Strategy and Culture in the Emerging World - Term Paper Example

Housing constitutes one of the basic necessities of humans. The study tries to analyse the real e sector with a special emphasis on Wulvern which is a charitable organization that provides housing solutions to need based customers. The study tries to identify the strategic issues of Wulvern and also suggest a set of plausible recommendations for the organization. These recommendations would be framed on the basis of the environmental and competitor analysis of the organization as well as the strategic strengths and weakness of the firm. Introduction Housing constitutes a basic necessity of human beings. The progress of civilisation has been inextricably linked with the development of housing. The aspect of housing as a business venture has been there since time immemorial. Over the years, housing has evolved from being a necessity to a luxury statement with luxurious condominiums dotting the landscape. Housing industry has evolved from being a necessity to a burgeoning profit making business. The demand for quality housing has been on the rise with the proportionate increase in the disposable income. Access to easy finance in the form of cheap credit has transformed the housing sector into a booming industry with huge potential. Twenty first century housing industry consists of big organisations executing projects worth billions of dollars across the world. The study deals with the strategic issues faced by Wulvern Housing. The recent financial crisis which began with the subprime crisis in US has engulfed the housing and real estate sector across the world. A research conducted by Knight Frank and Delloite shows a severe mismatch in the demand and supply dynamics of the real estate sector. The study shows that the supply of housing has hit rock bottom figures. The dip in supply could be attributed to the mortgage crisis and the subsequent credit crunch and recession that have significantly reduced the demand for new housing space. The financial turmoil has resulted in job losses among individuals which have in turn reduced the availability of finance for purchasing new homes. The scenario is the same for both US as well as the European markets (Delloite, 2010, p.4-5). The financial crisis has impacted almost all the sectors in UK’s economy. This crisis has also led to credit crunch which has severely affected the growth of an organization. Unavailability of credit has also affected the purchasing powers of the customers which has led to mismatch in demand and supply aspects. Such conditions have severely eroded the profit margins of the real estate firms. The present study tries to analyse the problems faced by the real estate housing sector in UK. Wulvern Housing has been chosen as the company for study. The study would try to figure out certain strategic issues faced by the organisation and would suggest a set of plausible recommendations based on the analysis of the study. Company Profile Wulvern is presently the largest organisation in South Cheshire and provides housing facilities to approximately 11,000 individuals spread across the villages of Crew and Cheshire. The firm is a non-profit organisation and provides housing to needy people. Wulvern is presently registered as a ‘Registered Provider’ in the nation whose services are being constantly monitored by the Tenants Services Authority. The company operates under the various rules set up for charitable organisations. Wulvern’s services range from providing homes and housing facilities both rented as well as owned (Wulvern, 2010). Wulvern aims to provide customers with greater value for their services and tries to involve its customer in the decision making process. The organisation was awarded with ‘Investors in Excellence award in 2010 for its commitment to provide greater value to its customers (Wulvern, 2010). Environment Analysis Performance of a firm is affected by certain internal as well as external factors. External factors affecting a firm can be analysed by evaluating a firm’s political, economic, social, technological aspects prevailing in a particular market. Wulvern is based in UK; hence an analysis of the above stated factors for the UK market would help in understanding the external factors affecting the organisation. External analysis Political Factors Wulvern operates in United Kingdom which includes Ireland, England, Scotland and Wales. The nation has a constitutional monarchical form of government with the Queen at the helm of affairs. The Queen is guided by the Prime Minister who along with his council of ministers is elected democratically. The administration has three branches namely legislative, executive and judiciary. The legislative branch constitutes the Parliament whose members are elected democratically. The executive branch is headed by the Queen who is advised by the Prime Minister and his council of ministers who are chosen democratically. Prime Minister is the one who exercises ultimate power. Judiciary comprises the Supreme Court and other courts namely the High courts and appellate courts. The Supreme Court is the highest court of appeal (CIA, 2010). Wulvern operates its business in UK whose political conditions stated above imply an investor friendly attitude for the organization. Economic Factors UK is one of the most powerful economies of the globe. Its capital, London, is one of the most important financial hubs of the world. Its GDP figures in terms of purchasing power parity stands at 2.128 Trillion US Dollars as on 2009. The financial meltdown had significant effects on the nation’s economy which is quite evident from its recent growth rate which is pegged at -4.9%. The nation has an approximate 31.37 million strong workforce engaged in the services sector contributing the highest percentage to the nation’s economy. The nation had an unemployment rate of 7.6 percent in 2009. The prime lending rate of the nation’s central bank had been 0.63% in 2009 (CIA, 2010). Purchasing power of consumers is dependent on the health of the economy in a nation. The robust economy of UK represents considerable advantages for Wulvern. The only for Wulvern impediment appears to be in the form of credit crunch which has come into effect after the current financial crisis. Unavailability of credit facility leads to reduction in the purchasing power of the customers which imply significant affects on the business prospects of Wulvern. Social Factors UK is the 23rd most populated nation of the world with population figures of 62,348,447 people as of 2010. The median age constitutes 39.8 years with majority of the population falling under the age group of 15-64 years. Population growth rate of the nation is about 0.563% on 2010. The demographic landscape of the nation is also dotted with a large number of immigrants who constitute 0.2% of the total population of the country. These immigrants come from all parts of the world to seek a better destination for their careers and lifestyle. The most impressive part of the demographics is that about 90 percent of the total population can be classified as urban. Rate of urbanization is pegged at 0.5 percent on an annual basis. UK represents a true cosmopolitan picture to the world of multinational and multicultural environment. UK is the birthplace of English language which is the official language of the country. Ninety Nine percent of the total population is literate which makes it one of the most literate nations of the world (CIA, 2010). A study report conducted by Cheshire East Council states that a large percentage of individuals are planning to move to areas like Crew (15.9%). The pleasant environment at Crew and Cheshire provided enough impetus of individuals to move into this area. This serves as a major opportunity for Wulvern whose operations are majorly based in these areas (Cheshire East Council, 2009). Technological Factors UK is the birthplace of the industrial revolution and the nation is accredited for many industrial inventions. The nation boasts of highly rated academic institutions like Oxford and Cambridge which churn out thousands of bright minds every year. The high level of academic institutions makes it one of the most attractive destinations for students across the globe. This implies huge implication for organisations as they get a supply of qualified and talented workforce. This assumes significance considering the fact that human resources are the greatest asset of an organisation. Presence of skilled talented workforce leads to greater productivity. The nation is also characterised by the influx of large number of talented minds from across the world. This has emerged as the most important asset for any organisation including Wulvern as the efficiency of human resources generates huge revenue margins for the company. Political Local government elections Rationalization of housing strategic planning process New legislation Budgetary savings and funding Economic Migrant workers Skills gap Shift from traditional to modern industry Limitation on ability to raise funds Student population In commuting Social Cultural and religious diversity Population fluctuation Changing household formation Aging population and Disabled people Technological New technology E-government Energy efficiency Wulvern strengths The main strengths in Wulvern’s business operations are stated below: Efficient fund management techniques: The efficiency of Wulvern’s financial management techniques could be justified from the report published by TSA which states that the organization has achieved significant growth without fully utilising its loan capital. This shows that the organization has access to financial resources which implies competitive advantage for the organization (TSA, 2009, p.5). Compliance: The TSA report published in 2009 states that Wulvern ensured strict compliance with the norms of the government (TSA, 2009, p.5-6). Asset Management Strategy: The organization has a well developed strategy to take care of its assets. A five year improvement plan has been prepared which would guide the organization towards it business goals. Social Responsibility: The biggest strength of the organization arises from its social responsibility measures. The organization serves to cater to the needs of the disabled and elderly sections of the society. It has also developed an ambitious plan of setting up a housing complex that would provide affordable housing solution to the senior and elderly citizens (TSA, 2009, p.6). Efficient Customer Service: Wulvern also has an efficient customer service which includes efficient after sales process and handling issues related to basic amenities like gas services, minor complaints, repairs etc.(2010) In the inspection report (2010) the audit commission has assessed how Wulvern housing is addressing many areas which are explained in the following table. (Audit Commission, 2010, p.5) Strategic Issues at Wulvern and recommendations The environmental analysis of Wulvern conducted above leads to the realisation that the organisation is operating under highly turbulent market conditions. The situation has become more adverse for business, considering the fact that the housing sector has suffered a tremendous set back after the recent financial meltdown. Some of the strategic issues faced by the organisation are stated below: 1. Dealing with competition and uncertainties prevalent in the market The present market condition are characterised by presence of a severe competition among the market players. This has eroded the profit margins of the organizations as more and more competitors are trying to take up the share of the market. 2. Developing a sustainable plan for protecting the environment (Wulvern-a, 2009, p.10) Real estate industry has significant impacts on the environment. The organization operates in a nation that is committed to protect the environment by reducing its carbon footprint. It therefore becomes imperative for Wulvern to address issues pertaining to environmental hazards. Effective handling of environment would also imply strategic advantage for the organization. 3. Improving service standards In any industry service standards are the aspects that differentiate between different market players. Presence of competition aggravates the necessity for organizations to improve their service standards. The Audit commission report also states that there are certain areas of service which must be improved by the organization to ensure long term growth and effective positioning. Hence handling and providing efficient service emerges as a key challenge for Wulvern. 4. Handling issues related to procurement (Audit Commission, 2005, p.39) Wulvern still follows methods of traditional procurement. These processes are generally found to be and more time consuming and inefficient in nature. Use of traditional procurement measures delays project schedules and also leads to issues related to managing the inventory levels. Decision making is also considerably delayed which affects the business prospects of the organization. 5. funding problem The financial crisis has severely impacted the credit availability to organizations which has hampered their growth prospects. Volatile market situations also give little scope for the organization to explore the stock market. Hence it has become a challenge for Wulvern to get access to funds for implementing future projects. Lack of credit facilities have also led to sever issues in demand and supply dynamics which offer major threats to Wulvern with regards to meeting its business obligations. In order to create competitive advantage for the firm it must overcome the above stated issues. Effective handling of these issues would not only provide competitive advantage but also improve the business process of the organisation thereby generating greater profit margins for the firm. The study would try to formulate effective recommendations for the organisation which would be based on various strategic concepts. Handling Competition The competitive market of UK is highly intensive and is characterised by the presence of large number of market players. The market scenario is dotted with numerous big and small players who are making every possible attempt to grab a share of the market. Financial crisis and subsequent credit crunch has further intensified the competition among the market players. Demand supply mismatch resulting from lower purchases has led to severe rivalry among market players in an attempt to maintain their profitability. Improving Environmental Sustainability The basic objective of Wulvern is to provide quality and affordable housing to customers. Organisations across the world are becoming increasingly aware about environmental sustainability. Construction leads to generation of environmental wastes that must be handled with care to minimise the threats caused to the environment. Wulvern is committed towards providing environmental sustainability. As a part of imparting its responsibility towards the environment the firm has taken up considerable steps that aim to provide quality green housing facilities which on one hand would provide sustainable environmental solutions. Carbon emissions have proved to have considerable threats on the environment. It has been stated that approximately twenty five percent of the entire emissions generated in the nation come from domestic households which includes everyday routine activities like cooking, lighting, heating etc. A study conducted by the UK government aims to reduce its carbon emission count to zero by the end of the year 2016. The proposals of the study aims to achieve this in a stepwise manner in which it would reduce emissions by 25 percent by 2010 and about forty four percent by the year 2013. Highly sustainable environmental standards would be implemented and executed for this purpose. Wulvern has implemented a strategy that would create conditions that would reduce the water usage in homes by about twenty percent. A code of sustainability for homes has been prepared which would serve as a guideline for consumers regarding the various sustainability measures. It would contain information about the maximum rate of emissions that could be emitted by households while keeping environment sustainability in mind (Department for Communities and Local Government, 2007, p.9-10) Improving Service Standards One of the most critical areas of a firm’s competitiveness involves setting up high service standards. Presence of numerous competitors results in large scale competition. Service standards create distinction among firms as consumers use service standards to compare and contrast between firms offering similar products and services. An audit inspection report gave a one star rating to Wulvern with regards to the standards of service provided by the company. The report stated that Wulvern’s excellence in service areas includes aspects like efficient customer care process, involvement of residents, adaptations and finally improvements with regards to planning and execution. In spite of these accolades, the report also states certain drawbacks in its service quality like improper repair and maintenance services, absence of anti-social behaviour strategy and absence of feedback mechanisms, improper handling of gas supply and distributions (Audit Commission, 2009, p.1-2). In order to improve service standards the organisation must formulate effective strategies like a feedback mechanism from its residents. This would not only induce customer confidence but would also provide feedback about the firm’s products and service offering. The strengths identified could be utilised to create improvements in service standards. Weaknesses should be taken note of, and urgent remedial measures must be taken to address the grievance of the tenants. Improving Procurement Strategy Procurement involves purchase of goods and other supplies by an organisation. A study conducted by the Audit commission of UK states that Wulvern does not have an effective procurement strategy (Audit Commission, 2005, p.7). Old Wulvern can implement an e-procurement policy which would help in providing sustainable advantage to the organisation. Andersen (2004) in his book quoted Mitchell who defined e-procurement as “the process of electronically purchasing the goods and services needed for the successful running of an organisation” (Andersen, 2004, p.109). E-procurement involves integrating the numerous suppliers and vendors in a single system. E-procurement assumes considerable importance in the real estate sector which is characterised by large number of suppliers and vendors. The advantages of incorporating e-procurement includes cost effectiveness, significant reduction the cycle time of procurement, considerable reduction in the entire cost of administering a project, improvements in control measures, enhanced power of bargaining and finally time management (KPMG, 2001). The advantages stated above indicate numerous opportunities for Wulvern with regards to improving its efficiency in conducting business. This would reap numerous benefits to the organisation which would help in reducing cost. The benefits cost reduction could be passed on to the consumers who would get better value for the products and services offered by the organisation. This would generate sustainable competitive advantage for the organisation. Funding issues at Wulvern Funding issues have arisen in the organization after the outbreak of the financial crisis which has shrunk the volume of credit available to business organizations. Lack of funds delays execution of projects which leads to cost escalations. The solution for the organization lies in identifying other sources of resources which includes private investment. Cost cutting techniques could also be adopted as it would help to reduce the cost of business operations. The TSA report published in 2009 states that the organization is yet to utilise its full loan capacity. This implies that Wulvern has an efficient fund management process which has led to creation of surplus sources of revenue for the organization (TSA, 2009, p.5). Setting organisation goals Vision and Goals of Wulvern The company’s strategic planning report states the following points as the goals for the organization over a period of five years starting from 2009 till the year 2014. These are as follows: 1. Ensuring diversity and equality 2. Providing value for money 3. Ensuring better health and safety standards 4. Proper management of risk (Wulvern-a, 2009, p.2) According to the latest corporate plan of the organization Wulvern has prepared a three point objectives that would guide its business activities over the next few years. These objectives are stated below: 1. Promoting Growth 2. Ensuring better service delivery 3. Promoting sustainability in operations (TSA, 2009). The strategic vision of Wulvern is ‘Excellence through growth’. The mission statement of the organization is ‘to provide better quality standards in every business activity of the organization’. Red Ocean Strategy Blue Ocean strategy was first formulated in Harvard Business School by a group of authors named W. Chan Kim and Renee Mauborgne. According to this concept, ocean represents the entire market space. Blue oceans represent an area or market place which is uncontested and is characterised by fewer number of competitors (uncontested business market). This concept uses ‘sharks’ as a metaphor for market players. In a typical ‘Blue ocean’ set up, competition is low in the market. The market players or sharks remain peaceful or less aggressive which imparts a natural blue colour to the ocean. In contrast, red oceans are characterised by the presence of large number of competitors or ‘sharks’ are trying to gain a significant portion of the market share. The conflict over business leads to severe wars among the market players or sharks in the ‘ocean’ resulting in bloodbaths which imparts a red colour to the oceans (Kim & Mauborgne, 2004). The prevalent market scenario in the real estate market in UK could be termed as that of a red ocean. Certain strategies that can be implemented Wulvern include the following: 1. Wulvern must try to exploit the prevailing market conditions (Kim & Mauborgne-a, 2004, p.5). The main advantage of Wulvern is that it provides both rented and leased housing space. Reduction in demand for new home could be balanced by its product offering of rented homes. The company must use its expertise and brand image to generate demand among the existing customers. It can enter into tie ups with selected financial institutions to ensure easy availability of credit for customers. 2. Wulvern can conduct a value to cost tradeoffs to meet the challenges posed by reduction of revenue margins which has been in force since the financial crunch of the nation. 3. Wulvern can adopt a low cost strategy wherein it would try to provide cost effective housing solution to the customers. Strategic advantage of the firm should be used to exploit the market weakness and generate competitive advantage for the firm. Wulvern must formulate effective promotional campaigns for conveying its message to the customers. This would not only help the firm in creating awareness among the customers but would also help in generating competitive advantage for the organisation. Balanced Scorecard Every strategic measure requires an examination and evaluation as to whether it successfully meets the desires objectives and goals. Analysis of strengths and weakness would help in identifying the areas of relative strengths and weakness. Immediate steps could be taken for addressing the issues related of a business process. The balanced scorecard approach is a technique that helps to analyse a particular business process. The concept of balanced scorecard was introduced by Kaplan and Norton. The basic advantage of the use of this technique would help in analysing the non financial aspects in addition to the traditional financial aspects that are being used to evaluate organisations. A balanced scorecard technique analyses a business strategy by four broad perspectives namely: financial perspective, consumer perspective, internal business perspective and Growth and learning perspective (Kaplan & Norton, 1996, p.44). Figure 3: The Balanced Scorecard Approach (Source: Balanced Scorecard Institute, 2010) In order to implement the balanced scorecard approach the Wulvern can set up a special task force that would comprise senior members of the organization. They would analyse the different strategies adopted by Wulvern with regards to the effectiveness of the strategies in achieving their objectives. During the process feedbacks from ground level employees must also be considered so as to gain a comprehensive analysis of the effectiveness of the strategies adopted by the organization. Balanced Scorecard Framework for Wulvern Financial Perspective- Wulvern must ensure that its revenues meet the desired estimates, ratios like return on investment; return on assets must have a favourable value which is dependent on the average figures of the industry as a whole. Customer Perspective- Wulvern could formulate standards in service delivery and undertake feedbacks. Aspects like perception mapping could be used to evaluate the service quality standards of the company. Corrective steps could be taken to ensure delivery of efficient service to the customers. Learning and Growth- Wulvern can introduce training programs like on the job training. Employees must also be given feedbacks regarding their knowledge levels after proper evaluation. Knowledge sharing must also be given due importance. Internal Business Process- Internal Business processes include aspects like production techniques. In order to evaluate these aspects Wulvern can ensure quality checks and inspections; time taken for project completion also reflects the efficiency of its internal business process. Critical analysis could be performed to analyse aspects as to whether projects have been completed on schedule. These aspects would reveal the effectiveness of the strategies employed by the organization. Immediate steps should be taken for addressing areas of concerns and the strengths should be further capitalised to ensure competitive advantage for the organization. Conclusion The study conducted above throws significant points about Wulvern with regards to its business process. The organisation has certain strategic advantages which includes a formidable brand name. The housing sector has been hit hard by the impact of the financial crisis which has shrunk the credit markets. This has led to a sever mismatch in demand and supply aspects of the industry. The study also reflects many other challenges for the organisation which includes service quality aspects, procurement and environmental sustainability issues. The company must utilise its strengths and try to formulate effective strategies for addressing the weakness and gaining in on the opportunities. The UK market represents tremendous potential for the organisation considering the fact that it is one of most advanced nations of the world with high purchasing power parity. The solution for the organisation lies in adopting suitable strategies that tend to address its issues of concern. Adoption of measures like e-procurement, environmental sustainability would not only improve its effectiveness and efficiency with regards to conducting business operations but would also provide the organisation with sustainable competitive advantage which would reap long term benefits for the organisation. References and bibliography Ahlstrom, D & Bruton, G.D. (2009). International Management: Strategy and Culture in the Emerging World. Cengage Learning. Andersen, K.V. (2004), E-government and public sector process rebuilding: dilettantes, wheel barrows, and diamonds. Springer, Japan , KK Audit Commission, 2005. Inspection Report Wulvern Housing Limited. [Pdf]. Available at: http://www.auditcommission.gov.uk/SiteCollectionDocuments/InspectionOutput/InspectionReports/2005/WulvernHousingInspection12May05REP.pdf [Accessed on November 12, 2010] Audit Commission , (2010), Short Notice Inspection, Available at: http://www.audit-commission.gov.uk/SiteCollectionDocuments/InspectionOutput/InspectionReports/2010/201002wulvernhousingsni.pdf Balanced Scorecard Institute. 2010. Balanced Scorecard Basics. [Online], Available at: http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx [Accessed on November 12, 2010]. CIA. 2010. The World Factbook. [Online], Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html [Accessed on November 12, 2010]. Cheshire East Council, (2009), Review of the Housing Options and Homelessness Service. [Pdf]. Available at: http://moderngov.cheshireeast.gov.uk/ecminutes/Published/C00000241/M00002485/AI00006978/$HomelessnessReviewFinal.docA.ps.pdf [Accessed on November 17, 2010]. Dagmar Recklies, (2001), Porters 5 Forces. [Pdf], Available at: http://www.themanager.org/pdf/p5f.pdf [Accessed on November 12, 2010]. Department for Communities and Local Government, (2007), Homes for the future: more affordable, more sustainable. [Pdf]. Available at: http://www.communities.gov.uk/documents/housing/pdf/439986.pdf [Accessed on November 12, 2010]. Delloite. 2010. REAL ESTATE INDUSTRY REPORT. [Pdf]. Available at: http://www.invest.gov.tr/enUS/infocenter/publications/Documents/REAL.ESTATE.INDUSTRY.PDF [Accessed on November 12, 2010]. Emory University, (2008), Porters Five Forces Analysis. [Online]. Available at: http://guides.business.library.emory.edu/porters_five_forces [Accessed on November 12, 2010]. Kaplan, R.S & Norton, D.P.A, (1996), THE BALANCED SCORECARD. Harvard Business Press. Kim, W.C & Mauborgne, R, (2004), Blue Ocean Strategy. [Online]. Available at: http://hbr.org/2004/10/blue-ocean-strategy/ar/1 [Accessed on November 12, 2010]. KPMG. (2001), E-procurement Realising Benefits in Higher Education. [Ppt]. Available at: http://net.educause.edu/ir/library/powerpoint/EDU0182.pps [Accessed on November 12, 2010] Portland State University,(2010), Michael Porter’s Five Forces Model. [Pdf]. Available at: http://www.sba.pdx.edu/faculty/hpettit/five_forces.pdf [Accessed on November 12, 2010] TSA. 2009. Tenant Services Authority Regulatory Judgement. [Pdf]. Available at: http://www.tenantservicesauthority.org/upload/pdf/Wulvern_Housing_Limited_RJ.pdf [Accessed on November 17, 2010]. Wulvern ,(2010), Who we are. [Online]. Available at: http://www.wulvernhousing.org.uk/introducing-wulvern/ [Accessed on November 12, 2010] Wulvern-a,(2009), Vision, grow, sustain, improve. [Pdf]. Available at: http://www.wulvernhousing.org.uk/attach/publications/0053%20Wulvern%20corporate%20plan%20LOW%20RES%20FOR%20WEB%282%29.pdf [Accessed on November 12, 2010] Wulvern (2010). Wulvern’s Annual Report 2009-10. Retrieved November 16, 2010, from Wulvern Web site: http://www.wulvernhousing.org.uk/attach/publications/Annual%20report%20web.pdf Wulvern. (2010, September). Our Performance. Retrieved November 16, 2010, from Wulvern Web site: http://www.wulvernhousing.org.uk/performance/ Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: text & cases. 8th ed. Harlow: Pearson Education. CHA. (2010). Housing Associations in Cheshire. Retrieved November 16, 2010, from Click Housing Associations Web site: http://www.clickhousingassociations.co.uk/housing-associations-cheshire-page2.asp Read More