Global Challenges for Business - Essay Example

?GLOBAL CHALLENGES FOR BUSINESS, MANAGEMENT AND LEADERSHIP Table of Contents GLOBAL CHALLENGES FOR BUSINESS, MANAGEMENT AND LEADERSHIP Table of Contents 2 Introduction 4 Application 6 Organisation Name and Challenge 6 SWOT Analysis 7 Strengths 7 Weakness 7 Opportunities 8 Threats 8 PESTEL 8 Political 8 Economic 8 Sociological 9 Technological 9 Legal 9 Environmental 10 Porter’s Five Force Model 10 Management at BAE 12 The Challenge 14 Impact of CSR on BAE 14 Recommendation 15 Conclusion 15 References 17 Introduction Business organizations are operating in an age of increased competition where there are a large number of market players playing price wars in an attempt to reach out to prospective customers. In order to cater to this competition and to maintain profitability and sustainability it has become essential for business organizations to formulate and implement strategies that can help provide greater value to the customers as well as enhance their brand image and positioning (Madura, 2006, p.197). Firms are essentially focussing on improving their management practises in an attempt to improve their business processes. The competitive value framework is a model that essentially helps business organizations to generate competitive advantage by enhancing the value proposition of the organization. The model named as one of the most essential and effective business models was proposed by Quinn & Rorhbaugh in 1983 (Competing Values Company, n.d., p.1). Figure 1: Competitive Values Framework According to Koontz & Weihrich (2006) management is defined as “the process of designing and maintaining an environment in which individuals, working together in groups efficiently accomplish selected aims” (Koontz & Weihrich, 2006, p.5). The competitive values framework shown in the figure above helps business organizations to formulate effective strategies that help in generating competitive business advantage by providing enhanced value proposition to the customers as well as the stakeholders of a firm. The framework is based on four dimensions namely flexibility, internal factors, external factors as well as monitoring and control mechanism of an organization. The combined effect of these dimensions helps in enhancing the value proposition and increasing the efficiency of business organizations. Internal factors largely include the internal strengths, weakness and opportunities of an organization and are largely associated with the operational and process management practices. External factors on the other hand include the political, legal, economic and sociological factors and help generate an impact for the organization. Relational perspectives include the interpersonal elements of inter group relationships while the empirical elements includes the internal business processes for collection and integration of information handling and management. Political and relational elements denote flexibility and stability while the rational and empirical elements ensure control and stability in a business organization (Schuman, 2010). The combined effect of all the above elements or factors determines the nature of effectiveness of the business strategies adopted by the organizations. Each element represents a set of core values of the firm that are largely distinct from the rest of the others. They show the extent to which an organization tries to be flexible and adoptable to the business environment while maintain an internal stability in the organization. The importance of this model in the present day business environment of turbulence can be easily noted from the fact that it largely helps in displaying the pros and cons, the opposing as well as supporting elements of the business strategies and the nature of alternatives before an organization that can largely help in maintaining profitability and adaptability while maintain an overall stability in the business processes and the organization (Cameron, 2009, p.2-3). Application Organisation Name and Challenge The organization selected for the present study is BAE Systems which is manufacturer of defence equipments and associated components and software’s. The UK based defence manufacturing giant has a product portfolio that caters to the needs of defence forces for air, sea and land forces in different nations including UK, USA and India to name a few. In terms of revenues the firm is the second largest of its kind in the world with sales figures of 34.6 billion US dollars as of the year 2010. The company has a strong and dedicated workforce of approximately 100000 employees across the world (BAE Systems, 2011). SWOT Analysis SWOT is an acronym for Strengths, Weakness, Opportunities and Threats (Bohm, 2009, p.2). The present section would be dedicated towards analysing the strengths, weakness, opportunities and Threats towards analysing the internal environment of BAE Systems. Strengths Strengths of BAE systems emerge from its formidable brand image and large scale of production apart from a strong financial balance sheet which provides it an edge over its competitors. The wide array of product offering with sophisticated technology and major clients makes it one of the most formidable brands of the world in its category. In addition a strong parent firm also helps the firm to gain expertise and add value to the product and service offering of the organization (Datamonitor, 2007, p.13). Weakness The main area of weakness for BAE Systems emerges from its over-dependence on the US Government which is the most important Client for the organization which shows a threat towards the sustainability of this capital intensive organization (Datamonitor, 2007, p.13). Opportunities The large scale spending by nations towards their defence purchases and a huge spending on defence by the developing nations like India show large scale opportunity for the organization (Datamonitor, 2007, p.13). Threats Threats to BAE Systems mainly emerge from the large scale intensive competition in the market which puts considerable pressures on the margins of the firm. Threats also emerge from the escalation of the prices of raw materials (Datamonitor, 2007, p.13). PESTEL PESTEL is a tool that is used to analyse the external environment of an organization and includes Political, Economic, Sociological, Legal, Technological, Environmental and Legal factors (Johnson, Scholes & Whittington, 2009, p.65). Political Political factors are perhaps the most dominating external factor that influences BAE Systems. The products of the firm are meant for military units whose sale and purchase largely depend on government spending and policies (Frost & Sullivan, 2007, p.14). Economic Economic factors like GDP levels have a widespread impact on the business prospects of defence manufacturing organizations like BAE Systems. Defence budgets of nations are largely influenced by government spending on defence which is again determined by the economic health of the nation including inflation, GDP growth etc (Frost & Sullivan, 2007, p.12-13). Sociological Defence purchase and spending have been largely criticised by many critiques as a policy that tends to wastage of resources on destructive activities that could otherwise had been spent on developmental activities for the society. Protests by different sections have a small but meaningful impact on the aspect of profitability and sustainability of the organization (Frost & Sullivan, 2007, p.65). Technological Technological aspects largely involve the use of modern technology that can be used in defence equipments to make them more advanced. The arms race among different nations has accentuated the need to ensure greater emphasis on use of technological innovations to maintain sustainability and to beat the competition in the market (Frost & Sullivan, 2007, p.17). Legal Legal factors for BAE systems normally involve importance in its overseas production units. Acceptance of jurisdiction of the International Court of Justice in a foreign market assumes significance for the organization. In addition legal aspects like defence transfer and procurement have also legal considerations based on international laws. Nations like UK have accepted the jurisdictions of the International Court of Justice have made profound effects on the business prospects of the organization (CIA, 2011). Environmental Environmental factors largely include use of eco friendly procedures in manufacturing. Nations have largely imposed restrictions with regards to the carbon emission which assumes significance for defence manufacturing firms like BAE Systems. Porter’s Five Force Model The analysis of the competitive forces for an organization can be done by using the Porter’s Five Forces model which was developed by Michael Porter and includes five forces namely, bargaining power of buyers, bargaining power of suppliers, competition among existing players, threat of new entrants and threat of substitutes (Grunig, 2010, p.144). Table 1: Porter’s Five Forces Model for BAE Systems Bargaining Power of Buyers Large number of competitors Vast array of choice before customers Extent of influence- High Bargaining Power of Suppliers Very few suppliers High cost of raw materials Extent of influence- High Threat of New Entrants High entry barriers High initial capital to enter the industry Presence of economies of scale and scope Extent of influence- Low Threat of Substitutes Very few or no substitutes Highly specific industry segment Extent of influence- Low Rivalry among Existing Players Large scale competition in markets Political factors largely influencing business prospects Large scale government interference Governments protecting domestic firms Extent of Influence- High (Source: Author’s Creation) Management at BAE BAE Systems is global firm with its manufacturing and business units spread over diverse nations and across different departments. BAE system’s has a flat organizational structure that helps the management to ensure greater employee motivation (BAE Systems-a, 2007). Use of a flat hierarchy helps in reducing the intermediaries in the process of organizational communication and ensures fast decision making. It also helps in ensuring greater adaptability and flexibility in the organization to meet the challenges of the turbulent business environment (Agarwal, 1983, p.129). Figure 2: Organizational Structure at BAE Systems (Source: BAE Systems-a, 2007) The analysis of the management structure at BAE Systems reveals that a rational goal model is being implemented at the organization. The model states that top management or an organization should have a set of clearly defined goals and should also have mechanisms that monitor the effective accomplishment of these goals (Anderson, Ones, Sinangil & Viswesvaran, 2002, p.8). As per the information given in the latest annual report of the organization shows that the company has a set of defined goals and objectives that are highly specific, measurable, realistic and achievable within a defined time frame. The organization also has control and feedback mechanisms such as audit committee, CSR committee and credit committee apart from control system in production to facilitate the health and safety of its employees as well as ensure compliance, credibility and accountability in the organization (BAE Systems-b, 2010). The Challenge In spite of being one of the most successful business organizations of the modern day business environment also faces certain challenges. The main challenge for the organization lies in the very nature of its product offering and maintaining a socially friendly image in the world. The products of the company are largely used for destructive purposes and critiques have been quite vocal about the large scale spending by governments and other organizations towards this trend of high spending in the defence industry. The challenge for the organization remains to have a socially friendly and responsive image. In addition to this the firm also faces issues of intense competition and excessively high government mediation towards its business prospects. Impact of CSR on BAE In order to have a more responsible image of the organization amidst the critiques the firm has embarked upon a strategy of Corporate Social Responsibility that would try to help incorporate a socially responsible image of the organization. The company spent about 3.3 million pounds towards community development programs. The community development programs include charitable aspects including spending on community education, health and hygiene of the entire community (BAE Systems-c, 2011). In addition to serving the needs of the community at large the company also has a strategy that seeks to promote the general health and safety standards of the large number of employees working at the organization. The incorporation of this strategy has generated two benefits for the organization (BAE Systems-d, 2011). Firstly it has put up a socially responsible image of the company and secondly it has increased the motivation levels of the employees and has made the organizations one of the best places to work. This has led to generation of competitive advantage for the company that would help it to take care of the cut throat competition in the market. Recommendation The analysis of the study reveals considerable opportunities of the organization. The analysis of the challenges and opportunities of the organization reveals the need for adopting a critical value framework in the organization. The nature of business and competitive environment shows that the company must critically evaluate the pros and cons of a strategy before implementation. The company needs to analyse its internal strengths so as to leverage on the opportunities and minimise the weaknesses. It should also incorporate an effective control and feedback measure for the organization. Tools like the balanced scorecard can be used to evaluate the financial as well as non financial strategies of the organization and help in ensuring better feedback and control which would lead to generation of more flexibility and efficiency of the organization. In the area of productions efforts must be made to ensure greater efficiency that includes uses of techniques like Kaizen, Six Sigma and TQM that would help in improving the internal aspects in the competitive value framework of the organization. Conclusion BAE Systems is one of the most prominent names in the defence manufacturing industry. The analysis of the business processes of the organization also reveals considerable areas of opportunity. However intense competition and dependence on government policies have merged as some of the main challenges for the organization apart from maintaining a socially responsible image of the organization in the minds of the customers. An effective strategy for the organization would involve use of operational efficiency apart from formulating and incorporating strategies that would help in improving the competitive value framework of the organization. The company’s strengths in brand image and overall product offering can be effectively used to counter the challenges and threats. Adopting a focussed and balanced approach would not only help in ensuring greater adaptability but would also help in generating long term sustainable competitive advantage for the organization in the turbulent business market. References Agarwal, R.D. (1983). Organization and management. Tata McGraw-Hill Education. Anderson, N., Ones, D.S., Sinangil, H.K., & Viswesvaran, C. (2002). Handbook of industrial, work & organizational psychology: Organizational psychology, Volume 2. SAGE. BAE Systems. (2011). Key Facts. [Online]. Available at: http://www.baesystems.com/AboutUs/FactSheet/index.htm [Accessed on May 18, 2011]. BAE Systems-a. (2007). Organization Chart. [Online]. Available at: http://production.investis.com/armorholdings/aboutus/organization_chart/ [Accessed on May 18, 2011]. BAE Systems-b. (2010). Annual Report 2010. [Pdf]. Available at: http://bae-systems-investor-relations.production.investis.com/strategy-and-performance/~/media/Files/B/BAE-Systems-Investor-Relations-2009/PDFs/results-and-reports/reports/2011/ar-2010.pdf [Accessed on May 18, 2011]. BAE Systems-c. (2011). Community. [Online]. Available at: http://www.baesystems.com/CorporateResponsibility/Community/index.htm. [Accessed on May 18, 2011]. BAE Systems-d. (2011). Safety. [Online]. Available at: http://www.baesystems.com/CorporateResponsibility/Safety/index.htm [Accessed on May 18, 2011]. Bohm, A. (2009). The SWOT Analysis. GRIN Verlag. Cameron, K. (2009). An introduction to the Competing Values Framework. [Pdf]. Available at: http://www.haworth.com/en-us/Knowledge/Workplace-Library/Documents/An%20Introduction%20to%20the%20Competing%20Values%20Framework.pdf [Accessed on May 18, 2011]. CIA. (2011). The world Factbook. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html [Accessed on May 18, 2011]. Competing Values Company. (No date). The Competing Values Framework: An Introduction. [Pdf]. Available at: http://competingvalues.com/competingvalues.com/wp-content/uploads/2009/07/The-Competing-Values-Framework-An-Introduction.pdf [Accessed on May 18, 2011]. Datamonitor. (2007). BAE Land Systems and Armaments. [Pdf]. Available at: http://favormall.net/clientimages/38996/security-baesystems.pdf [Accessed on May 18, 2011]. Frost & Sullivan. (2007). STUDY ANALYSING THE CURRENT ACTIVITIES IN THE FIELD OF UAV. [Pdf]. Available at: http://ec.europa.eu/enterprise/policies/security/files/uav_study_element_1._en.pdf [Accessed on May 18, 2011]. Grunig, R. (2010). Process-based Strategic Planning. Springer. Johnson, G., Scholes, K., & Whittington, R. (2009). Exploring Corporate Strategy: Text & Cases, 7/E. Pearson Education India. Koontz, H., & Weihrich, H. (2006). Essentials Of Management. Tata McGraw-Hill Education. Madura, J. (2006). Introduction to business. Cengage Learning. Schuman, S. (2010). The Handbook for Working with Difficult Groups: How They Are Difficult, Why They Are Difficult and What You Can Do About It. John Wiley and Sons. Read More