Application of Theories in Firms - Assignment Example

? Application of theories in firms [Insert [Insert and Unit [Insert MEMORANDUM Application of theories in firms To: From: Introduction As directed by you, research and extensive literature review was done on the subjects of the culture of employee empowerment, penetration pricing strategies from a theoretical point of view; as regards human resources and the attendant issues leading to the adoption of the mentioned theories. The memo covers the use of the researched topics by a US firm applying them, their beliefs concerning these theories and the results achieved by applying these theories. A conclusion is then made after reviewing literature. Key points Employee empowerment enhances trust and confidence, which in turn enhances innovation in an organization. Companies use penetration marketing to gain market share and retain their customers Method Various literature and information were evaluated as regards the culture of employee empowerment theory. Empowerment as a social theory is traceable to Freire, an educator and humanitarian of Brazilian origin who espoused a plant for liberating the oppressed in the world using education. The idea of empowerment was mostly associated with alternative approaches to social or psychological development. The theory of employee empowerment suggests that employees will undertake their duties and responsibilities in a more responsible, efficient, and effective manner if they are allowed to behave in a less encumbered way and are better informed (Hur, 2006). Employee understanding of the mission, objectives, vision, and goals of the company will enable them demonstrate greater initiative, risk-taking and responsibility when they are effectively trained, accorded an environment that is relatively free of castigatory consequences and they have some authority in making decisions. It involves delegating authority up to the lowest level within the organization where decision making is allowed. Over the past twenty years, the theory of employee empowerment has been tried and proven to yield considerable predictive value (Towns, 2010). Employee empowerment culture gives employees the leeway to make decisions by themselves and this gives a lot of room for creativity, and entails principles of shared leadership and is a shift from the traditional hierarchical leadership method. It incorporates an approach that is motivational where not much independent power and authority is accorded to employees. The other approach is relational that entails a lot of power decentralization (Towns, 2010). Question Two The theory of penetration pricing is a strategy that entails giving customers a markedly low price (compared to average market price) at the early stages of the business enterprise with the belief that over time due to experience and increased efficiency, costs of production will go down for instance due to economies of scale. This ultimately leads to the enterprise becoming profitable (Rao, 2009). It is suitable when a completely new product is being introduced, the market has customers that are price sensitive, a threat of a competitor entering the market exists, and continuous innovation is expected. Question three This memo reviews Google and Wal-Mart as two companies in the USA that practice employee empowerment and penetration pricing; respectively. Most traditional companies condition their employees to rely and depend upon leaders whom they really have no intrinsic connection to as the means for company progress. Employees are just not trusted to make the right decisions on matters affecting the company on their own (Llopis, 2010). Google has shown leadership and ‘breaking away’ from the pack by empowering their employees to make decisions and explore their creativity. Google employees are empowered to use 20 percent of the time they spend at work daily to pursue personal projects that are not related to Google as a company and remarkably enough, this presently accounts for half of Google’s yearly new product innovation (Llopis, 2010). That the company trusts them to use 20 percent of ‘work time’ in pursuit of personal projects creates trust, which consequently propels empowerment. This inspires people to think outside the box and act and think more creatively, resulting in innovations. Wal-Mart, a US retail giant uses penetration pricing in selling some of its products with an ‘everyday low prices’ strategy. A 2003 survey done by the Bank of America Securities and published in the Wall Street journal established that Wal-Mart had a lower price for some 15 popular toys than the prices at Toys ‘R’ Us, the largest single toy seller; by 12 percent . Wal-Mart’s prices were still 8 percent lower than discount retailer Target (“The pricing journal”, 2011). This strategy was established to be driven by a desire for a bigger market share by Wal-Mart, touted as the worlds’ biggest retail chain. Before 2003, Wal-Mart was second in toy sales in terms of market share, however they became number one after the price cuts in 2003. This is a strategy that has long been used by Wal-Mart with considerable success and this continues to the present. In 2011, it launched an ad campaign with the slogan “Low prices, Daily, Everywhere” and this was in response to many years where its US sales were slow due to an earlier strategy of lowering prices of other products and raising that of other products. This shows that pricing has a lasting impact and that an organization should have a pricing strategy in-line with its overall business and corporate objectives (“The pricing journal”, 2011). Question four The field of human resources is also experiencing employee empowerment with management putting up infrastructure and systems that employees can manipulate to increase efficiency and productivity. Empowering employees by giving them the freedom to make individual decisions helps them become more creative and better committed to their work. Empowering employees entails devolving decision-making duties to the lower tiers of the organization with the lowest employees having the power to take certain decisions on their own without consulting for instance superiors (Akbar, Saeid, Mehdi and Saeid, 2010). Decision-making and delegation of responsibility is directed to those most involved in undertaking an activity. This would for instance mean asking the computer support technicians to decide on what hardware and software platforms are suitable for a certain department rather than having top purchasing managers make that decision (Akbar, Saeid, Mehdi and Saeid,2010). Other areas where responsibility is devolved include developing systems and processes for total quality management, increasing employee engagement in initiatives as is done at Google and profit centers growth. Employee empowerment came about at Google since the company was facing mounting competition and innovation was a strategy adopted to help it stay ahead of the pack and indeed Google is the largest and most popular search engine in the world with many other applications based on it such as web mail. Its organizational structure, innovation, treatment, and freedoms for staff have seen Google attract and retain the best human resources. Employees for instance are allowed to go into their work places with their pets and are encouraged to come up with new ideas. It is an innovation that has made Google the leading search engine because its results come fast and are detailed when one searches using similar key words on Google and another search engine. To fully empower employees, certain actions are taken to enhance this among them removing any barriers that could jeopardize the success of employees. This involves giving employees freedom and leeway to make responsible contributions, for instance at Google, barriers to success are removed by allowing employees at least 20 percent of their daily work time to innovation and pursuit of personal projects. This applies to all members of staff. A supportive culture will also empower employees by making their efforts feel appreciated; this can only inspire them to think more creatively (Akbar, Saeid, Mehdi and Saeid,2010). At Google for instance, employees have a direct communication channel with senior management and they also have an internal site where they (employees) collaborate and showcase their ideas. All ideas and innovations are given consideration and where necessary alterations and improvements made until a suitable innovative product is arrived at. This provides a positive environment in which employees feel inspired to try. Allowing trial and error encourages further innovation and further empowers employees. In terms of penetration pricing, companies deliberately take steps to ensure their costs are the lowest to maintain a respectable margin. The firms must also do enough consumer awareness campaigns to ensure they do not get the impression that the low priced items are not of a lower/ inferior quality. The firms must also ensure the products have a long term potential of being widely accepted since profitability will be dictated by the volumes of products sold . This for instance has been done by Wal-Mart where they sell a similar product sold by its competitors at a price 12 percent lower than the competitors. Wal-Mart runs twelve promotions annually in which it creates awareness of its products and their prices are not the lowest, they have just mastered the art of manipulating perception that their prices are actually lower than the real prices The result of Google’s employee empowerment is that 50 percent of their revenue come from new products and this has ensured their market leadership in the search engine market, with 65.5 percent of the US search engine market with the closest follower being yahoo at a distant 15 percent, despite yahoo having been in the business longer than Google. It is also the dominant search engine in Europe with 91 percent of the UK market, for instance (Nguyen, 2011). Wal-Mart is also the leading retail giant in the US with the largest market share. Other theories that could inspire employee empowerment and penetrative pricing are innovation and market leadership. This can be achieved by getting a large market share through lower prices and new unique products to stay ahead of the competition. I would advise the management to stick with their plans in both companies and in implementing the theories under review. Penetrative pricing would however be revised by putting a slightly larger margin than what Wal-Mart does and doing this across the board not just for a few products. Wal-Mart can apply the game theory to increase their market share in different product lines. Instead of selling toys sold by Toys ‘R’ Us, Wal-Mart can make its own branded toys with a feature that Toys ‘R’ Us does not offer for instance a trade in system for undamaged toys as kids grow up, so they get bigger complex toys at a lower price and trade in the smaller older toy. Wal-Mart then refurbishes the traded in toys and sells them again, much cheaper. Google can use the reward and compensation theory to stimulate innovation by giving inventors a share of the profits for the finished product; this will encourage great innovative thoughts with monetary compensation as the driver. Conclusion Employee empowerment involves removing communication barriers, letting employees make decisions on their own at all levels, open communication channels and allowing employees time for their own projects is a theory that stimulates imagination and innovation by employees. This has been successfully done at Google where employees are encouraged to utilize 20 percent of company work time to pursue personal projects. The result is increasing market domination by Google and over half or revenue coming from innovations. Motivational theory for instance through added monetary compensation can also stimulate innovation. Penetration pricing is a theory used to gain market share where a company charges lower than average prices to get and maintain more customers. Profitability is attained through volume sales and has been successfully used by Wal-Mart who have created the impression that their prices are lower than they actually are. The game theory can also be used by Wal-Mart to gain market leadership in certain product categories. References Akbar, E., Saeid, S., Mehdi, A., & Saeid, A. (2010) Importance of the relationship between psychological empowerment of employees and human resources productivity in government organizations European Journal of Economics, Finance and Administrative Sciences, (26), 45-49. doi: ISSN 1450-2275 (2011). Lessons learned from Wal-Mart’s pricing strategy. The Pricing Journal, Retrieved from http://thepricingjournal.com/2011/04/12/lessons-learned-from-wal-marts-pricing-strategy/ Hur, M. (2006) Empowerment in terms of theoretical perspectives: exploring a typology of the process and components across disciplines Journal of community psychology, 34(5), 524-525 DOI: 10.1002/jcop.20113 Llopis, G. (2010, June 09). Employee empowerment, driven by employer trust: The employee/employer relationship Retrieved from http://www.glennllopis.com/2010/09/employee-empowerment-driven-by-employer-trust-the-employeeemployer-relationship.html Nguyen, P. (2011, March 13). Search engine market share by country mar 2011. Retrieved from http://www.chandlernguyen.com/2011/03/search-engine-market-share-by-country-mar-2011.html Rao, V. (2009) Handbook of pricing research in marketing (pp. 170-171) Cheltenham, UK: Edward Elgar Publishing Inc. Towns, P. (2010, June 05). The case for a three-dimensional employee empowerment model part . Retrieved from http://www.articlesbase.com/human-resources-articles/the-case-for-a-three-dimensional-employee-empowerment-model-part-i-2550858.html Read More