Strategic International Business Management : Tesco Future International Expansion Strategy

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Introduction

Tesco PLC is a British multinational retailer involved in general merchandise and grocery. It is ranked no 2 in the top 250 global retailers 2012 ranking by retail revenue of USD $101.3B as mentioned in the Deloitte’s Global Powers of Retailing 2014 report. The growth to become one of the top retailers in the world has been aggressive and began with acquisitions from 1957. With strong experience in the UK home base market, Tesco’s venture into the overseas market was inevitable with the first venture to be in Hungary in 1994. To date it has presence in 12 markets including the UK Market. Based on 2014 Annual report Tesco currently has 3378 stores in the UK, 2417 stores in Asia and 1510 stores in Europe which totals to 7305 stores.

Entering into a new market is a challenging endeavor, however with the right strategy and the ability to react accordingly can make a difference on success or failure. Tesco is not new to the exiting strategy of where it has left the Taiwanese market in 2005 and recently the American market in 2013 by selling its business to existing rivals. With lessons learned from the American market, Tesco should consider venturing into emerging markets where potential for growth is high and with low competitors.

Tesco’s current strategic priorities are (Tesco Plc, 2014)

  • Continuing to invest in strong UK Business
  • Establishing multichannel leadership
  • Pursuing disciplined international growth

In Pursuit of Expansion

In pursuit of expansion, especially internationally; proper research, resources and good partnerships is necessary to ensure continuous success in the business. Tesco’s established strategy of “pursuing disciplined international growth” is used as a guideline for selecting the next potential country for expansion.

Currently Tesco is based in Asia (China, India, Malaysia, Thailand & South Korea), Europe (Czech Republic, Hungary, Turkey, Poland & Slovakia) and UK (Ireland & England). (Tesco Plc, 2014)

In selecting the next country for expansion, an evaluation of the countries prospect and stability is required. The PESTEL framework will be used to review the selected country to understand and ensure its suitability for expansion.

Emerging markets would be the ideal venture countries to be considered for expansion opportunity. The BRICS group and the Next Eleven (N11) group is considered for expansion potential. The BRICS group is the acronym for Brazil, Russia, India, China and South Africa. Wikipedia article on BRICS classifies the countries as fast growing economies with significant influence on regional and global affairs. (Wikipedia Contributors, 2014). It’s to note that Tesco has already expanded into the BRICS with efforts in India and China.

The Next Eleven as Goldman and Sachs have grouped them consists of Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. (Goldman Sachs Global Economics Group, 2007). It’s to note that Tesco has operations in Korea and Turkey currently. Upon further evaluation of the countries of N11 and BRICS, suitable country for expansion based on current economic and political environment would be Vietnam. Vietnam has similar characteristics politically and culturally to China and Thailand where Tesco has already been operating for a number of years. Forbes ranks Vietnam at 113 (Forbes, 2013) of their Best countries for business and the Economy Rankings (Doing Business, 2013) puts Vietnam at 99. However it is to note that the same Economy rankings put China at 96 and India 134 where Tesco is operating.

Vietnam in overview

Vietnam is a growing market in the South East Asia with a population of 93 million estimated for 2014 making it the 15th most populous country in the world. The “Doi Moi” policy implementation since 1986 which is the government’s initiative to improve the economic and political reforms has allowed for increase in foreign inflow of investments (CIA, 2013). Joining the World Trade Organization (WTO) in 2007 allowed the economy of Vietnam to improve with access to funds and trade countries. Vietnam has 659 supermarkets based on 2012 statistics from General Statistics office of Vietnam and this figure is poised to grow reviewing previous year numbers.

PESTEL framework

Political

Politically Vietnam is a Communist country with policies concerning government being strictly controlled.

Review of the political situation through the SWOT analysis tool

Helpful Harmful
Internal Strength Weakness
·      Commitment of the Communist Party government to market reforms. (Doi Moi Reform). 

·      Increase in trade & relations with US (lifting of sanctions in 2000’s) and the WTO(2007).

 ·      Corruption 

·      Possible public unrest of single government rule.
External Opportunities Threats
·      Recognition of the corruption and acts against it by the ruling government. 

·      Setting up of constitution for comments by public and legislators

 ·      Relations with china deteriorated due to territory dispute. 

 

Figure 1 : SWOT – Vietnam Political Overview

Based on above SWOT review, it can be concluded that the government’s effort is visible in ensuring economy prosperity to continue. However, change towards democracy can be damaging if the general public decides to go against the government. It can be deduced from the CIA Factbook that with the current government’s continuous efforts, chances for an uprising is unlikely for the next decade as policies implemented allows general public’s involvement.

Economy

Below table is the macro economy outlook of Vietnam in overall (CIA, 2013)

 

Year GDP 

(USD Billion)

 GDP Growth Rate (%) Per Capita Income (PCI) (USD)
2011 323.8 6.2 3700
2012 340.8 5.2 3800
2013 358.9 5.3 4000

Figure 2: Vietnam economy outlook

 

The 2013 household consumption is at 68.9% of the GDP based on CIA Factbook. This shows that there is potential for retail market development. It is to note that the labor force of this country is 52.93million of which 48% is in the agriculture and the rest 52% is in service (31%) and industry (21%) with a total unemployment rate at 1.3% (CIA, 2013).

It is to note that even though the labor market ratio is leaning towards the agriculture, however based on the GDP ratio, industry contribution to GDP is 40%, service with 38% and the remainder 22% goes to agriculture sector. With the above figures it can be summed up that 52% of the labor force actually generates 78% of the GDP which is significant to the economy growth.

The inflation rate for 2013 is at 6.8%. With the increase in PCI, the ability for consumers to spend increases ideally allowing spending to continue. Household income or consumption by share for lowest is at 3.2% for the lower 10% and 30.2% for the highest 10% (2008).

Infrastructure of the country is good with roads, railway, inland water ways, ports and airports supporting the economy. For Tesco this would assist the distribution networks.

Social

Vietnam is a country rich with culture and history. Buddhists make up the majority of the population with 37.4% percent of the population (Stewart, et al., 2012). Vietnam remains a traditional, conservative society, particularly the senior generation which fought for the country. Due to wars restraint and moderation, their overview of the consumer culture is still cautious. However the younger generation is opening up to the consumer culture by adapting the future trends. All the previous incursions indefinitely left a mark with the “Chinese bringing Buddhism, Taoism and the principals of Confucianism: Community above individual, a respect for education and family” (Stewart, et al., 2012).

Vietnamese is the official language of Vietnam. However with the advent of the west, currently many adapt English as a second language. Literacy rate is at 90.3% in 2008 (Wikipedia Contributors, 2014).

Technology

The communication and internet infrastructure in Vietnam is conducive to allow for exploring the online retail ability. Currently Vietnam has 23.38 million users online which ranks to be 17th in the world (CIA, 2013). Tesco’s online business would be able to capitalize this available resource to create more revenue.

Environment

Vietnam is a country with a coastline of 3,444km and densely forested with 40% of the lands covered with mountains. Northern Vietnam has a humid subtropical climate, southern regions are tropical savanna climate with high humidity and distinct wet and dry season. (Wikipedia Contributors, 2014).

Legal

Following the “Doi Moi” policy, Vietnam passed its constitution in 1992 to strengthen its legal institutions and allow for communist party led economic development. The legal framework takes into account the international requirements and the agreements to ensure integration is met. Several laws have been enacted which includes but not limited to civil, labor, enterprises, investment, tax administration, corporate income tax, VAT, land, commercial and etc.

The judicial systems are in place to ensure the legal system is governed fairly.

Five Forces Framework

Porters five forces analysis is used to analyze the external environments and understand the strength and weakness of the potential Vietnamese competitive position

Figure 3: Porters Five Forces Framework (Hitt, et al., 2011)

Competitive Rivalry – Medium

The competitors are international and local. Nielsen Report lists the international companies as Metro (Germany), Lotte (Korea), Giant (Malaysia), Maximart (Taiwan), Big C (Thailand)

Local companies that operate supermarkets are Citimart, Hiway, Satramart and a handful others. The local companies operate most of the minimart and convenience stores.

Opportunity is available for Tesco to introduce its brand of shopping with great service, price/value and with its range and quality. The online shopping is also an opportunity for Tesco to explore further.

Power of Suppliers – Low

Tesco’s advantage over the smaller marts is its ability for being a one stop location for all daily needs. Shoppers have a tendency to spend at larger shops and with that suppliers have the ability and access to a bigger market. Ability to purchase in bulk allows Tesco to dictate the price and disagreements leave suppliers a loss of a big customer. Tesco’s own in house brands and ability to source internationally when necessary is good for consumers.

Power of Buyers – High

The buyers are in control with the choice of available retailers. Tesco needs to be conscious of customers’ requirements. Based on Vietnam grocery report, consumers are tightening their belts and price is considered their main choice of selecting a product. The consumers are keen on promotions and bulk purchase (Nielsen, 2012). With low switching cost to the buyer, probability to choose Tesco is high.

Threat of New Competitors – Low

Capital Investment in starting up a supermarket is high, hence the probability for entry and competition is low. However, renowned competitors such as Walmart, Carrefour, Metro and other external competitor entry are possible with the government’s open door policy.

Substitute Products and Services – Low

Substitute options in the grocery and retail industry is high and with low or no cost of switching to the customers. Tesco’s bulk purchasing allows for low costs offers and consumers switching over can be controlled. Introducing loyalty cards such as Tesco’s Clubcard helps retain customers and reduce switching.

Tesco’s SWOT Analysis

Helpful Harmful
Internal Strength Weakness
·      Tesco Online 

·      Brand Value

·      Leadership

 ·      Reliance on UK market 

 
External Opportunities Threats
·      Tesco Online worldwide 

·      Diversification of offerings

·      International

 ·      Price war 

·      Competitors (Walmart, Carrefour, Metro)

·      Rising operations costs

 

Figure 4 : Tesco SWOT

Strength

Tesco’s brand being world known is an advantage that can be taken to further improve services and introduce more products to gain consumers’ confidence in the new market. Tesco’s leadership and vision to continuously improve products range/price and services for customers is a great trait. The leadership is continuously looking to increasing market share and venture into new markets based on the Tesco’s 2014 annual report.

Weakness

Tesco relies heavily on the UK market with 68% of the group revenue coming from it. Although this can be seen as a strong point, however with entry by Walmart by taking over a local competitor can be detrimental to future growth.

Opportunities

Tesco’s international expansion efforts into Asia is an opportunity. With developing economies and stability in many Asian regions, Tesco can benefit greatly if the expansion is carried out in a controlled and disciplined manner.

Threats

Potential for price war between competitors has always been in existence. Continuous price wars can reduce margins with the ever increasing costs in the operations. Constant vigilance and review of the price is required to ensure profitability is maintained.

Tesco’s Market Entry options and Key Issues

Due to exit from the North American market, Tesco management has set group wide limit to capital expenditure on expansion and upgrading to £ 2.5billion for the next 3 financial years. The Chairman indicated that there is a need to create value internationally by leveraging skills and scale in relatively rapidly growing economies with less developed modern retail sectors. Where the rate of economic growth coupled with switching to modern retail outlets can generate attractive returns. These requirements can be met by Vietnam if executed in retrospect to Chinese and Indian investment methods where a strategic alliance was made with existing local partner that were experienced in local culture and regulations.

Johnson et al, lists four market entry modes that consists of

  1. Exporting
  2. Joint Ventures and Alliance
  3. Licensing
  4. Foreign Direct Investment (FDI)

The above options each comes with its advantages and disadvantages. With consideration of Tesco’s set target of £ 2.5billion expansion budget for next three years, the FDI option would be opted out as it involves high capital investment. At this juncture, after the exit from North America, a cautious approach is required. However (Vermeulen, 2001) argues that the best option for expansion would be to have a Greenfield mindset. He based this assumption upon research of 825 cases of international expansion success and failures.

A joint venture with a local retailer is another option for market entry. Some Asian governments require foreign based business seeking opportunities to have a joint venture prior to engaging in business. Portion of ownership would entirely depend on the government regulations and investors.

Strategic alliance can reduce the risk through sharing of costs. However on the downside, identifying the right partner and agreeing to conditions would be a tedious task as Tesco would need to review the partners’ capability prior to engaging in business. Building on Tesco’s experience in the region, it is believed that a joint venture approach has borne fruit before and hence it would be good to capitalize the previous experience and expand in a familiar manner.

Conclusion

To ensure success, Tesco’s best approach would be to identify and form a strategic alliance with a local Vietnamese partner. This would enable Tesco to obtain increased market size, higher return of investment and achieve economies of scale in a faster and disciplined manner. Since a well-known challenge on doing business in Vietnam is on dealing with the government related activities, engaging a local partner can partially resolve this challenge.

With the existence of good internet infrastructure and with Tesco’s online retail experience, it would be ideal for Tesco to capitalize the strategic gap that exists.

Access to over 50 million new potential consumers in a country that is similar size to UK would definitely increase Tesco’s revenue. With Tesco’s experience in similar markets, the issue of gaining competitive advantage would be relatively easy based on its years of experience in UK and Internationally.

Bibliography

CIA, 2013. Vietnam. [Online]
Available at: https://www.cia.gov/library/publications/the-world-factbook/index.html
[Accessed 27 July 2014].

Doing Business, 2013. Ranking of economies – Doing Business – World Bank Group. [Online]
Available at: http://www.doingbusiness.org/rankings
[Accessed 26 July 2014].

Forbes, 2013. Best Countries for Business. [Online]
Available at: http://www.forbes.com/best-countries-for-business/list/#page:1_sort:0_direction:asc_search:
[Accessed 25 July 2014].

Goldman Sachs Global Economics Group, 2007. BRICs and Beyond, New York: Goldman Sachs.

Hitt, M. A., Ireland, E. D. & Hoskisson, R. E., 2011. Strategic Management : Competitiveness & Globalization. Mason: South Western Cengage Learning.

Johnson, G., Scholes, K. & Whittington, R., 2008. Exploring Corporate Strategy. Harlow: Prentice Hall.

Kalish, I. & Bearse, S., 2014. Global Powers of Retailing 2014 : Retail Beyond Begins, London: Deloitte.

Nielsen, 2012. Grocery Report Vietnam 2012. [Online]
Available at: http://www.nielsen.com/content/dam/nielsenglobal/vn/docs/Reports/2013/vietnam-grocery-report-2012
[Accessed 20 July 2014].

Statistics Doc Center, 2012. Number of Supermarkets as of December 31 annually by class and by province. [Online]
Available at: http://www.gso.gov.vn/default_en.aspx?tabid=472&idmid=3&ItemID=14618
[Accessed 27 July 2014].

Stewart, I., Atkinson, B., Dragicevich, P. & Ray, N., 2012. Vietnam. China: Lonely Planet.

Tesco Plc, 2014. Results & Presentations : Investor Event – Winning In The Era Of Retail. [Online]
Available at: http://www.tescoplc.com/files/pdf/events/Investor_event_Winning_in_the_new_era_of_retail_presentation.pdf
[Accessed 14 July 2014].

Tesco Plc, 2014. Results & Presentations : Preliminary Results 2013/14. [Online]
Available at: http://www.tescoplc.com/files/pdf/results/2014/prelim_2013-14_presentation.pdf
[Accessed 14 July 2014].

Tesco PLC, 2014. Tesco PLC. [Online]
Available at: http://www.tescoplc.com/
[Accessed 14 July 2014].

Vermeulen, F., 2001. Controlling International Expansion. Busines Strategy Review, pp. 29-36.

Viet Nam News, 2013. Retail Giants Target Vietnam. [Online]
Available at: http://vietnamnews.vn/economy/240901/retail-giants-target-viet-nam.html
[Accessed 17 July 2014].

Wikipedia Contributors, 2014. BRICS. [Online]
Available at: http://en.wikipedia.org/wiki/BRICS
[Accessed 25 July 2014].

Wikipedia Contributors, 2014. Tesco. [Online]
Available at: http://en.wikipedia.org/wiki/Tesco
[Accessed 25 July 2014].

Wikipedia Contributors, 2014. Vietnam. [Online]
Available at: http://en.wikipedia.org/w/index.php?title=Vietnam&oldid=618764618
[Accessed 28 July 2014].

 
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Hull: 2017 City of Culture Marketing Communication Plan

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Hull: 2017 City of Culture Marketing Communication Plan

 

Name:

 

Course:

 

Lecturer:

 

Date:

 

Introduction

The city of Hull, known officially as the Kingston upon Hull is a unitary authority area under a city council and in the ceremonial east riding of Yorkshire county England. As per the 2001 UK census, Hull has a population of 243,589 persons. In addition to its rich history manifested in the various museums, Hull has quite a host of other attractive sceneries that make it one of the top destination areas in the UK. Based on the fact that the city of Hull was selected to be the 2017 UK City of Culture, it is a symbol of the far the city has come and how much further the city has to go not only as a cultural icon in the UK, but also as a tourist destination for the world. This essay is a marketing communication targeting adults from Hull and surrounding areas aged 24-45 who are have not engaged with arts and events in the past.

Situational analysis

Over the years, visitors to Hull have been mainly tourists either local or international. With the 2017 city of culture event, the expected visitors are art and culture lovers, investors, as well as tour enthusiasts who would want to use the event to tour the various sceneries the city has to offer. The expected visitor population is to range between 20 years old and 45 years. To maximize the attendance and the impact of the 2017 city of culture event, this plan seeks to target the non-culture enthusiastic population in and around Hull.

Since the time of William de la Pole the first mayor of the Kingston upon Hull, the city of hull has continuously prospered to be one of the admired destinations in the entire of UK (Griffiths 2006). After local government act of 1888 which set hull as a county borough, the city has set itself on a development course of itself in all dimensions. Politically, under the city council the city is politically stable, with some of the notable tourist’s destinations in the UK.

Culturally, Hull has a vibrant arts and culture that is marked by numerous museums that are of importance to the entire of UK. Based on the city’s firm theatrical culture, the heritage of Hull is littered with numerous notable actors and writers. This is one of the primary visitor attractions for the city. In addition, the city has remarkable architecture which is complimented by outstanding well manicured parks and squares (Mooney 2004). For Hull visitors who are not art and culture enthusiasts, these are sure to make the experience memorable.

In addition to the rich culture are museums which are sure to appeal to both art and culture lovers and no lovers. Some of these museums include the deep, the street life museum of transport, Ferens art gallery, spurn lightship, and the public aquarium among others. Hull is also well endowed with theatres among them the Hull New Theatre, and the Hull Truck Theatre among others. To be mentioned in the same breath with theatres is poetry. Hull is the home of some of the globally renowned poets among them Philip Larkin who wrote some of his major works while in Hull (McKinlay & O’Connor 2007).

According to research finding, both local and foreign potential visitors to the city of hull have indicated that, if the city of Hull wants to attract more and continuous visitors, then authentic and effective holiday and tour destinations should be availed. This is one of the areas that the city of Hull prospects to achieve in the future even as preparations for the 2017 City of Culture event go on.

Objectives

The communication plan is required for the purpose of promoting the city of Hull for the 2017 city of culture event. The specific objectives of this strategy are to;

  1. Foster community sprit – develop a Hull city community that will be the brand and the value for the city.
  2. Harness the various resources required to prepare for the 2017 City of Culture event. To this effect, the strategy plan is expected to be the rallying call.
  3. Awaken the city of Hull and the various stakeholders to the realization of the opportunities available by hosting the City of Culture annual event.
  4. Put the spotlight on hull city for culture enthusiasts as well as other interested visitors
  5. Identify the various critical areas of concern and how to improve them.
  6. Provide solutions on how to target a specific audience and attract them to visit Hull during the event.

Strategy

To effectively reach and appeal the target population to attend the 2017 City of Culture event, as well as realize the objectives set out in this plan, an effective and comprehensive strategy is to be adopted (Baker 2007). This strategy will involve categorizing the various target populations, namely art and culture lover and those that would want to visit the city but not primarily for the culture events.

Based on data collected through the questionnaire used to collect information from potential visitors, the number of these two groups is distributed evenly therefore, each segment makes a critical target for the events (Anthony 2008).

Different but similar strategies are to be used to reach the two established segments. While the culture loving will be reached through adverts and promotions on what the culture event and Hull city has to offer in culture, the culture non-enthusiasts population will be targeted mainly on tour destination strategies (Baker 2007). This will include the various sceneries, museums, and lifestyle for example the nature of night life that Hull City has to offer.

The communication plan target persons between the age of 24 and 45 who are interested in sight seeing as well as experience the local culture of the City of Hull. To reach this audience, the plan will include promotional material locally, online, and through commercial media. The content to be carried in these promotions is on the various authentic sites in Hull, and the unique culture the city has to offer. In addition to those on offer, the city of hull will continue to review the best prospects it has to offer to potential future visitors. This reviewing is to be done with the objective of positioning Hull city as one of the top choice destinations for culture and sightseeing in the UK.

Time and financial budget

Even though the preparations for the 2017 City of Culture event began as soon as the city was selected to be the host, the official implementation of this strategy is April 2015. The strategies will continue up to the D-day of the event. Given the metrics and the time involved in the strategy, it is estimated that a total of £350,000 will be required. Revisions on both the time and financial budgets are to be done as the implementation proceeds.

Tactic

The communication plan is to be overseen by the city council of Hull through a special task form. The task force is to be made up of various stakeholder of the City of Hull including business owners, art and culture personalities, resident representatives, and representatives of the UK government as well as any other relevant and crucial stakeholder (Baker 2007). The taskforce is to be made up of persons who are resourceful and committed to the objective of the communication plan as well as having the desire to organize a fruitful 2017 City of Culture event that will not only place the City of hull on the cultural map, but also the holiday and tourists destination for both UK national and foreigners.

The task force will be responsible for the design of PR elements for both above-the-line as well as below-the-line promotion. In addition, it is the responsibility of the task force to ensure that the right channels are established for the goal of reaching and informing the 24-45 years old target population that has not been involved in art and culture before. Notably, given this populations disinterests in art and culture, they will not be found on art and culture oriented platform like art and culture forums etc. t ensure that the various task in implementing the strategy are effectively carried out, the taskforce will need to hire or employ relevant professional

It is also the responsibility of the taskforce to manage this communication plan budget.

Action Plan

Through the services of qualified and experienced professionals for each of the respective area, the communication plan is to be implemented through the electronic media, the print media, and establishment of dedicated social media channels (Baker 2007).

Electronic media which is a major communication platform because it is sure to reach almost everyone, especially Television ads, will be one of the primary strategies used. TV ads are to be created by professional ads designers and presented to the various TV stations that target Hull and its surrounding. Additionally, there shall be radio ads that will be created for radio station that target the city of hull and its environs. In addition to placing ads in the electronic media, there is to be occasional public figure appearance in these platforms to talk about the 2017 city of culture event. This can be for example, the mayor being interviewed on primetime news, or even the leader of the taskforce answering questions related to the implementation process of this communication plan (Baker 2007).

Social media which is a major component in today’s society and especially for persons under the age of 30, which is part of the target population, will be used by having channels created for the various social media platforms popular in hull. Social media campaigns are to be driven and overseen by social media personnel. Some of the actions to be taken for social media include having groups that target the objective group in this campaign, posting and linking of the City of Culture pages to the various Hull-oriented pages in Facebook. Other platform to be used are twitter, Google+, and YouTube which allows for the creation of a dedicated channel and allows for visual capability which is useful in providing video snippets for some of the cultural, holiday, and sightseeing destinations in Hull (Richards & Palmer 2010). In addition to social media, a website is to be created that is dedicated to communicating all and only about the 2017 city of culture event, the prospects the event presents to the city of hull, and why both art and culture lovers and non-lovers should purpose to attend.

The other platform to be used for communication to the target group is the print media. Even though the print media has been dealt a big blow by social media and the online platform, still dailies and magazines remain popular. Ads about the 2017 City of Culture to be hosted in the City of Hull are to be placed in the various print medium that targets the city of Hull and its surrounding. Given this communication plan target the art and culture non-enthusiasts, these ads are to be placed in almost every print media that target Hull and its environs readers.

Control

Because the action phase of the strategy is to be done by experts, to ensure that positive progress is being achieved and there is Return on Investment (ROI), the various areas of action will have to be measured appropriately by the various experts and have them report to the taskforce which is to be the overseer of the strategy. Additionally, control to ensure progress towards the realization of the set goals is to be done by gauging progress towards the established time and financial budget. In cases where the actual events lag behind the time budget or vice versa, it is a sign of redundancy hence the taskforce will be required to take the appropriate measures to ensure compliance even it is to fire seemingly non-performing persons.

In addition, the implementation committee is to carry surveys periodically for example, every two months to establish the effect of the communication plan. This can be done by seeking knowledge of the 2017 city of culture from the target regions through interviews, questionnaires, and polls.

References

Anthony, H. 2008. Understanding Strategic Management. Oxford University Press.

Baker, B. 2007. Destination branding for small cities, Creative leap books, ISBN: 978-0-9797076-0-5, Portland, USA

Griffiths, R. 2006. City/Culture Discourses: Evidence from the Competition to Select the European Capital of Culture 2008; European Planning Studies, vol. 14, no. 4; pp 415-430

McKinlay, I., & O’Connor, M. 2007. FCS Marketing L2. Pearson South Africa

Mooney, G. 2004, Cultural Policy as Urban Transformation; Critical Reflections on Glasgow, European City of Culture 1990; Local Economy, vol. 19, no. 4, pp 327-340

Richards, G. & Palmer, R. 2010. Eventful Cities: Cultural management and urban revitalization, Elsevier, ISBN: 978-0-7506-6987-0, Oxford, UK

Smith, P. 2011. The SOSTAC® Guide – to writing the perfect plan. PR Smith; V1.1 edition.

 
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Strategic human resource management: case study

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Strategic human resource management: case study

Strategic human resource management (SHRM) is a complex integration of human resource to the strategic management of the organization with the objective of achieving the organizations goals efficiently and effectively. SHRM is a process that requires understanding of the status of the firm, human resource available, and then placement of the right human resource personnel in the right position to achieve the strategic goals of the organization. This essay will seek to create a working SHRM plan for the stated case study by providing solution to the listed problems. The following will be tacked in the essay; the practical aspects of SHRM, the balanced scorecard approach, then provide a summary on how to move the organization forward. This will be achieved through review of relevant literature.

According to Purcell & Kinnie (2007), there are different ways of achieving the integration of human resource and the strategic objectives of the organization. Some of the theories available include the best fit, the best practice, and the resource based view (RBV).

The best fit theory according to Hodge et al, (2003) is a contingency model that is designed based on internal and external environment of the business. This model links the HR strategy to the existing environment, the pressures, and the demands of the organization. For the best fit theory to work in meeting the needs of the organization, it requires flexibility and professionalism in the HR strategy. This theory categorizes organizations into three major groups; the defenders, the prospectors, and the analyzers.

These classifications are developed based on HR practices that are required for the various categories. Defenders are those organizations producing limited goods in a narrow product-market. Prospectors produce goods based on market opportunities and needs, while analyzers combine the aspects of both defenders and prospectors (Davila et al, 2007). For defenders to remain active they need innovation to improve on the existing products while on the other hand, prospectors need active innovation to satisfy the existing market opportunity.

The best fit theory requires that any organization align its human resource to fit its operations. For the defenders, because their market environment is stable, they need for example, innovation, but only to remain at the top of the market by delivering on customer satisfaction (Millmore et al. 2007). On the other hand, prospectors because they are in a highly dynamic market environment, they need to strategize their human resource for aggressive innovation. In addition to innovation, the human resource relationship structures in these classifications differ. For example, in defender organization, human resource relationship can be vertical and horizontal, but in prospector organization, competitive structure is most appropriate.

Best practice theory on the other hand entails the employment of several practices that are considered best and they contributed to the improvement of the organizations performance. In best practice theory, there are no contingency models as characteristic of the best fit model. The practices in use as well as the changes in practice are not determined depending on the market environment rather, they are “universal prescription”. The determination of the implementation of any practice is based on wisdom, according to Wright et al, (2001).

The best practice theory requires advancement in knowledge management. This can be through knowledge management literature, through partnership between organizations, and through employment of knowledgeable employees. In common market terms, this is referred to as experience. In situation where experience is deficient, best practice theory requires the use of common sense, and sensitivity to the organization.

Best practice theory aims at developing the employee and developing their commitment to the business with the goal being to improve the organizational performance with the ultimate goal of improving on competitive advantage. To achieve this, organizations using the best practice theory have firm human resource nurturing structures. Employees in these firms are very vital and valuable resources.

Some of the best practices used by organizations include; ensuring employee’s security of employment. Practices under this include formal contracts, equal employment opportunities, etc. Selective hiring to ensure the best-qualified candidate is selected for the vacant position. Qualification under the best practices theory is a combination of skills and experience. In addition, effective compensation strategies through wages or salaries, allowances, and rewards. Reduction in status terms to make the highest status not very different from the lowest rank in. Effective use of teams, which are has seen the shift from centralized control of organization to per based control.

For effective implementation of the best fit theory in the SHRM of an organization, it requires a process of analysis, strategizing, and evaluation (Jiang et al, 2012). The first step is stating the organizations goals and mission, values and management philosophy. These act as the drivers of what is to be done as well as the controllers because they provide the direction the organization should take.

The second step is to analysis the status and position of the organization. Before any new strategy can be implemented, it is essential that the current position be established. The various evaluations in this step include environmental analysis of the organization, scan of internal position, and external positions (Wright et al, 2001). Some of the aspects in this evaluation are the current human resource capabilities and the required skills, which help to determine the right course of action.

The third step is strategic formulation. Formulation is developing the way forward. Formulation involves determination of the various solutions and then strategic choice. The choices to be made are corporate, business, and functional (Salaman et al, 2005). For example, corporate choice maybe between hiring new human resource with the right required skills or training the existing human resource. In choice making, consideration has to be made on the opportunity cost among other factors.

Step four is strategic implementation of the choices. Implementation has to be done in the various aspects of the business including leadership, structure, control systems, and the human resource.

The fifth and last step is analysis of performance. The aspects analyzed include the strategy, operational and financial. Analysis determines the effectiveness of SHRM.

Lastly, the RBV is based on the idea that the organizations resources whether tangible, intangible, form a critical and important part when undertaking a strategic position. The assets included in this theory include cash, brand name, loyalty, assets, and research and development abilities. Internal resources rather than the environment drive RBV. In organization operating under RBV, the organization is viewed as a hub of abilities, powers, and achievement, which are integrated through strategic management to achieve competitive advantage.

Typically, the environment of on organization in relation to competitive advantage is viewed with two assumptions. The fist being that organizations in a given industry have similar resources that they control as well as the strategies they pursue. The second is that, resources can develop heterogeneity, but it is short lived because the resources are very mobile. This is the argument behind the best fit and best practices theories being not related on the organizational resources. The reason behind the argument being that, for ay two industries in a product-niche, it is impossible to create competitive advantage (Barney, 1995). However, the RBV assumes that firms in a niche industry can be heterogeneous in terms of the strategic resource they control therefore, heterogeneity can be long lasting and the firm is immobile, hence competitive advantage of two firms in an industry can compete.

Balanced scorecard

The balanced score card is an approach to effectiveness that is based on four dimensions of performance. This is informed by the understanding that performance is a multidimensional aspect. To an organization to achieve effectiveness in performance, it must achieve financial performance, customer performance, internal operational performance, and innovation and learning performance (Campbell et al, 2012).

Financial performance is to measure shareholder success including revenue growth, profitability, economic value added, and ROI. It designing a balanced scored card, it is advised that the aspects chosen be towards establishing how to look for shareholders.

Internal operational performance measures productivity, and quality levels and cycling time. The measures included in this performance indicator are those that seek to establish where the organization can excel. Internal operational performance assesses the process involved in production.

Customer performance measures seek to establish the customer opinion of the organization. The aspects included in customer performance are market share, repeat sales, and customer satisfaction levels with the services and goods on offer.

Innovation and learning performance measures the growth of the organization. Learning and innovating are aspects of growth in an organization. This measurement seeks to establish the continual of success in the organization and it is achieved through analysis of people and infrastructure. The key aspects assessed include employee satisfaction, organizational innovation, intellectual capital, and employee development.

An effective balanced card should assess the organization current position as well as project on its future. This is done through the leading and lagging indicators (Hodge et al, 2003). Lagging indicators show the outcomes so far, while leading indicators are drivers to what will happen. For a well designed and effective balanced scorecard, some of the measurement aspects have to be related. For example, productivity, employee satisfaction, and product quality should be directly related to customer satisfaction and retention, which should be in turn related to market command share and financial performance.

Based on balanced scorecard details, it is possible to know where the business is from and where it is headed. This is possible as the balanced scorecard shows what has worked and what has not. In relation to strategic human resource management, the card will show which strategies of human resource management has worked in the past and those that have failed. Based on such details, it is possible to manage strategically human resource by implementing strategies, which have been proven to work or modify existing strategies for optimized performance.

Conclusion

For John to achieve the 20% growth as well as improve the business as required by the CEO, it is important that he adopt a SHRM plan. First, he needs to establish the competencies and capabilities available for the business. This is to be done through human resource evaluation. In addition to human resource management, evaluation of the business is important. This can be done through SWOT analysis. The SWOT analysis provides the strengths, the weaknesses, the opportunities, and the threats to the business (Purcell & Kinnie, 2007). Based on the SWOT analysis, the human resource has to be strategically integrated with the business to optimize the strengths, make use of the opportunities, strengthen the weaknesses, and eliminate the threats as much as possible.

For maximized implementation of strategic management, John has to select between choices for the right options for the business. The choices have to be made based on the HR evaluation and the business evaluation. The choices to be made in terms of HR are, does the business have at its disposal the right skills and experiences to achieve the set mission and goals. If not, can the existing HR be trained to develop the skills or is a recruitment drive required to get the right resource. The choice has also to be made based on the best practice to the business. For example, between training and hiring, which would be effective and the costs involved.

The next step for john is to implement the SHRM plan. To ensure effective and fast realization of the set goals and growth of the business, it is advised that John employ both best practice and best fit models. While the best fit model would require the business to operate as analyzers, the best practice model would require the right employee to be placed in the right position based on their skills and expertise.

To boost HR productivity, which is essential for the realization of the set goals, the right culture and environment should be created in the business. These can be created through adoption of the right structure. For example, the competitive structure would be right for to promote innovation and dedication to work. The right structure will determine how information flows in the business for effective communication between HR management and the rest of human resource (Millmore et al. 2007). in addition, introduction of a reward structure in the business would serve to motivate employees towards improved productivity.

With every implementation structure in place, the next will be to adopt an analysis strategy. This can be at employee level or at the business level or both. It is recommend that both employee and business evaluation strategies be adopted. At employee level, evaluation strategies include performance appraisal while at the business level the SWOT or balanced scorecard can be used.

References

Barney, J. (1995), Looking inside for competitive advantage, Academy of Management Executive, vol. 9, no. 4, pp. 49–61.

Buller, P.F. & McEvoy, G.M. (2012). Strategy, human resource management and performance: Sharpening line of sight, Human Resource Management Review, vol. 22, pp.43-56.

Campbell, B.A., Coff, R. & Kryscynski, D. (2012). Rethinking sustained competitive advantage from human capital, Academy of Management Review, vol, 37, no. 3. pp. 376-95.

Davila, T., Epstein, M.J. & Shelton, R. (2006). Making Innovation Work: How to manage it, Measure it, and Profit from it. Pennsylvania, Wharton school publishing.

Godard, J. (2004). A critical assessment of high-performance paradigm, British Journal of Industrial Relations, vol. 42, no. 2, pp. 349–78.

Hodge, B.J., Anthony, W.P. & Gales, L.M. (2003), Organisation theory: a strategic approach, 6th edn, Prentice Hall, New Jersey, pp. 51–78.

Jiang, K., Lepak, D.P., Han, K., Hong, Y., Kim, A. & Winkler, A.L. (2012). Clarifying the construct of human resource systems: Relating human resource management to employee performance, Human Resource Management Review, vol. 22, pp.73-85.

Millmore, M., Lewis, P., Saunders, M., Thornhill, A. & Morrow, T. (2007). Strategic Human Resource Management: Contemporary Issues, Harlow: Prentice Hall

Purcell, J. & Kinnie, N. (2007), HRM and Business performance, in P. Boxall, J. Purcell & P. Wright (eds), Human resource management, Oxford University Press, Oxford, pp. 533–51.

Robbins, S.P. & Barnwell, N. (2006). Organisational effectiveness, in SP Robbins & N Barnwell (eds), Organisation theory: concepts and cases, 5th edn, Pearson Education Australia Pty Ltd, Frenchs Forest, pp. 71–100.

Salaman, G., Storey, J. & Billsberry, J. (2005). Strategic human resource management: defining the field, in G Salaman, J Storey & J Billsberry (eds), Strategic human resource management, SAGE, London, UK, pp. 1–11.

Stacey, R.D. (2003). Strategic management and organisational dynamics: the challenge of complexity, 4th edn, Prentice Hall, London, pp. 265–90

Wright, P.M., Dunford, B.B. & Snell, S.A. (2001), Human resources and the resource based view of the firm, Journal of Management, vol. 27, pp. 701–21.

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Financial Analysis

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Discussion

The paper would strive to explore the difference between the cost value, book value and market value for the fixed assets. In this scenario the relevance of AASB116 would be used to differentiate between the aforesaid value by means of its Cost and Revaluation Model.
In the given scenario Smith purchased a property for 5 million in 2017. This particular value stands for the cost price of the property which is being incurred by Smith to possess the same. The cost value derived is different to the book value of the property. The initial book value of the property would be worth 5 million as its purchase price but with the passage of time it differs as it takes into consideration the element of accumulated depreciation (DeFond and Zhang 2014). This is in line with AASB116 Para 30 showcasing the Cost Method revealing that as the assets need to be recognised in the balance sheet, then the value are to be carried forth at its initial cost subtracting the accumulated depreciations and accumulated impairment losses (Carson et al. 2016).

So depreciation on the property worth 5 million needs to be charged and the derived amount would be considered as the book value of the particular asset. In this way the cost or initial value of the asset differ with its book value. The book value needs to be recorded in the balance sheet and are considered important for determination of taxation owing to reduction in taxes due to depreciation of the assets (Arsen et al. 2013). In this regard AASB116 Para 31 for the Revaluation Model need to be quoted as it states for a fair value of the assets taking consideration of the deprecation in the subsequent periods. Again the book value differs with the market value as the later strives for the value on which the particular amount could be sold as the market demands.

Bibliography

BIBLIOGRAPHY Arens, A., Elder, R. amp Beasley, M., 2013. Auditing and assurance services. Boston Pearson Higher Ed.
Carson, E., Fargher, N. amp Zhang, Y., 2016. Trends in auditor reporting in Australia a synthesis and opportunities for research. Australian Accounting Review, 26(3), pp. 226-242.
DeFond, M. amp Zhang, J., 2014. A review of archival auditing research. Journal of Accounting and Economics, 58(2-3), pp. 275-326.

 
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