The Management Models to Assess Environment - Research Paper Example

The Management Models to Assess Environment A firm’s environment management plays a very important role in its financial performance. Earlier, there used to be some misconceptions that meeting the environment challenges bring the profit margins down. On the contrary, such initiatives increase a firm’s profit. The environment management models add to the performance of future financials that can be measured empirically. Good performance in environmental initiatives provides positive returns and weak management creating a crisis generates negative returns for a firm. Customers prefer to buy only those products and services that don’t harm the natural climate and environment. Even corporate shareholders prefer expenditure on cleaning the environment. Separate environment reports are published annually on business ethics, corporate social responsibility, climate change effects and related crises. Company Introduction – BMW BMW -- Bayerische Motoren Werke -- is an automotive legend into car and motorcycle manufacturing. The aeronautical industry has enriched with the arrival of BMW, which is in both engine manufacturing and making of deluxe cars. It has its headquarters in Munich in Germany. It has 10 production sites out of which 7 are in Germany, 1 in Austria, 1 in South Africa and 1 in the United States. It is also into manufacturing of engines for civil aviation, via its joint venture with Rolls Royce. Introduction of Challenge 1: BMW Credit crunch BMW credit crunch, although is not directly associated with environment compliance issues but the recent economic downturn in the economy has created a challenge of credit crisis. Economic crisis worldwide has affected BMW Group’s performance. The challenge of credit crunch, the vicious circle of which started with the so called sub prime mortgage fiasco, took all industry segments in its fold. The reactionary market forces affected the financial markets the maximum, which play the pivotal role in energising demand of products and services by financing and refinancing loans to car and motor-cycle buyers of new and used vehicles. Severe damage to the prevailing economic climate in the year 2008 went on worsening the situation in international financial market to the extent not known before in the past. The fast downturn pace of the economic crisis and uncertainty over its future turn affected the BMW Group’s performance in the financial year 2008. Consumer spending during the second half of the year got decreased due to this uncertainty, as a result, the whole world’s car markets suffered. Same thing happened to used car market, which negatively impacted the BMW Group’s stats. The rising refinancing costs in the global market further worsened the situation. Adding fuel to the fire were weak US dollar in the first half of the year and the British pound following the same path by going down in value, thus, adversely impacting the BMW Group’s finances. Although raw material costs saw a sharp decrease, commodity market didn’t show any sign of improvement. A cut in work force size, as announced earlier, was to be implemented. Production also decreased due to model life cycle factors, further cutting the number of cars to be sold. In total, the BMW Group sold 1,435,876 BMW, MINI and Rolls-Royce cars in the year 2008, which was 4.3 % lesser than the last year. In motor-cycle segment, the BMW Group reached the previous year target, selling 101,685 motorcycles, thus, maintaining its position in tightening market. The BMW credit crunch pinched the company’s earnings and revenue. The Group’s revenue decreased by 5.0% to euro 53,197 million. Additional risk provision against bad debts amounting to euro 1,968 million was made. The challenge of credit crunch with the deteriorating world economy has made forecasting difficult for the year 2009. Remaining on safe side, the group has taken a number of collectively coordinated steps and high level of flexibility to adapt to the changing environment. Employees have been deployed flexibly in the production network. Their time accounts and leaves are being managed by consulting their representatives besides making short time working arrangements. As a result, the company is getting more competitive advantage of changing production strength according to sales market demands. It has applied the formula Number ONE of taking enterprising decisions and redirection initiatives. Opportunities hopefully will emerge as the external economic situation improves. BMW range of models has got renewed with, for example, the new BMW Z4 and the MINI Convertible shown at the North American International Auto Show in Detroit. BMW 7 Series has got good response. Further additions are in the pipeline. BMW’s profitability program in fixed and variable costs is showing positive results. It has been achieved by strict application of benefits of scale, standardization of processes throughout the business and better capital management. Innovation in new products will create positive results in the coming time. A feeling of confidence prevails with the implementation of strategic measures. Aligning with CO2 emissions based tax will bring the company in line legally and create new opportunity to go ahead of others in the matter of technology. All these steps definitely will bring the BMW Group out of the credit crunch by boosting sales in new and used car market. A lot depends on market volatility in the year 2009 for the financial services component. Foremost is the availability of lucrative credit and lease products for the buyers of BMW, MINI and Rolls-Royce brand cars. Easy credit is must for the long term volume growth of business for the company and through dealer financing as well. Hopefully, with its Number ONE formula strategy besides cost cutting and improvement in quality and value-added tactics, the challenge of credit crunch will be faced with dexterity. Company Introduction – Club Med Club Mediterranee is a French public limited company having its registered and head office in Paris, France. Club Mediterranee Group’s parent company is Club Méditerranée SA. It operates Villages under the Club Med brand in France and abroad besides acting as the Group holding Company. Club Med is into resorts business, over 80 resorts throughout the globe offering a world full of activities for children’s club, sports equipments customised with tourists’ room, travel, dining and vacation style. It came into existence on 12 November 1957. The company distributes village resorts through its direct network and indirectly through travel agencies. Business is carried in the ratio of 50:50 for direct and indirect distribution of vacation Villages. Introduction of Challenge 2: Club Med-Climate Change Climate change is a big challenge for Med Group as it affects the sustainable development practices initiated by Club Med for energy saving, fuel, water and bio-diversity. The group’s vacation Village activities depend to a great extent on weather conditions. Primary climate risks include natural disasters like hurricanes and tornados. Club Med covers such risks through insurance policies. To minimise adverse climate change impacts on the Club Med business activities, environmental risks are well managed, as both climate and environment forces create a cause and reason effect and are two sides of the same coin. To check environmental risks occurring through technical installations at vacation Villages, periodic checking is made. Club Med is taking extra strides in controlling carbon foot prints. Reducing carbon in the atmosphere plays an important role in fighting against climate change. To become Green Globe certified company, it has associated with Carbonfund.org. In its efforts to offset carbon emissions, Club Med will help in maintaining the status quo of snow capped mountains, rain forests and reefs. The partner company is into three kinds of carbon offset projects: renewable energy, energy efficiency and reforestation. Hopefully, this collaboration of Club Med with Carbonfund.org will pave the way for becoming a Green Globe company. In the fiscal year 2008, no such environment guidelines and warrantees were needed as no such risk was found existent. The Med Group otherwise takes action to save natural resources like energy, water and other related issues as part of its sustainable development policy on progressive decrease in energy consumption in the Villages via “tech care” system of saving energy in Villages. In the fiscal year 2008, the Med Group had no legal environment liabilities. As per its policy, all subsidiaries outside France are bound to follow the environment policy besides adhering to local guidelines on environmental issues affecting climate change indirectly. By providing insurance risk coverage to its properties affected by climate change, Club Med identifies risks through its major risk insurance programmes by partnering with Marsh, a world leader in insurance brokering. The leading insurers for damage programme are ACE and London market. Through modeling tools of reinsurance companies and policy on protection of property assets because of natural calamities, Club Med covers losses. In a measure to enable renewal of its programme on particular loss retention rules on 1 May 2008, additional capacities will be attained for natural events, which will reduce the premium budget by about 20%. This has been possible due to a thorough analysis of the exposure of company assets to natural climatic disasters. Company Introduction – British Aerospace BAE Systems is an international company involved in the development, delivery and support of high calibre defence, security and aerospace systems in the air, on land and at sea. Business is strongly enrooted in six home markets – Australia, Saudi Arabia, South Africa, Sweden, UK, and US. Its business operations are managed across the five continents. The company associates and customers are in more than 100 countries. British Aerospace is strategically well placed and organised in its home markets of Australia, Saudi Arabia, South Africa, Sweden, UK, US. Important facts include its being the 3rd biggest international defence company, making 100 new inventions each year. Challenge 3: British Aerospace-corporate social Responsibility The agenda of corporate social responsibility is deeply inherited in the company strategy. It is committed to strong business ethics, one of the CR agenda of British Aerospace. A special post of managing director, corporate social responsibility has been created to underline its dedication for doing responsible business on the international horizon. There is a hierarchy of line leaders and members of executive committee doing the home work on CSR. Since 2001, BAE Systems has been inculcating a spirit of responsible behaviour and culture throughout all of its businesses. It has delivered on the recommendations of the Woolf committee report in parameters of business conduct. The CSR strategy is focused at achieving the set goals. Keeping in mind the set objectives on ethics, 12% of available bonus was set against results on safety and ethics. The company is also developing environment and sustainability issues of its CR agenda. BAE has set business conduct objectives for the year 2009, which include commitment to high ethical standards through discussions with employees, discussions on the topics in meetings and conferences and initiating employees sessions on global code of conduct and ethical issues and developing a code of conduct for the Group among others such initiatives. An employee sample survey on significant ethics questions will be made in the fourth quarter of the year 2009. It will help in comparison of the results on CSR in the year 2008. BAE has thoroughly not only accepted the challenge of CSR but has left no stone unturned in making efforts in the leadership direction by following the Woolf committee recommendations. Its effects can be seen in employee segments, like safety issue where a standard has been achieved in performance level not deficient in comparison to others. It is the benchmark gap of 10% in the year 2008 in comparison to the year 2007 of 2000 days lost per 100,000 employees on days lost to work-related injuries. It was a little above 9% between Group performance and the external benchmark. On safety maturity matrix, 60% sites will cross to Level 4 from Level 3 by the end of 2009. Further, to achieve level 5 safety maturity matrix by the year 2011, a plan is already in the pipeline. Already, all operations sites have achieved Level 3 and incident rate targets have been set accordingly to show improvement by 10%. Diversity and inclusion are other topics on the agenda as identified in the Employee Opinion Survey. Business codes of conduct and safety issues are two of the Executive Committee’s top 10 objectives for the year 2009. Thus, BAE Systems is efficiently managing corporate social responsibility challenges. Company Introduction – Green King Green King is in the line of beer brewing and pubs business for more than 200 years. Starting the business with traditional ale brands from its base in Bury, St Edmunds, Suffolk, it has expanded with a range of pubs and restaurants. It is one of the major pub retailers and brewers. Green King is not only into renting and lease of pubs and restaurants but also into selling to the licensed trade. Customers of Green King are pub-goers, hotel guests, licensees, supermarkets and national pub chains. Green King has seen growth in reputation amid challenging conditions. It is seen as a good corporate citizen, as all business transactions are ethically negotiated. Challenge 4: Green King - Business Ethics Green King’s Loch Fyne restaurants’ chain is dedicated to following business ethics in not serving fish of endangered species. Full attention is paid to preserve and sustain natural landscape. Raw stock is derived from sustainable sources only. The Ethical Consumer Magazine in its spring 2008 report has shown appreciation for the Green King’s ethical approach in fish buying. White fish is sourced from farms or small day boats as deep sea trawlers harm the marine environment by their large nets on by-catch. Its decision to serve farmed salmon was also based on animal welfare criteria among other reasons. Suppliers had the RSPCA’s Freedom Food accreditation for their innovative concept on rearing, feeding and managing stocks. Environment concerns are taken care of through all the processes from distribution to disposal of waste. Green King will be publishing its environment KPIs as per the international Greenhouse Gas Protocol and the UK DEFRA terms. Through this framework, the company will exhibit to its stakeholders its deep concern and interest in environment improvement efforts. Business ethics through responsible attitude is shown in serving alcohol in pubs and to see that it is consumed responsibly. Warning on responsible drinking are displayed on bottles, cans and outer packaging besides quantity in units is written on the outer cover. New alerts will be added for female drinkers not to drink alcohol during pregnancy. Green King also complies with the Portman Group's code of practice on the naming, packaging and promotion of alcoholic drinks, and the British Beer and Pub Association's code on drinks promotions. As per accepted business ethics not to sell alcohol to under 18s and not to relate drinking with bravery, hyper attitude or mean to associate drinking as a status symbol or arousing in sexual desire, such messages are not conveyed through advertisements. Green King supports the campaign of Public trade magazine’s “Proud of Pubs”, in which due respect to the feelings of local communities and businesses is paid. The company supports the “Challenge 21” initiative to ascertain the age below 21 so that no doubt remains that customer is below 18. Further, there are no discounts provided in the pubs to discourage drinking as a habit in young generation. Full safety measures are taken by the staff. CCTVs are installed at English managed pubs. There is a local Pub Watch scheme for people to get mixed in safer environment for work and socialising. As per business ethics demand, all pubs are smoke-free. Full compliance has been made with the legislation in this regard. Challenges of business ethics are earnestly met by Green King. References: BAE Systems: Corporate Responsibility Report 2008 Our Strategy. [Online]. Available: http://www.baesystems.com/BAEProd/groups/public/documents/bae_publication/bae_pdf_cr08_our_strategy.pdf [9 May 2009] BMW Group Management Report: A Review of the Financial Year. [Online]. Available: http://www.bmwgroup.com/annualreport2008/_downloads/BMW_Group_Konzernlagebericht.pdf [9 May 2009] Club Mediterranean 2008: Registration Document. [Online]. Available: http://www.clubmed.us/cm/carbon-footprint-calculator-clubmed-vacation_p-115-l-US-l-US-p-115-pa-CARBON-FOOTPRINT-REDUCTION-115US-ac-ad.html [9 May 2009] Green King: Corporate social responsibility. [Online]. Available: file:///D:/Documents%20and%20Settings/Administrator/My%20Documents/Greene%20King.htm [9 May 2009] Read More