Strategy Process of Anheuser-Busch Inbev, Virgin Airways and British Council - Case Study Example

Strategy processes in private sector organizations are similar to the strategy process in public sector organizations. Executive Summary This paper analyzes whether Strategy processes in private sector organizations are similar to the strategy process in public sector organizations, with three effective examples, namely two organizations from the private sector and one organization from the public sector. It analyzes the strategy process of Anheuser-Busch InBev, Virgin Airways and British Council through Porter’s Five Force Model and Balanced Scorecard. After thorough analysis and arguments, the paper concludes that there are many similarities in the strategy management processes between private and public sector organizations as both have the same goal or aim, which is customer satisfaction although the outcomes are different. Public sector organizations have outcomes which include socio-economic change and societal betterment. Private sector organizations have customer satisfaction, gain in market share and revenue increase as the main outcome. Despite this, the fact remains that strategy processes are similar in both sectors as the aim or goal is common. Strategy Processes in Private Sector and Public Sector Organizations. Introduction “Strategic Management is the conduct of drafting, implementing and evaluating cross-functional decisions that will enable organizations to achieve its long-term objectives.” (David, 1989). The strategic management process varies widely from company to company. Public and Private sector managers function in different contexts which generate distinct constraints on their behaviours, choices and actions. Ring and Perry (1985) have identified five specific differences in strategic management between public and private sector. Firstly, policy ambiguity can be clearly seen in public sector organizations. Since the general management functions of the government are spread across constitutionally across federal, state and local branches with more than one legislative body, to prevent concentration of power, it often results in vagueness and ambiguity in policy and objectives of the company. In contrast private sector organizations function within a framework of a relatively clear and stable set of goals such as growth, profits and market share. The second differentiating factor is the levels of openness. Policy making in the public sectors is a much more open process and is often subject to the eye of the media which plays a very vital role. Private sector organizations on the other hand are not exposed to scrutiny by the public as the media coverage of the same is limited. Public sector managers and management not only face challenges because of its openness and levels of scrutiny from the media, it also faces challenges because of the paradoxical nature of public administration (Whorton and Worthley, 1981). Thirdly, public sector organizations have attentive public. The openness of public sector makes its imperative for managers and the management of public sectors to pay increased attention to the general public. Strategy management process in the public sector must consider a wider range of stakeholder interests. In private sector organizations, the level of attentive public is much less when compared to the public sector. The fourth differentiating factor is the issue of time. Time constraints are present in any kind of organization. However, public sector organizations are subject to a higher level if time constraint due to the tenure of public officials and legislative time constraints imposed by courts, or any other political force. In private sector time constraints are brought about by the kind and rate of market changes and the natural interaction of market forces are not influenced by legislative orders or political influences. The final differentiating factor as pointed out by Ring and Perry is the aspect of shaky, unstable coalitions. In public sector organizations, employees often have to form coalitions to get policies passed successfully. These coalitions are often unstable and tend to break up during the implementation process. These coalitions are practically non-existent in private sectors and if they exist are not unstable. Also, values and leadership play a vital role in the strategy formulation of public sector organizations due to their broad socio-economic objectives. They also require a theoretical model that makes way for their special motivational characteristics. Hence leadership and values play an important role in the strategy process (Steane, 1997). Analysis of Private and Public Organizations The following sections of this paper will analyze the differences between public and private sector organizations using the examples of two public and one private organization. The first organization to be analyzed is a private sector organization called Anheuser-Busch InBev, a leading global beer brewer and one of the world’s top five consumer product companies. They operate in six international zones and market close to 300 brands. Their primary objectives and goals include commitment to responsible drinking with specific programs in each market, commitment to strong environmental management with the recycling of 92.7% of the company’s waste and encouraging young talent with their programs. The strategic management process in Anheuser-Busch InBev will be discussed through Porter’s Five Force model and Balanced Scorecard (Anheuser-Busch InBev, Online). Porter’s Five Force model is a business strategy tool used to identify the attractiveness or value of the industry. This is identified by analyzing five fundamental forces. Rivalry - Anheuser-Busch InBev faces a significant amount of competition and rivalry from various popular brands occupying a considerable amount of market share. While Anheuser-Busch InBev has close to 21.8% of market share only in the UK, Heineken is the market leader with 28.2% market share. Other brands such as Scottish & Newcastle, Sabmiller, Calrsberg Breweries A/S etc also occupy significant market share, although Heineken is the primary rival. There is an extensive amount of rivalry in this segment as product differentiation and switching cost is not very high. Most rival drinks are priced at the same level and contain the same ingredients and hence give the same effect. Threat of Substitutes – There is a reasonable threat of substitutes as there are a number of players in the market. However, the largest threat is from the market leader Heineken who can take over some market share of Anheuser-Busch InBev as there is very little difference between the two, both in terms of price and product differentiation. Barriers to Entry – the primary barrier to entry are government regulations regarding alcohol, regarding responsible drinking and other health organizations that may be against drinking. Brand loyalty could also be considered as a barrier to entry as Heineken has gained some image both as a brand and as a market leader. Power of Buyers – While on one side the lack of much product differentiation and price of switching may work against Anheuser-Busch InBev, on the other hand, it may work to an advantage as buyers may see this as a reason to try out a new brand and indulge in a switch over. Power of Suppliers – The primary supplier for the beer industry is the cereal grain supplier who provides malted barley, wheat, maize and rice. Anheuser-Busch InBev may be placed at a disadvantage as beer industry is not the key industry for cereal grain suppliers. Additionally because of the larger number of players in the market, the switching cost for the supplier is very less as it is easy for him to find new customers. The effects of the above complex dynamics include a few new customer demands and fresh policies aimed at becoming the market leader. Consumers are continuously looking out for new products with a difference. Hence it is essential for Anheuser-Busch InBev to introduce more product differentiation to gain customers and supply good quality beer to satisfy existing and future customers. Anheuser-Busch InBev must try to incorporate the above analysis in its strategic process for both short and long-term. It must take up a strategic process that is customer-centric and one that builds the image of the brand as such. The following Balanced Scorecard will also provide some insight into the strategy process required for a private sector organization such as Anheuser-Busch InBev (Evans, 2002). Source: Value Based Management, Online From the above perspectives, it can be said that a consumer-centric strategy which increases efficiency and revenues is required. The first strategy that Anheuser-Busch InBev used was to win over the customers with their brand portfolio. With over 300 brands to their credit, they have handpicked a group of focus brands which they believe will most effectively build deep relationships and connections with customers. Additionally they have devised another strategy in order to win over customers at the point of connection, i.e. the stores, is the use of sales, merchandising and effective distribution, through supplier partnerships etc. Lastly, they achieve efficiency and increase in revenues through quality leadership and direction, accompanied by accountability of the Board to the shareholders. The second organization that this paper will analyze is the British Council. The British Council is a public sector organization and is UK’s international organization for the promotion of educational opportunities and cultural relations. Apart from education, the organization runs programmes in arts, science, sports, governance and the English language. The British Council is a non-departmental public body, with the Foreign and Commonwealth Office as its sponsoring department. The Secretary of State of Foreign and Commonwealth is answerable to the parliament for its policies and operations. The main purpose of the organization is to build engagement and trust for the United Kingdom through the exchange of knowledge and ideas between people from all over the world. Using Porter’s Five Force model, we can analyze the strategic management process used for a public sector organization such as the British Council. Rivalry – British council activities are not based on gaining market share or becoming the market leader and hence there is no rivalry per say. Threat of Substitutes – Since the British Council is not dependent on gaining market share or becoming the market leader, it results in lack of rivalry. Hence there is not much threat of substitutes. A few minor threats include private organizations which promote education and culture although there are few organizations that can match up to the size of British Council. Barriers to Entry – The British Council have no visible barriers to entry within the United Kingdom itself. However, on a global level, in other countries it may face political and cultural barriers in that specific country which may threaten its entry. Power of Buyers – The buyers in this context refers to students interested in education, patrons of culture and cultural activities and educational institutions who tie up with the British Council. Since there is not much competition and the switching may not be feasible, British Council enjoys greater advantage wherein its buyers do not wield a great amount of power over it. Power of Suppliers – The only main supplier for the British Council comes from the countries where it is housed. The country provides space, electricity etc., and hence must always be kept in the good books in order to retain their interest and goodwill. From the above analysis we can ascertain that a customer based approach, which can retain the goodwill of the host country, is required for the British Council. A strategy that will aim to achieve a broader socio-economic and political end is necessary for the British Council, to enable it to achieve its goals and objectives. This socio-economic approach will retain existing customers and draw in new customers. The British Council will also require a strategy that will improve the organizational structure and the internal working of the organization to provide better services. Analyzing the same through the following Balanced Scorecard, we can aim to understand the strategy management process required for the British Council. Source: Value Based Management, Online From the above analysis it can be concluded that the British Council requires a broader socio-economic strategy aimed at the development of quality education, bringing about change in the societies they operate for the better and the building of influence for UK overseas. To achieve this they have proposed three main broad themes which include, Intercultural Dialogue which aims to strengthen levels of understanding and trust between people in UK and other societies, UK Creative and Knowledge Economy which seeks to enhance UK’s reputation as an effective partner for skills development, especially in education and creative sector and lastly Climate Change which aims to increase support for the achievement and implementation o international agreements that address the threats posed by climate change. In order to meet the above objectives, the British Council has devised a strategy that increases leadership capability and staff profile as they have recognized the need for both. The strategy also includes four types of changes including perception change referring to changing audience opinions, agenda setting which refers to changing priority given to an issue, capacity building referring to increasing capacity of personnel, skills, resources etc and institutional change referring to changing organizational policy and civic structures (British Council, 2008). The third organization that this paper will aim to analyze is Virgin Atlantic Airways. Started by Sir Richard Branson 25 years back, it is a larger part of the Virgin Group which is a leading branded venture capital organization and is one of the most popular brands in the world. The main purpose of the Virgin group is making a difference and they believe in providing value for money service, quality, innovation, fun and encourage competitive challenge (Virgin Airways, Online). The following is Porter’s Five Force analysis of Virgin Airways. Rivalry – The primary rivals include British Airways, Continental Airlines, easyJet, American Airlines etc. British Airways is clearly the market leader with 47% of market share, with easyJet flowing far behind with 8% market share. Virgin Airways follows close behind with 7% market share. Hence the biggest rival is British Airways. Threat of Substitutes – The primary threat stems from easyJet as the switching cost and product differentiation is not very high. Barriers to Entry – The barriers to entry for Virgin Airways come in the form of government regulations which may have certain specific rules for private airways and brand loyalty. Power of Buyers – The fact that the switching cost for buyers is very less and there is lack of product differentiation, can work as an advantage for virgin Airways. Since they promote their brand as a fun product with value for money and quality consumers may be highly interested. Power of Suppliers – The main supplier for Virgin Airways is the fuel supplier. He has significant bargaining power as the switching cost is low due to many competitors at the same level. Hence his goodwill must be retained. Hence a strategy that can gain market share and enable Virgin to become the market leader is required. The following Balanced Scorecard will give further insight into the strategy that is required. Source: Value Based Management, Online From the above four perspectives, we can infer that the main objective of Virgin Airways is to provide value for money, quality services, gain customer satisfaction and obtain market leadership. For this a customer-centric strategy is required. To achieve this Virgin Airways has put forth a strategy that aims to answer questions such as whether there is opportunity in the market to gain competitive advantage, what are customer requirements, what value can be added, and whether there is a reasonable tradeoff between risk and reward etc. Talented people from throughout the Virgin group are also called upon to formulate and implement these strategies. The management style as such of Virgin Airways is also a strategy that aims to achieve its objectives. Conclusion In conclusion, based on the above examples of Anheuser-Busch InBev, Virgin Airways and British Council, it can be said that there are many similarities in the strategy management processes of private and public sector organizations. For both public and private sectors customers or clients are the most important or central aspect of the business. Customers are the backbone of the business. Hence both follow a customer-centric approach to retain existing customers and gain new customers, although their outcomes may be different. For instance public sector organizations aim at socio-economic and societal developments. British Council shows proof of this as it focuses on the development of quality education, better relations among cultures and environmental betterment. Anheuser-Busch InBev and Virgin on the other hand aim for customer satisfaction and increase in revenues. But both aim at customer retention and customer gain. Hence it can be concluded that while outcomes may be different, the aim is the same, namely customer satisfaction and hence strategy processes of public and private sector organizations are similar. References Anheuser-Busch InBev. About AB InBev. Anheuser-Busch InBev Website. Retrieved July 15, 2009. http://www.ab-inbev.com/go/about_abinbev.cfm British Council (2008). Corporate Plan 2008-11. British Council website. Retrieved July 15, 2009. http://www.britishcouncil.org/new/Documents/7.1.2.4%20Corporate%20Plan%20-%20vision,%20purpuse%20and%20values%20-%20Who%20we%20are%20-%20British%20Council.pdf David, F (1989). Strategic Management. Columbus: Merrill Publishing Company, 1989. Evans, M H (2002). Course 11: The Balanced Scorecard. Excellence in Financial Management. Retrieved July 15, 2009. www.exinfm.com/training/pdfiles/course11r.pdf Ring, P S and Perry, J L (1985). Strategic Management in Public and Private Organizations: Implications of Distinctive Contexts and Constraints. Academy of Management Review. Vol.10, No.2. p 276- 286 Steane, P D (1997). Oils ain’s Oils. Strategy Across Sectors. The International Journal of Public Sector Management. Bradford 1997. Vol. 10, issue 6. p 461 Virgin Airways. About Virgin. Virgin Group Website. Retrieved July 15, 2009. http://www.virgin.com/about-us/ Value Based Management. Balanced scorecard. Value Based Management website. Retrieved July 15, 2009. http://www.valuebasedmanagement.net/methods_balancedscorecard.html Whorton, J W and Worthley, J A (1981). A Perspective on the Challenge of Public Management: Environmental Paradox and Organizational Culture. Academy of Management Review. Vol. 6, No.3. p 357 – 361 Read More