Variables Impacting on Business in Fast Food Industry - Article Example

1. Organizations and businesses are to numerous external influences while operating in todays world. Identify at least four of these key variables explaining how they impact on business and organizations giving practical examples where possible Organizations are subject to economic, political, social, regulatory, technological and competitive environmental influences. These influences affect the organization‘s bottom line depending on the intensity. The ensuing paragraphs explain how economic, social, competitive and technological variables have profoundly impacted the operations in the industry and in companies. The fast food industry was adversely impacted by the slow down and the eventual recession in the economic environment. This resulted in customers reducing their visits to the Quick Service Restaurants. The consumers started packing their own lunches for work. Many consumers reduced their eating out habits, and even those who ate out opted for less expensive restaurants. People also resorted to changes in their grocery shopping habits, such as using more coupons, switching to cheaper brands and avoiding impulse buys. They preferred eating at home to cut costs. Many companies, who were in the fast food business such as Starbucks and others reported, slow down in their sales in many of their segments. The social environment is extremely important particularly in the field of natural resource related polluting business, in which Shell is engaged. Shell’s operation in Nigeria was in Ogoniland, the site of great mineral wealth. The Ogoni people, who were the inhabitants of the heartland of the Nigerian oil fields, were poor people, who had to bear the brunt of environmental pollution. Their interests should be of paramount importance for any industrial venture in that area. The extent of pollution was horrendous. The World Bank found evidence of significant environmental problems, including land degradation, over fishing, deforestation, loss of biodiversity and water contamination. When Ogonis revolted and resorted to violence, the government cracked down on the community and killed their leaders. Though the government was mainly responsible for precipitating the crisis, Shell had to face the ire of global community and lost respect and brand equity. Competitive environment played a decisive role in the PC industry resulting in demise of some players. In the late 1980s and 1990s the PC industry was going through a growth phase, which eventually went through a shakeout with heightened competition in the late 1990s. Gateway started in 1985 to offer computers directly to the customers built to their specifications. Gateway witnessed early years of growth and was in direct competition with Dell computers. But in the new millennium, the computer industry went through a downturn. The low price PC market was in a shake out with only two major players rivaling each other; Dell and Gateway. The mighty names such as Compaq were trailing behind. During this downturn, while Dell improved its market share, Gateway and others lost their share. Dell during the heydays of the PC industry enhanced its scale substantially. Its costs were low owing to the economies of scale. It stayed closer to the customer through innovative strategies. Therefore during the period of intense competition, Dell could reduce the price to an extent that no one else could match. Therefore in the price war that ensued, Dell gained, while others lost. The changes in technology have influenced the way the companies work in every industry. In the hospitality industry, Information and Communications Technology is the single greatest force affecting change. The ICT based products and processes help the hotels to enhance the operating efficiency, improve the service experience as well as provide a means to access markets on a global basis. Today, PMS is virtually the brain behind the operations of the lodging industry. It gives instantly the room inventory with details of available rooms, occupied rooms and unchanged rooms. It helps to check the guests in and out. It consolidates charges from various services such as mini bars, restaurants, calls and gives the guest folio. Today, PMS has become scalable, delivering high performance and also integrating various components of hotel management. 2. CISCO Case Study: A) Describe how CISCO has been affected financially by changes in the external economic environment In the year 2000, Cisco stole the show as the world’s most valuable company. But in the ensuing year, the company was hit by what Mr. Chamber labeled as 100 year flood. The economic decline only served to exacerbate the weakness in its core product markets. Routing and switching which were the companys mainstay had matured and could never dream of phenomenal growth rates of over 50% which catapulted the revenues of the company from $1.2 billion in 1994 to $18.9 billion in 2002. In the new paradigm the networking core had become a commodity. In addition, the inflexibility of large companies afflicted Cisco. In typical commodity markets, competition is intense and hence the volume and the margins are adversely hit. B) Describe how the company has responded to these pressures in terms of new product development. In particular discuss what is described as prime example of this new product development Cisco responded to these external pressures through innovation and new product development. Its foray into optical networks, Internet telephony and wireless equipment bear testimony to its commitment to new product development. Cisco has identified 30 market adjacencies bearing interrelationship with the existing lines of business. The prime example of this new product development is video. Cisco envisages the predominance of video in communication among B2B, B2C and C2C. According to the company, video communication is expected to grow tenfold by 2013 twice that of the overall traffic. Cisco’s bigger routers and switches can manage this flood of data. Its new product ‘TelePresence’ combining big high-definition screens, spatially sensitive microphones, custom video processing technology and networking equipment will enable the company to dominate the video pie. ‘TelePresence’ would soon be ushered into homes. Application of TelePresence at home could give viewers new experience in sports and entertainment. Such exciting potential is possible since the company’s video products are mounted on the same platform called ‘Medianet’. Cisco has big plans for consumer electronics as well with new devices for pictures, videos and music on the same platform. Other exciting possibilities, Cisco is opening up are ‘virtualization’ and ‘Smart Grids’ leading to unification of computer networks. C) Discuss how the company has altered the structure to reflect the new products strategy and why it seems to work well. The structure in Cisco comprises an elaborate system of committees manned by managers from different functional areas. Most of these groups evolve and target new markets. The hierarchy of groups is well-defined. Councils target $10 billion markets and boards target $1 billion market. The working groups support their endeavors. At present there are 50 boards and councils with a membership of 750 motivated employees. The working groups on the other hand are transient. The company pursues cooperative management style. The councils may or may not have a formal leader. Most managers have to play two leading roles, one in a function and another on a board or council demanding cooperation. Indeed the characteristic of a manager as a team player would be evaluated for 30% of their bonuses. The company calls the rules governing the setup of groups, the evaluation of their work and dynamics of decision making as replicable processes. The groups also have a common language to describe their work. Each group should formulate a five-year vision, a two year strategy and a ten-point execution plan. The company uses its own digital tools and harnesses the benefits. D) The article identifies one major drawback of this structure. What is it? The major drawback of the system is that it would not tolerate lone fighters. Team work is rewarded with promotion, while lack of it would be rejected by the system. This has resulted in leadership attrition to the extent of nearly 20%. Despite the goals being met, attrition has inflicted considerable costs on the Company. Further, endless group meetings have fuelled employee burnout due to enormous increase in workload. An employee should not only make fruitful recommendations in the meetings, while going through the deliberations for hours, he or she should also attend to the regular work. ‘TelePresence’ meetings could mean substantial usage of time. Read More