agreeing to produce own-brandsmoothies for one of the supermarkets' premium ranges. Consideration however needs to begiven to the lower profit margin on own brand products and to the competition from existingsuppliers of own-brands to supermarkets.

In addition, it will be important for WD to continue to look after the smaller, independentshops which were their initial buyers. It would be easy to start neglecting these because of therelatively small proportion of turnover they account for individually but the collective value tothe business is still around CU2.7m at 40% of revenue.

(ii) Suppliers

Distribution: As the sole distributor, Chiller Solutions currently have considerablepower and influence.

Implications for WD

WD is currently very reliant on Chiller Solutions. One way to reduce this reliance would be toinvestigate alternative distribution channels and the switching costs that would be involved inchanging this supplier. Alternatively, WD need to continue to build their relationship with CS asone of partnership, rather than that of a traditional supplier.

Suppliers of fruit: There seem to be plenty of suppliers, spread across the world, manyof whom are likely to be small with limited power. There is no information to suggest thatfruit is a scarce resource. Fruit also is largely homogeneous, commodity type, product(other than variations in quality) so switching costs are likely to be small.

The suppliers may be more likely to support WD rather than sell to alternative drinkproducers due to their desire to be sustainable and because of the possibility of receivingcharitable funding.

As a result their overall power is likely to be low.

Business strategy


Implications for WD

As Wholesome wants to produce a premium product they need to ensure they are getting thepick of the crop.

They would be advised to source supplies from a number of different countries so they reducethe risk of being affected by poor weather/harvest in one particular location.

Suppliers of labour: Wholesome currently operate with a small team who is treated aspart of the family. Individually the staff are unlikely to wield much power.

Implications for WD

WD rely on staff for new recipe ideas and will need to continue to develop and encourage thatcreativity. Given the open and informal way that the business is run they would not want tolose staff to a competitor. However, WD's attitude to staff as demonstrated by the investmentin their welfare should mean they do not have a retention problem.

(iii) Competitors

As the smoothie market is currently growing, there are sales available to all. Once marketgrowth slows, rivalry is likely to increase.

Power relies on the ability to promote the brand to consumers.

Currently no competitor is producing an identical product to Wholesome's smoothies,due to their 100% pure stance.

The major competitor (Frooty Tooty) currently has a 27% market share. Their product issimilar to WD's, but retails at around 40p cheaper as it includes juice from concentrate.

There is a danger that Frooty Tooty or another smaller competitor gets taken over by alarger food and drinks business they may get greater backing/ resources etc, e.g.PJ Smoothies is now owned by PEPSI.

The other key players in industry are the supermarkets who collectively have a 29% sharewith their own brands. They will have much larger resources and marketing power etc,which would allow them to bring out a 100% pure own brand product and promote it atthe expense of Wholesome's product.

Implications for WD

They are operating in a very competitive market and need to protect their competitiveadvantage by continuing to innovate.

Diversification of the product range may lead to increased product awareness and reach awider range of customers.

They could also make more use of point of sale advertising to promote brand loyalty.

WD would be advised to monitor market activity on a regular basis, especially that of theirclosest competitor.

(b) Ethics

The ethical stance of WD can be looked at on both an individual and a corporate level.

Individual – concerns Spike's and Jemma's actions in managing the business

Corporate – looks at the extent to which WD have gone beyond the minimum legal andcorporate governance obligations.

On an individual level, Spike and Jemma want to work for themselves rather than for a largecorporate because their primary concern is that they are able to do something 'they enjoy andbelieve in'. As such they are looking to earn a comfortable living from the business rather than to



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maximise short-term profits. This is also evidenced by their commitment to the long term and theabsence of plans for an exit route.

This individual integrity and moral stance then influences the mission and objectives of the business,which reflect the beliefs and values of the founders who want 'to operate as an informal, open andethical company'.

WD's mission statement is 'to make juices that are healthy and that people will enjoy drinking. Theywill be produced in as socially and environmentally friendly a way as possible'.

This mission reflects the desire of the two founders to make a difference to people like themselvesby delivering a convenient, healthy product. It also demonstrates the fact that they are attempting toinclude the wider interests of stakeholders by taking account of the impact WD's actions have onthe society around it.

This is evidenced in Bangladesh by giving away drinks to the homeless and by their support forholiday programmes and outside Bangladesh by the 10% of profits donated to fund projects indeveloping countries. As a result, WD's approach to creating a sustainable business can be seen totake account not just of the expectations of the Bangladesh Government and society but also theother countries affected by their operations.

Company's mission and objectives

Products

The stated aim is to produce a 100% pure product with no additives or preservatives, which ishealthy for consumers.

Staff

The founders want Wholesome 'to be a fun place to work' and promote teamwork as one of thekey values. The sabbaticals, awards etc suggest that they treat employees like 'one of the family'.

Environment

The company objective is 'to minimise any negative impact on the environment'.

This has led to the company investing in technology to produce bottles and cartons that are 40%recycled plastic. They promote recycling via their cartons and website and they take anenvironmentally friendly approach to energy consumption: the company car is electric and they use a100% renewable energy supplier.

Marketing

The smoothies market is a small market segment within the soft drinks industry. Wholesome Drinksare the only company currently producing a 100% pure fruit product. Their product has a relativelyhigher selling price than competitors and is placed at the premium end of the market. As a resultWholesome Drinks could be said to be operating a differentiation strategy in a niche market.

WD's ethical stance has given them a unique position in the market place.

This competitive advantage can be seen in their rapidly growing revenue and market share. Revenuehas grown more than tenfold in two years (6,864/624) and market share has increased from 4.2 % to24.5%, despite WD's product being the most expensive on the market. They now hold the secondlargest share of any individual business.

Production and costs

The ethical approach is likely to have had short term impact in terms of higher costs: More expensive cost of sales Shorter shelf life and therefore higher wastage Technological investment required to develop recyclable packaging

To make a further analysis it would be necessary to have information about the competitor's coststructures. It is unclear whether WD are able to pass all the extra costs on to the wholesalers/consumer although we are told that the recommended retail price is 40p dearer than Tooty Frooty'sproduct.

Business strategy


WD's profits are also reduced by the higher staff costs although their human resource policy is likelyto enable them to attract and keep the best staff, which will help them with innovation and productdevelopment.

After a sizeable loss in the first year, WD has become profitable, albeit the rapid growth has placed astrain on cash flow, despite the introduction of the further CU100,000 loan by Spike in 20X5. Thebank overdraft at the end of each of 20X4 and 20X5 at around CU94,000 is close to the CU100,000overdraft facility although there is a significant improvement in 20X6.

The donation of profits will reduce cash and available reserves but will help maintain their reputationand visibly position them as an ethical company.

Summary

The company's desire to be sustainable seems to have had short-term costs in terms of profitabilityand cash flow but has paid off in strategic position and market growth. Their start up is well timed asit coincides with increased consumer interest in healthy eating and concern for food safety and theenvironment. WD should see long term benefits provided that they are able to sustain theircompetitive advantage. Future success will continue to depend on their reputation, which is linked totheir ability to innovate.

(c) Expansion issues

There are a number of general issues that Spike and Jemma should consider if they are to expand thebusiness:

As the business gets bigger it will become more difficult to control.

Retention of an open and informal structure is important to them. As a larger business theymay lose the feeling of a small family team and inevitably have to become more corporate inoutlook.

Any change will have an impact on the staff. Given the importance they place on the team,Spike and Jemma should ensure that the change is carefully communicated and managed.

Expansion is likely to require a further injection of finance. This could come from savings, newborrowings or new investment. As the owners have already injected their spare capital andgiven personal guarantees it may be difficult for them to provide more finance.

Any new investment e.g. by a business angel would reduce their control and may end upintroducing a stakeholder with different or conflicting objectives e.g. with regard to exit.

New borrowings would require security and evidence of a business plan, taking into accountthe need to repay the existing and new finance.

Expansion may place a strain on the IT, communication and management information systems.

The business has done well so far because the timing suits the general trend in society forhealth and fits with various government initiatives in this area. Wholesome produce a premiumproduct and may suffer if there is a downturn in the economy or if consumers tire of theircurrently fashionable product.

Future success depends on their ability to sustain a competitive advantage. It would not bedifficult for competitors to follow suit and copy Wholesome's ethical approach.

The Boston Consulting Group matrix could be used to analyse Wholesome's position in termsof market attractiveness and market strength:

– Market attractiveness: The smoothie market has been experiencing high growth and isforecast to grow by a further 51% in 20X7. This is likely to attract new entrants.

– Market strength can be measured by Wholesome's market share relative to the marketleader. In 20X6 Wholesome had 24.5% of the market, relative to Frooty Tooty's 27% butis forecast to overtake Frooty Tooty in 20X7 with a share of 38.2%.

– This would suggest that Wholesome smoothies are set to become a 'star' and that WDwill need to invest heavily to hold this position/ build upon it.



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There are few barriers to entry so an existing large soft drinks manufacturer with economies ofscale could easily develop a product and compete away excess profits.

Wholesome could go for organic growth but should also consider the possibility of enteringinto corporate arrangements that may reduce the risks of expansion.

(d) Report to the Directors of Wholesome Drinks Ltd

To Spike Jones and Jemma SharrattFrom A N AccountantDate TodayRe Strategic plans for Wholesome Drinks

Since it incorporated in 20X4, Wholesome Drinks has enjoyed rapid growth in sales and marketshare. This report considers the future direction of the company and in particular the specific plansput forward by the directors.

1. Juice bars

This strategy is one of market diversification by downstream vertical expansion.

Suitability

In keeping with current trends for health and fitness e.g. people trying to reduce caffeineconsumption and increase daily fruit and vegetables.

This would benefit the brand by making it more widely available and better known on thehigh street.

There is already strong competition from lots of other delis, sandwich shops and coffeebars.

This strategy is likely to require an amendment to the mission statement that currentlyfocuses on the production of smoothies.

Acceptability

A chain of juice bars would require quite a high investment in terms of premises etc sorisks are quite high e.g. there might be penalty clauses for withdrawing from leases.

Demand for juice in a high street bar may be seasonal which would increase the riskattached to Wholesome's cash flows.

There is a possible risk of health and safety issues due to contamination that may damageWholesome's reputation.

Jemma is likely to be resistant to this option due to her attitude to risk.

Feasibility

Wholesome already know that their product is in demand.

Management lack expertise of running such an establishment and would need to hire staff.

Does Wholesome have any core competences in retailing management even is staff arehired in?

Wholesome would need to locate (and probably lease) suitable premises.

The cash flow required for a chain of juice bars would be significant.

Business strategy


2. Wider product range

Using the Ansoff matrix, this strategy is one of product development – selling new products toexisting markets.

Suitability

This strategy is consistent with Wholesome's current mission, objectives and brand image.

It strengthens Wholesome's reputation for innovation / creativity.

It fits in with government campaigns targeting obesity in the general population and inchildren.

Suggested products are consistent with the existing acceptance criteria for 100% pureingredients and a healthy product, although the health drinks may not be simple and greattasting.

The children's range is likely to address increasing parental concerns re additives etc.

Organic products are consistent with Wholesome's desire to avoid a negative impact onthe environment.

Acceptability

This strategy is probably the lowest risk as it makes use of Wholesome's existingresources and core competences.

This is likely to meet with least resistance from the various stakeholders i.e. staff,stockists, Chiller Solutions.

There is a risk that some consumers may switch from existing Wholesome smoothies tothe new brands and that some sales may be replacement rather than incremental.

There is a risk that competitors may copy these products or alternatively that they mayintroduce them first if Wholesome does not.

Feasibility

Wholesome will be able to use their existing distributor and stockists.

They will require increased spending on product development and marketing.

The suggested products may involve more regulations and therefore be more costly dueto screening requirements.

Wholesome may need to take on staff with medical / nutritional expertise.

The timing of the launch will be important e.g. launching the health drinks in January wouldfit with the general increase in people 'detoxing' at this time of year.

Market research is required to establish the size and nature of the market for the newproducts.

Competitor analysis will be needed to ascertain the incumbent suppliers in these markets.Does Wholesome have any particular core competences in producing and selling theseproducts compared to those companies already doing so?



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3. European sales expansion

Using the Ansoff matrix, selling WD's existing product, smoothies, in the South-East Asiamarket would constitute market development.

Suitability

This strategy is consistent with Wholesome's current mission and objectives.

It capitalises on Wholesome's currently successful product/ brand.

The South-East Asian lifestyle and climate is very different from that of Bangladesh.Consumers tend to prefer fresh produce not commercially packaged and there is plenty offruit available for people to make their own juice/smoothies. The success of the productwill depend on to what extent convenience is valued.

Acceptability

There is a cultural risk that the product may not work due to the different climate andlifestyle. Certain flavours/recipes may be less popular and there may be problems withbrand names in certain languages.

Transporting the product overseas increases the risk of perishability and wastage.

This strategy will expose Wholesome to exchange risk that will need managing.

Feasibility

The Wholesome brand name is currently unknown in Europe.

It is unclear whether the existing production facility has the capacity to supply theEuropean market.

Wholesome may need to consider moving production overseas due to the product'sshort shelf life.

There is not the same emphasis on supermarket shopping and the absence of largesupermarkets and out of town stores may cause a problem.

Wholesome will need to establish a new distribution network.

This strategy is likely to require marketing spend.

4. Conclusion and recommendations

Before any decision is made, forecasts need to be prepared to assess the returns and risks fromthe various strategies. The strategies suggested are not mutually exclusive, although are likely torequire additional management expertise as managing the growing Bangladesh business willprobably take all the current time available.

The least risky option is to expand the product range as this uses Wholesome's existingresources and competences. If Wholesome decides to expand into Europe, it would be best toundertake this gradually and concentrate in the first instance on countries closest to Bangladeshwhere the culture is similar e.g. Ireland. The juice bar strategy would be more sensible ifundertaken as a joint venture with an existing chain of coffee bars/ deli that wants to add juicesand smoothies as an extra product line.

All the strategies need to be seen against a background of rapid expansion in the company'sexisting markets for 20X7 (market penetration in the Ansoff matrix). Any of the proposals maytherefore lead to excessive expansion or overtrading if not appropriately resourced. Thus astrategy may be desirable, however for a small and young company, with inexperiencedmanagement and rapid growth in its current markets, caution is necessary in assessing whethera good strategy could be successfully implemented.

Business strategy


19 Harburry Hotels Ltd (Sample paper)

General comments

This question examines a scenario in the hotel industry where there is a start-up as an offshoot from alarge listed leisure group. The question includes a data analysis requirement which requires the use ofquantitative data to interpret the strategic position and performance of the business. The data needs to beused alongside the other information provided in the question to build up the most complete picturepossible.

The question also requires an examination of the extent to which the company has been able to achieve asustainable competitive advantage and an assessment of two proposed strategies in the context of its corecompetences.

(a) (i) Strategic position in the industry

HH has a small share of the Bangladesh hotels market at around 1.6% market shareCU191m/CU12,000m). However, in assessing the company's competitive position this figure isnot particularly relevant as it seems unlikely that 2-star, 3-star and 4-star hotels are directcompetitors to HH in most cases, given the price difference. Thus, any comparison of HH'sprices with the average of CU95 per night for the entire industry is likely to have little meaning.The focus of any comparisons should therefore be on competitors and prices in HH's marketniche.

The key competitors are therefore other 5-star hotels, but even in this case there is probablya limited subset of this market that may be considered active competitors. For example, thesmall boutique hotel market may be different in characteristics, if not in price, from larger5-star hotels.

Any comparison to the industry leader using models such as the BCG matrix would only berelevant if the industry leader was a major operator in the 5-star sector. A more validcomparison might be with the sectoral leader in the 5-star hotels grouping generally, andboutique 5-star hotels specifically. Additional financial and operating data relating to sectoralleaders may be useful to assess HH's competitive position against the sectoral market leader.

However, to the extent that HH regards itself as part of the '5-star' market, then it wouldappear that it is attempting, on the basis of pricing, to position itself toward the top of thismarket. In 20X4 HH was charging a price premium of 4% above the sector average but this hadrisen to 11.1% by 20X6. This appears to be at the upper limit, however, further information isneeded on the prices being charged by HH's direct competitors for a fuller analysis as:

Boutique hotels may all be at a premium above the 5-star sector average.

The mix of HH's hotels may be weighted in high value geographical sectors (e.g. London)where the prices may be set close to those of geographically proximate rivals.

It is clear that occupancy levels have fallen. This is considered in more detail below underperformance but more information is needed as to whether this decline is due to the increasein price (movement along the demand schedule) or due to decline in the sector (a movementof the demand schedule).

For example, if there is decline in the general economy, the higher price hotels sector maysuffer unduly. As it stands, there has been an increase in the total sales of the industry (of justover 2% per year) but it does not follow from this that all sectors have improved. Moreinformation is needed specifically about the 5-star sector. For example:

Average occupancy rates Sectoral sales and growth New capacity in the sector



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(ii) Performance

HH's profit has fallen over the period 20X4-20X6, while revenue has risen. The data providessome explanation of why this might be the case.

HH's revenue rose by 12.4% in 20X5 and by zero percent in 20X6.

In terms of performance this might be of concern, as the overall increase in revenue can beanalysed into:

Effect of price change Effect of occupancy/volume change Increased capacity in term of new hotels

A brief summary would be:

20X5 20X6Price change 7.7% 7.1%Volume utilisation change (8.8%) (9.6%)Capacity change 14.3% 3.1%Total revenue change 12.4% 0

In terms of volume of activity:

20X4

28 hotels 80 bedrooms 365 days 80% utilisation = 654,080 room nights sold

20X5


(i.e. + 4.3%)

20X6


(i.e. - 6.8%)

Thus, the volume of activity has increased in 20X5 in terms of the number of bedroom nightsbut this increase in activity was not as great as the increase in capacity thus utilisation has fallen.

In 20X6 the volume of activity fell and was lower than in 20X4.

Also, despite the investment in new hotels, profit has declined in both years. An analysis ofcosts is needed to make a fuller evaluation of the impact of the strategy on profit. This wouldinclude direct costs to establish changes in margins, but also movements in fixed costs.

Activity performance

A more detailed measure of financial performance would be to determine the separateprofitability of each of the four activities: bedrooms, conferences, banquet and restaurants.

Whilst separate accounting records need to be kept for control purposes their usefulness indetermining performance is questionable as:

There is significant interdependency of revenues between the activities. For example, ifthe rooms are not filled by the hotel accommodation manager, then the restaurant is alsolikely to be empty.

There is likely to be significant interdependency of costs between the activities at eachhotel. Issues such as overhead allocations of floor space, usage of staff time, usage ofjointly used assets are all likely to give problems of jointness and thus cost allocationbetween the activities.

There is likely to be significant interdependency of central costs for each type of activitybetween each of the hotels. Thus, for instance, the costs of head office administration ofrestaurant activities (such as central food purchasing) would be difficult to allocatebetween the restaurants of each of the hotels.

Business strategy


Thus, while more information about the costs and revenues of each activity may be available, itsusefulness in assessing the separate performance of each of the activities is likely to be limited.

Benchmarks

Performance can be assessed by comparison to benchmarks. There is little information here toassess appropriate benchmarks but with additional information comparisons might be:

Internal benchmarks – comparisons of utilisation, revenue growth and profit comparedto the best performing hotel in HH. The problem with this measure is that theperformance of any hotel might be as much a function of its location, as its managementand this probably cannot be replicated. Thus, a hotel in the countryside might find itdifficult to replicate the performance of a Dhaka Hotel. Nevertheless, perhaps somelessons could be learned.

External/competitive benchmarks – compares to the industry leader in the sectorand the locality. Information might be hard to come by for a specific hotel. However,indicators are: prices charged (e.g. list prices, frequency of discounts offered, special rates),and utilisation (e.g. availability of all types of rooms at all time of year).

Activity benchmarks are best practice in whatever industry it is found. Most obviouslya comparison of the hotels' food provision against highly rated restaurants.

Generic benchmarks are against conceptually similar processes (e.g. dealing with VIPguests' at a prestigious event) but this is a much looser comparison.

Future performance

The data relates to historic performance, but this is a new company attempting to develop anew brand and strategy in a difficult market. In this context, a short series of financial resultsmay be atypical of the underlying strategy. Heavy advertising may be part of the explanation forthe reduced profit, but this might be part of the strategy of developing the brand into a wellknown name in accordance with the mission statement.

Useful additional information in this respect would be budgets for the available forthcomingperiods and, in particular, the assumptions on which the budgets are based.

Similarly, other projections (e.g. costs, revenue, CAPEX) would be useful. Market researchcould indicate whether the data that is available for past periods can be projected into thefuture with any reasonable degree of reliability.

Profit achieved

While profit has declined in the period 20X4-20X6, a profit has been achieved by a newcompany in a difficult market. The profit before tax as a percentage of revenue is:

20X4 10%20X5 8.4%20X6 7.9%

Additional information to determine the return on assets would be useful although this mightbe affected according to whether all the hotels are all still owned or whether some will now beleased. This in turn will depend on whether the leases are finance leases or off-balance sheetoperating leases.

The decline in occupancy rates is of concern. In particular, hotels have high fixed costs and thushigh operating gearing. As a result any decline in sales volumes is likely to affect profitdisproportionately, through the leveraging effect.

As already noted, the increases in prices (and more particularly the increase in prices relative tocompetition) may have had a significant effect on occupancy rates. More market research isneeded, however, to establish the extent to which the decline in utilisation has arisen as aresult of price changes.



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Further information on prices and sales volumes would include:

Individual bedroom sales prices are provided in the data but this only 'generates about50% of total revenue'. We need to know whether HH's prices for other facilities haverisen pro rata and how competitors have changed their prices for other facilities.

The data only provides average prices, but we are told that in the business sector 'pricestend to be higher'. We therefore need to know not just the average price but how thepricing structure may have changed for HH and its competitors. Market segmentationwould allow HH to take advantage of price discrimination (e.g. business markets v privatemarkets; winter v summer pricing).

(b) (i) Analysing the existing sustainable competitive advantage

A sustainable competitive advantage can be achieved where there is the ability to outperformdirect competitors in the long term. In this context, the term 'competitors' is likely to bedefined in terms of the boutique or 5-star sector, rather than the industry generally given theniche nature of the market.

The 'advantage' element can take a number of forms including cost advantage anddifferentiation. The ways these are achieved may be different in different industries. In terms ofHH, it appears to be a differentiator on the basis of the services and the facilities it provides.

A sustainable competitive advantage is created where the unique resources and corecompetencies attained by a company are difficult for competitors to obtain or copy.Competitors are thus unable to compete away any strategic advantage and thereby reduceprofit. This can be achieved by developing critical success factors (CSFs) which can be definedas:

'Those components of strategy where the organisation must excel to outperform competition.These are underpinned by competencies that ensure this success.'

CSFs therefore concern, not only the resources of the firm, but also the competitiveenvironment in which it operates.

The ability to compete in a market depends upon the possession of threshold competences andthreshold resources, which are necessary to carry out the basic activities and processes to stayin business (e.g. to provide and service hotel bedrooms). These will be possessed by all industryparticipants and do not give a competitive advantage.

Unique resources are those that can give a firm a sustainable competitive advantage (SCA) overits competitors, enabling it to meet its CSFs.

Thus, core competences are the critical activities and processes that enable the firm to meetCSFs and therefore achieve SCA.

Given that HH is a newcomer to the industry it is difficult to achieve an immediate competitiveadvantage. However, HH does appear to have successfully penetrated the industry and it isachieving profits. Moreover, the review carried out appears to place HH towards the top of theindustry in terms of reputation.

A possible source of competitive advantage is, however, that HH is a niche player in the hotelsmarket as it only operates in the 5-star boutique sector. As a result, its brand name canbecome more readily associated with quality than large hotel operators which tend to operateacross the spectrum of hotel sizes and quality.

There is however a downside:

If demand in the long term is strong in the boutique sector, then there appears to be fewbarriers to entry into this market to prevent new entrants eroding the competitiveadvantage by copying the concept. This is indicated by the fact that some recent newentrants to the boutique sector are 'beginning to offer similar standards at prices that arelower than HH's'.

Business strategy


The total industry size of the boutique 5-star sector is constrained as, in the at least,there is only a limited capacity at the top end of the market for people being willing tospend CU150 per room per night.

There do not appear to be particular service skills which could be regarded as corecompetences that could not be copied by competitors in providing a similar service.

(b) (ii) Proposal 1 – Outsourcing of the restaurants

Outsourcing involves buying in a service from external suppliers, rather than trying to createthe service internally.

The key question is whether HH has a core competence in operating hotel restaurants, perhapscompared to the best restaurants (see activity benchmarking above).

The question here is not whether the HH's restaurants are a core activity. They clearly are.The question is whether they are a core competence.

The survey by Zodiac would imply that high standards are being attained by HH in other areasof its activity but not, for its sector of the market, in the restaurants. This would imply thatrestaurants are not a core competence.

Prior to deciding whether to outsource restaurants, however, a number of factors need to beconsidered by HH:

Can restaurants improve in future to become a core competence internally e.g. with moreresources, better management, organisational learning?

By outsourcing, HH management loses direct control over a key area of activity.Contractual control would therefore be needed as a replacement for managerial controlin order to maintain and improve quality.

Outsourcing companies would need to supply a similar, or improved, service and stillmake a profit. Their core competencies in this activity therefore need to be significantlygreater than those of HH.

The benefits of any outsourcing scheme will depend upon the terms of the contract thatcan be negotiated. This will be a function, not just of the level of service that theoutsourcing company can provide, but also the amount the outsourcing company is willingto pay to use the hotel facilities.

It will also be necessary to consider the financial risk of the contract terms (e.g. themixture of fixed fee and revenue dependent fee). Similarly a service level agreement willbe needed in the contract as the wider strategic requirements of the hotels (e.g. breakfast,long opening hours) may be contrary to the interests of the outsourcing company.

With the financial support of the parent company, International Leisure Ltd, the operatingstrategy has been backed by a financial strategy to expand the asset base of hotel propertiesthrough direct purchase.

The acquisition of International Leisure Ltd, by Zodiac Inc, has meant a change in the financialresources available to HH. In this respect, the new financial strategy may require changes inelements of the business strategy.

In terms of core competences, however, the management of HH is more likely to possess corecompetences in hotel management than in property management. In this respect, it cancontinue to expand the business by expanding, and profiting from, the number of hotels beingoperated in the chain, even though the number of hotels owned may actually be reduced.

The terms of sale and manage-back are that hotels will be sold in return for a long termcontract to manage the hotels on behalf of the new owners and in return for a fee based onperformance achieved. The funds liberated by sale could be used to provide additional facilitiesin existing hotels and to establish new hotels under a similar management contact.



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Potential issues include:

The benefits of the scheme are dependent of how favourable the terms are that can benegotiated.

Due diligence will be necessary to establish to both parties the likely future profits thatcan be achieved from each hotel.

At the end of the sale and manage-back contract, HH is in a much less favourablenegotiating position as it will have lost control of its major assets and may need tocompetitively tender to manage-back the hotels it previously owned.

Alternatives such as sale and lease-back may be preferable as they would give morecontrol over the benefits generated from operating the hotels.

20 Trend Electricals (Sample paper)

General comments

This question examines the scenario where a company initially manufactured low cost electric lighting but,as it grew, it expanded into a wide product range of household electrical appliances. After a period ofinternationalising production, the company changed its centralised structure into a decentralised structurebut incurred problems in the application of the new control systems.

The topics covered by the question include: the inter-relationship between corporate strategy andorganisational structure. It also covers issues of centralisation, performance measurement, and changemanagement.

(a) Introduction

TE is pursuing a strategy of overall cost leadership according to Porter's generic strategy approach.That is, the production of basic, no frills products, aimed to be delivered to the market at a lowercost than competitors. The internationalisation of production therefore needs to be seen in thecontext of this central strategy.

Benefits of internationalising production

The movement of manufacturing capacity overseas has enabled lower manufacturing costs to beachieved. This may have included lower labour costs but also other internal costs. Cost savingsmay also have arisen through increased operating efficiency.

It should be noted that cost savings may arise not just within the organisation, but alsothroughout the supply chain. Thus, external costs such as materials, power and otheroverheads may also be reduced by shifting operations to a different geographical market.

Access to specialist knowledge and labour because a particular country/economy specialises inproduction of a particular product.

There may have been a capital gain from the sale of the old site (e.g. on land) if the cost of thenew site is lower.

The new sites are larger than the existing plants. (In 2002 average production, at sales value,generated in Bangladesh is CU500m per plant. The overseas plants generate average productionof CU1,000m.) This may generate greater economies of scale. However, it might be that thereis no necessary causal link here with international diversification in that manufacturing capacitycould have been moved within Bangladesh to larger sites.

There are significant markets for TE in SE Asia and South America. Manufacturing locally maymake supply to customers more reliable and at lower cost.

To the extent that revenues from SE Asia and South America are matched against costsincurred in the same currency, then exchange rate risk is reduced through natural hedging.(This may not be the case, however, if manufacturing occurs in one country in the region andrevenues occur in another neighbouring country, where the macro economies are notcorrelated.)

Business strategy


Problems of internationalising production

Currency risk may be an issue to the extent that matching of currencies in terms of revenues andcosts is not improved by the relocation of manufacturing.

Relocating supply has transitional problems of redundancy and other realisation costs inBangladesh. There are also start-up costs in the overseas plants.

To the extent that there are interdependencies between production plants then thegeographical remoteness of the overseas plants may reduce this synergy.

There may have been poor publicity from Bangladesh closures, which could have affectedreputation and employee morale.

In South America the value of production, at CU1 billion, was twice that of sales in the regionin 2002. As a consequence, the excess production of CU500 million would need to betransported to other markets in Europe where sales exceeded production. Due to sales growthin South America this problem had been reduced by 2006 with the excess productiondecreasing to only CU300million, but nevertheless this is a significant issue in terms of risk (e.g.exchange rates) and transport costs.

In SE Asia, production matched sales in 2002, but by 2006 sales were CU250 million in excessof production. There is thus a mismatch between production and sales (but in the oppositedirection to South America). If the SE Asia site is at full capacity then this relocation ofmanufacturing capacity only partially solved the problem of matching local sales with localproduction. The shortfall causes additional transport costs and seems likely to be supplied bySouth America (where there is excess product), assuming the appropriate types of goods arebeing manufactured there to match demand in SE Asia.

Domestic inflation or exchange rate changes may change any cost advantage at home orabroad.

The overseas operations may be harder to control due to geographic distance.

Possible exposure to political risk due to more unstable governments or economies. There aredifferent regulations regarding HRM, tax regimes health and safety.

There may be national cultural differences between Bangladesh and the new sites which mayhave implications for performance, control and motivation.

Additional information

Information regarding the sourcing of raw materials is important. This will affect exchange raterisk but also transport costs and risks relating to supply chains.

Costs of production and transport at each site are important to decide where marginalproduction is most efficient

Information on future likely sales in each market is needed, as the figures given are short term,whereas the decision to locate abroad is long term.

The data given only relates to total revenue, but the demand for each type of goods needs tomatch its supply. For example, there may be an excess supply of DVDs in SE Asia but ashortage of PCs. An analysis of production and sales for each type of product is thereforeneeded.



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(b) Memorandum

To The TE BoardFrom A. CandidateDate XX/XX/XXXXSubject TE – The Impact of Organisational Change

The advantages and disadvantages of centralisation and decentralisation to TE

Centralisation/decentralisation refers to how much authority/decision-making ability is diffusedthroughout the organisation.

In centralised structures the upper levels, such as the group board, retain authority to make keystrategic decisions. In TE prior to 2002, this was shown as it had a centralised organisationalstructure with the group head office maintaining close operational and financial control overoperating divisions.

In decentralised structures the ability to make decisions (i.e. commit people, money andresources) is passed down to lower levels of the hierarchy such as divisions. From 2004 TE movedtowards this organisational form as each subsidiary became a strategic business unit (SBU) to beoperated, reasonably autonomously, as an investment centre.

Factors affecting the degree of centralisation in TE

Strategy: A key factor is that the structure should be appropriate to the strategy. Whilst TE hasadopted a low cost strategy, there are many other aspects to the corporate strategy and theenvironment of the company that should be considered in adopting an appropriate organisationalstructure.

Management style: This was initially authoritarian before 2004 with tight budgetary controls. Thislends itself to the centralised structure in place in this period, which focuses control at the top of theorganisation.

Size of organisation: As size increases, decentralisation tends to increase. In the case of TE,however, it had grown from modest beginnings to a large organisation while appearing to maintainits centralised structure.

Extent of activity diversification: The more diversified, the more the tendency towardsdecentralisation. All TE's products are in a similar market of consumer electrical goods, which wouldtend towards enabling centralisation, given the degree of similarity.

A counter argument would be, however, that these markets are in fact different (e.g. PCs andcookers) with different consumer pressures and different competitors. They may also be regarded asbeing in different industries (as opposed to different markets) which require different productionskills.

Effectiveness of communication: Centralisation will not work if information is notcommunicated downwards. With TE, the major means of achieving this communication appears tobe through the budgetary system.

Ability of management: The more competent the divisional managers are, the betterdecentralisation tends to work. However, in the case of TE the managers may have been competentwithin the old regime of implementing a strategy dictated by head office, but this does not mean theycan devise appropriate strategies

Speed of technological advancement: Lower managers likely to be more familiar with changingtechnology, therefore decentralisation can mean more informed and quicker decision-making.

Geographical diversification: If locations are spread then decentralisation is normally moreappropriate, as knowledge of local conditions becomes more important and direct control from thecentre becomes more difficult. In the case of TE, however, production has become more dispersedsince 1995 thus centralisation has become more difficult, with more remote communications, arange of cultures and reduced knowledge of local manufacturing conditions. In addition, TE's marketsare world-wide and overseas markets are growing.

Business strategy


Advantages of decentralisation

Senior management of TE are more free to concentrate on group-wide strategy as day to daydecisions are delegated to lower levels of management.

Motivation for lower managers arises from increased delegation/responsibility.

Local expertise of managers improves decisions based on local knowledge.

There are quicker and more effective responses to local conditions.

Career paths for managers/employees are enhanced by greater early responsibility and greaterexposure to autonomous decision making in local markets.

Disadvantages of decentralisation

It may be more difficult to co-ordinate the TE organisation, as many managers are makingseparate operating and marketing decisions rather then just a few centralised decisions.

Incongruent decisions i.e. different levels of management may pursue different objectives.This may be a problem for TE where they are selling different products into the same marketor even the same customer.

Loss of control by senior management whose experience in strategic decision making is nolonger directly applied.

Complicated structures may be necessary across the globe to implement, enforce and controloperating decisions.

Problems with transfer prices (see below).

Evaluating divisional performance becomes difficult (see below).

Duplication of some roles (e.g. administration).

In pursuing a low cost strategy there may be significant economies of scale from centralised andcollective activity (e.g. in sourcing some common raw materials in bulk from suppliers) andeconomies of scope (e.g. in common distribution systems of electrical goods from different divisionsto similar regions or even the same customer). These may be lost with decentralisation.

Measuring the financial and strategic performance of divisions

Pre 2004

Hopwood considered the way in which budgetary systems are used to assess divisions and theirmanagers. Three distinct styles are identified:

Budget constrained style: The primary emphasis is on a manager's ability to meet the budget inthe short term.

Profit conscious style: Performance is measured in terms of overall ability to improve long-termeffectiveness and profitability of an area of responsibility.

Non-accounting style: Performance is measured in ways other than financial budgets.

Pre 2004, the company appeared to have adopted a budget constrained style, whereas after 2004 itseemed to change to something like a profit conscious style.

The effects of the two styles according to Hopwood are as follows

Budget constrained Profit conscious

Involvement with costs High Medium

Job related tension High Medium

Manipulation of data Significant Some

Relationships with superiors Poor Reasonable



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Contingency theory however argues that the budgetary style should be appropriate to thecircumstances of the company. Thus, in a dynamic market such as consumer electrics a budgetconscious style may be inappropriate as the underlying assumptions of the budget may be renderedinvalid by rapid market and technology changes. This may lead to tensions.

Thus appraisal according to strict budgets may have seemed appropriate to TE initially, due to thelow cost strategy. However, this has become less valid due to rapid changes in markets andtechnology and had been causing tension. As such, by 2004 this approach was no longer working forTE and was likely to be causing an increase in costs, albeit indirectly.

Post 2004

After 2004 divisions were measured on the basis of a mixture of financial measures:

(i) Profit after interest charges(ii) Revenue growth and(iii) Average production cost per unit of output.

The use of profit after interest charges is consistent with the adoption of divisions as investmentcentres as it requires divisional managers to take investment decisions but charges them for capitalused.

However, one needs to be careful to charge interest on a comparable basis for externally raisedfinance and for head office finance, as one is an actual interest charge while the other is an imputedcharge.

Profit after interest charges

This suffers many of the same problems as accounting profit:

Valuing assets at historic cost or current value Depreciation method may be arbitrary and based on historic cost Which assets to include in capital employed There may be manipulation of accounting policies The interest rate used is difficult to determine

Revenue growth

Over-emphasis on revenue growth may lead to revenue maximisation rather than profitmaximisation (although the other two criteria are a control on this).

It may however give an indication that market share is significant and that growth and size may beimportant in the long run to gain scale economies.

Average production cost per unit of output

In a low cost strategy, an emphasis on costs may be appropriate. However, where fixed costs arehigh, this measure is sensitive to changes in volume of output as fixed costs per unit are likely to rise.

Evaluation

Unfortunately, use of these measures immediately post 2004 appears to have led the divisions tofocus too much on the short term, as evidenced by the lack of investment in fixed assets and R&D.This is likely to have an impact on TE's longer-term ability to sustain its competitive advantage andmay be undesirable. TE needs to consider its strategic performance as well as its financialperformance and as a result strategic performance measures also need to be considered.

Measures of strategic performance

All the measures of performance are financial measures. A balanced scorecard approach, forinstance, may be appropriate to measure other attributes which capture wider strategicperformance. These include:

– Customer perspective– Innovation and learning perspective– Internal business perspective– Financial perspective

Business strategy


In the same vein, the financial measures of performance are all short term, thus the concernthat arose about lack of investment and short term decision making may have as much to dowith the methods of performance measurement as the cost of capital or the central rechargingmechanism. Measuring performance over a longer period would better measure strategicperformance.

There appears to be little evidence of trading between operating divisions so transfer pricing isnot a major issue in performance measurement but organisational strategy may be an issue ifinter divisional trading becomes significant.

Managing the change process in 2004

The change was both fundamental and rapid.

It was not only a change in organisational structure in TE but also a change in culture from one ofcentralised management to one of divisional autonomy.

It would seem that many of the problems arose, not from the nature of the changes, but from themanner and speed of their implementation.

More specifically:

The management personnel in place appeared unable to fulfil their new roles and many left orwere removed in the following year. This may have been because they were the wrong peoplefor the new roles or it could have been a lack of investment in education and training for thenew roles.

It appears that the changes were decided at board level and thus it is not clear that there wasmuch participation in the decisions from the divisional heads who would be implementing thenew policy.

The changes could have been introduced piecemeal to reduce the transitional problems suchthat autonomy was transferred progressively rather than suddenly.

The reversal in 2005 of some early decisions appeared to indicate that early errors were madeand the behavioural impacts of the new system were not fully anticipated.

Pricing head office services

The initial pricing of head office services appears to have been too high as few divisions chose topurchase them and they also chose to raise finance outside the group.

The divisions were only being charged at full cost (i.e. no profit) and yet they appeared to beacquiring the same services from outside providers (who were presumably making some profit) atlower cost.

This may be indicative that head office had been operating inefficiently under the old regime by beingable to recover all its costs by internal charge, as the divisions then had no choice.

As a result, the pricing seemed excessive in market terms.

An alternative explanation might be behavioural in that divisional heads wanted reduced dependenceon the head office, and thus they may have wanted to reduce links by acquiring services from outsidethe group.

The move to variable cost pricing appears to have swung the pendulum in the opposite directionwith excessive use of head office services using the low variable cost pricing basis.

This could have unfavourable long-term effects as it may lead to:

Unwarranted over-investment due to an excessively low cost of capital. Excessive use of services where the cost to the group exceeds the benefit to the divisions.

Acquiring head office services is optional, thus it should not distort divisional performance adversely(as divisional managers would purchase from outside the group if the head office attempts to chargeexcessively.) It may, however, in the longer term distort performance measures favourably asservices and finance are being offered at below market rates in 2005 and after.



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Summary

The change in structure for TE is not a change in strategy of itself, but a change in the means forengaging in a strategy. Nevertheless, it involves a change in corporate culture, incentives,performance measurement and ultimately, in all probability, a change in the strategy of many SBUs.

The results of such changes are unlikely to emerge in full within a few years and thus a longer termassessment of the changes may be necessary. Even then, one does not have a 'counter factual' (i.e.what would have happened if the old structure had been maintained for comparison). Indicationswere, however, that there would have been increasing problems in continuing to pursue theprevious centralised policy.

Business strategy


Answers to Interactive questions

Answer to Interactive question 1

Ford

Forced: They are reacting to external competitive and environmental changes and the results will be asignificant change in the way Ford is structured and its overall size.

Tesco

Planned: It is proactive, aimed at seizing an opportunity, and given the size of the US and Chinese markets itwill change the character of Tesco in terms of size but also its global profile.


Reframing

The major reframing is the term 'commercial business' which implies making profits as the primary goal, or atleast providing as good a service as competitors in a de-regulated environment.

The ensuing strong emphasis on profits and termination of loss-making activities underlines this.

Management needs to consider how to make this a goal that staff will wish to support. In fact, Allan Leightonhad hoped to issue shares to all Post Office staff to give them a stake in profits but was overruled by the UKTreasury. This was taken as a set-back for him although he is hoping to offer staff 'phantom shares', in effectnon-tradeable rights to shares of profits.

Restructuring

None obviously stated although references to automated sorting suggest there are changes here. In fact, therehas been major restructuring with closures of thousand of network post offices, integration of services, closureof entire administrative and sorting offices.

Revitalising

'Competing successfully in an open mail market is going to be even more difficult. We've a mountain to climband we've only reached the base camp.'

Renewal

The statements are clearly inclusive and emphasise gaining staff commitment. There are new financial controlsystems and new reward structures.


Driving forces for change: Technological developments raising customer expectation, irritated customers,new innovative staff member.

Restraining forces: Partners' habits and possible fear of the unknown, possible concerns overexpense.

Eva should strengthen the driving forces by stressing to the partners the level of clients' concerns and gain thesupport of the secretaries in encouraging the partners to consider the system.

The restraining forces should be weakened by producing costings, and explaining clearly how the system wouldwork and what benefits would arise.

Documents

Chap - 14 Strategies for Change