The CEO of the Eurotravel Company Lacks Leadership Skills - Essay Example

SWOT Analysis: STRENGTHS It is part of a larger leisure group d LG Leisure. 2. Euro Travel represents about 30% of its parent companys business. WEAKNESSES 1. Policy on ICT investment/expansion is very loose. 3. Local and cultural factors are ignored. 4. Information to assist in decision-making is either not used or is unavailable. 5. There is a wealth of tactic knowledge, which is not being used. 6. Senior managers are resistant to change. 7. The company has spent on ICT but is under-utilized. 8. Inappropriate incentive scheme. 9. Holiday booking software is complex and complicated. 10. Vague corporate level strategy. 11. Managing information strategy is also vague. 12. Ergonomics of sales desk is not ideal. OPPORTUNITY 1. LG Leisures diversification into theme parks and villa rental. 2. Explore the "intelligent agents" as suggested by HQ Germany. 3. Virtual Organization can be introduced to reduce the operating costs. 4. Use e-business to maximize the usage of technology. THREATS 1. Stiffer competition from larger tour operators who have swallowed up high street travel agents in UK and Germany. 2. The travel agency business is threatened by the power of suppliers, as they are the intermediaries between the airlines. 3. Bird flu virus. Issues Leadership Rhonda Fleming, the CEO of the company lacks leadership skills. She does not know how to concentrate on strengths and avail the opportunities. Most of her already existing strategies are not appropriate like the incentive scheme. Lets discuss how to manage this issue. Rauch & Behling (1984) define Leadership as the process of influencing the activities of an organized group toward goal achievement. DIRECTIONS: How can she become a good leader Explain the reasons for instructions and procedures. Care about employees and how are they doing. Give personal guidance and direction to her employees Be result oriented. Listen to all employees. Give credit where credit is due. Maintain an open door policy Celebrate success Handle disagreements privately Insist on training Have a good understanding of the job Be there when needed and spend time with her employees. Training The Information Communication Technology (ICT) is under utilized. Few managers are trained in the fine points of the ICT systems and don’t realize that it can be used for remote decision-making and storing/capturing information. Training is a course of study in which employees are trained to identify and work safely with hazardous materials. The company should realize the importance of training. Builds better communications skills. Develops hidden talent. Ensures consistent quality. Provides greater focus. Produces more effective/productive efforts. Clarifies the concept of marketing as a business process. DIRECTIONS: How to train our employees Video Classroom with and instructor On the job training with managers and key employees Computer based training Self study manuals Managing change At Euro Travels very few mangers know how to overcome potential resistance to change or even have had any experience of managing change. DIRECTIONS: How to manage change within Euro Travel Education and Communication This tactic assumes that the source of resistance lies in misinformation or poor communication. Participation Prior to making a change, those opposed can be brought into the decision process. Facilitation and Support The provision of various efforts to facilitate adjustment. Negotiation Exchange something of value for a lessening of resistance. Manipulation and Cooperation Twisting and distorting facts to make them appear more attractive. Coercion The applications of direct threats or force upon resisters. Effective Incentive Scheme Staff is unhappy with the arrangement of incentive scheme and tension is running high between the local management and the sales staff. Staff at Euro is also in competition with one another as the greatest amount of time saved per month by an individual globally, is rewarded with a cash payment. DIRECTIONS: Euro Travel in such a case should setup its own incentive scheme, which can produce effective results by keeping the following results in consideration. Communicate goals Communicate what you are doing and why is crucial to success. Everyone needs to know what the goals are and what are the rewards for achieving those goals. Know your objectives There is no point implementing an incentive scheme just because everyone else is. Establish what aspect of your business you are trying to improve, be it product knowledge, absenteeism rates, customer satisfaction or retention rates Convince the board If you have got the objectives right, know what you want to do, why and how, then winning the board over should not be too hard. Consult with staff As such schemes are all about staff participation, it makes sense to get them involved at the beginning. Find out what would motivate them to work harder or please more customers. Maintain momentum Management needs to keep banging the drum and alerting employees to any results, new targets or rewards. It needs to become part of the company culture. Make it pertinent This ties into ensuring the rewards are appropriate. Different departments or locations will probably have different objectives, so you need to establish what those are and how to reward them. Poor Management Staff feels that their needs at work are not being met and that there is too much "clock watching" by themselves and managers. They are dissatisfied not just by the incentive scheme but also by poor management. DIRECTIONS: Euro Travels needs to make its management system effective. 1. Give the staff a huge goal that will keep their attention and ask them to develop the strategies or steps to effectuate the goal. 2. Have daily or weekly reports or check-ins, daily at first. 3. Ask the staff how willing they are be to effectively managed and inform them in advance them of your particular style and of your high standards/expectations/requirements. 4. Get the person focused on actions and outcomes, not just goal setting and reporting. 5. Set up your staff/goals so that you can afford for them not to produce or that you can afford to fire them as this will free you up to manage well as being fearful or reactive. PEST ANALYSIS Political Due to war against Iraq the hotels from Paris to Rome to Berlin have seen a drop in reservations and anticipate a greater slowdown, in peak tourism season. This is due to fears of global terrorism and economic gloom in many parts of the world. The drop in visitors is all the more damaging because the worlds big spenders, the Americans and Japanese, top the list of those staying home. Economic Growth in the travel sector of UK is forecasted at 7% over the next five years, whilst in Greece it is forecasted to grow at a healthy 33% over the same period. There has been an angry reaction in the South West to an independent report, which has suggested the possible introduction of a tourism tax. Malcolm Bell, the chief executive of South West Tourism, has described the proposal as "barking mad". Many businesses said such a tax would be costly to administer and would stop people visiting the area on holiday. The cases of bird flu found in the swans would affect the tourism industry. H5N1 has been confirmed in wild swans in Austria, Bulgaria, Germany, and Greece. There is going to be an automatic creation of 3km (two-mile) protection zones and 10 km surveillance zones around outbreaks in wild birds. Socio-cultural The UKs tourist industry is in crisis. Tourists come for the castles, the culture, the landscape, the heritage. And these things have not changed. But the tastes of tourists have changed, making it essential for the industry to upgrade to meet their requirements. Twenty years ago, an en-suite bathroom was a luxury, today its a necessity. Technological Most of the travel agencies have started using e-business as a means of accessing the untapped markets. The usage of e-business saves time of the customer in terms of visiting the office as well as in terms of making payments to their chosen packages as the online credit card transactions have become very successful. Directions that Euro Travels should take: Product Development: Product development is a kind of strategy that would seek increased sales by improving or modifying present product or services. EuroTravel has a number of weaknesses to overcome out of which one of them is the ignorance of local and cultural factors. Secondly they have an opportunity to bring e-business into their organization. All they need to do is bring more tour packages into their existing packages, which would be taking place during the local and cultural events when customers have their public holidays. Usage of e-business would allow internet bookings that would reduce the hassle of customer coming over to the office. Concentric Diversification Over here EuroTravel can add new but related products to its existing product lines. As the number of tourist has decline after the bird flu virus, we should cater our customers to areas where bird flu is non-existent. Most of the people like to travel wherever there is peace. Therefore catering such customers who would want to travel during their vacations would be more willing to travel safer places in the world. For example Dubai, Malaysia, Singapore and so many other places have beautiful scenic wonders and are safe from bird flu. Porters Five Forces Threat of new entrants The threat of new entrants is favorable to the industry due to following reasons: Large firms have performance and cost advantage in this industry There are proprietary product differences in the form of different tour packages offered to the customers. Serviceable used equipments like ICT are expensive. Bargaining power of buyers The bargaining power of buyers is favorable to the industry as: There are a large number of customers with relative small purchases. Customers do not face significant costs when switching the suppliers as the overall package costs are approximately the same. The customers are highly sensitive to price. Threat of substitutes There are no such substitutes of travel agencies, therefore it is favorable to the industry. There are no real substitutes There is no such thing as performance being justified by their higher prices The customer will incur cost if her substitutes. Bargaining power of suppliers The bargaining power of suppliers is not favorable to the industry as It is not easy for travel agents to switch between suppliers There are no potential suppliers in the industry The cost of purchase has significant influence on the overall costs of the tour packages. Determinants of rivalry among existing competitors The rivalry among competitors is favorable to the industry due to the following reasons The industry is growing rapidly The fixed costs of the business are relatively low portion of total costs. The competitors are diversified rather then specialized. Further Directions Market Penetration This strategy seeks to increase market share for present products or services in present markets through greater marketing efforts. EuroTravels could use this strategy, as the current market is not yet saturated completely and there are chances of increasing the present customers with appropriate marketing efforts. Retrenchment EuroTravels could use retrenchment as a strategy as here an organization regroups through cost and asset reduction to reverse declining sales and profits. This strategy would suit EuroTravels as they have clearly distinctive competence but have failed to meet their objectives and goals consistently and secondly it is one of the weaker competitors in the industry. Conclusion: Tourist industry is one of the rapidly growing industries of the world. Taking correct strategic measures can help any travel agency to succeed in this field. EuroTravel as we know has a strength of being part of the LG Leisure group. But the internal analysis shows the need of strategic changes to be brought in. The internal analysis is so weak that their relation to LG Leisure is of no good to them. The overall structure needs to be modified from the CEO to the Sales desk. The application of above mentions directions and strategies should be taken into consideration for the success of EuroTravels. British Airways to cut pension costs Analysis By Ian Pollock BBC News personal finance reporter Thursday, 23 March 2006 How do you get your workforce to save you nearly half a billion pounds? Simple, soften them up with a long campaign about how a pension fund deficit is threatening the future of the company - and therefore their jobs - then ask them to pay more for their pensions. That is the plan that British Airways is now bringing to fruition. The airline is joining a growing number of employers who have been not only shutting their schemes to new joiners (something BA did three years ago) but also changing the future build up of pensions by current members of their schemes. Already firms like Rentokil, Sainsburys and Scottish & Newcastle have said they will reduce the value of their future pension provision. In BAs case its big final salary scheme will stay open to its 34,000 contributing members, for which they are probably very grateful. "We are keeping a final salary scheme while some other companies have abandoned theirs," chief financial officer Keith Williams said in the latest British Airways News. "Were also protecting current pensions with the changes only relevant to future service." But to stop the schemes deficit ballooning any further, membership is going to cost rather a lot more. Big cheque In 2003 the schemes actuaries said it was short of £928m, so a recovery plan was put in place. Under the plan BA will have soon paid in £350m. If BA can get the new arrangements in place by this time next year, it has also promised to top-up the fund with a one-off £500m payment. So, what is it worried about if it can afford to eradicate most of the deficit so easily? The funds actuaries will soon start on the next three yearly scheme valuation, and as a company spokesman acknowledged "it is common sense to assume the deficit will have grown even more". BA needs to make sure that the future cost of the scheme is reduced, so any new deficit is smaller or prevented altogether. "These changes are necessary to clear the past deficit and to contain the amount of future funding needed," BAs chief executive Willie Walsh said. "It means working longer to get a similar amount of pension, but one that is more secure." Retire later The big headline change at BA is that the normal retirement age will rise to 65. Hand in hand with this will be what is known in pensions jargon as a slower "accrual rate" - for each year of service, the staff will build up slightly less pension than before. As a result, the pension age of ground staff will rise from the current levels of either 60 or 63 while cabin staff will have to work an extra 10 years beyond the current retirement age of 55 to get the sort of pension they had been expecting. This is being phased in, with a retirement age of 60 operating for the first five years before the 65 year target kicks in. Pilots will also have to work longer - they will now have to fly until the age of 60 rather than 55. If countries like France and the USA can be persuaded to lift their ban on pilots flying over their territory beyond that age, then BA plans to raise their retirement age to 65 as well. So work longer - and pay in more as a result - to get the same pension. Other changes These arent the only changes. In line with new limits allowed by current legislation, the inflation proofing of pensions in payment will be restricted to just 2.5% a year. That means if prices shoot up at any time in the future, the real value of pensions for retiring staff will be severely reduced. Meanwhile, the top slice of any above-inflation pay rise will not be used to calculate future pensions. As a result, current staff will find that their pensionable salary - already set at just 85% of gross salary - will be even lower than their actual pay. Thus pensions may become increasingly disconnected to final salaries. These changes will not affect pensions currently being paid to around 15,000 retired staff. The new package will also not affect pension already built up. Therefore, if someone has been working at BA for 20 years and stays for another 20 their pension will eventually have two streams of income - some built up before 2007 under the current rules, and the rest built up afterwards under the new rules. What next? Under new laws BA, like all employers, is now obliged to consult with its workforce for at least two months over the proposed changes. Consultation does not mean agreement. But it is not supposed to be a sham either. The company says it will talk to trade unions and, crucially, to the schemes trustees - they hold the power to approve or reject the changes. There will be staff briefing sessions, questions and answers on BAs internal internet site, worked examples of how things might change for typical staff members and an opinion poll by MORI. Staff will also be able to write to BA executives with their views. The company will not be drawn on what it will do if its plans are rejected. Earlier this year the pilots union Balpa threatened to organise the first strike of its BA members if the current pension scheme was mutated into a less generous "career average salary" version. That sabre rattling appears to have had some effect. But Balpa said it would examine the new proposals closely. "The union is .... concerned that there is little room for individuals to make a choice on when they retire on a full pension" said general secretary Jim McAuslan. "The company may also be misleading its staff in the way it is communicating the changes to the scheme." Synopsis British Airways has decided to reduce pension costs strategically by benefiting the organization as well as the staff by making a few changes in the pension funds. The campaign informs the staff that how pension fund deficit is threatening the company and how can the staff pay more for their pensions. Firms like Rentokil, Sainsburys and Scottish & Newcastle have already said they will reduce the value of their future pension provision where as British Airways is now planning to implement. According to Keith Williams the financial operator of British Airways they plan to keep the final salary scheme as well as protect the pension funds with changes only relevant to future service. In 2003 the schemes actuaries said it was short of £928m, so a recovery plan was put in place. Under the plan BA will soon have paid in £350m. If BA can get the new arrangements in place by this time next year, it has also promised to top-up the fund with a one-off £500m payment. These changes are necessary to clear the past deficit. It means working longer to get a similar amount of pension, but one that is more secure. Their next plan is to make their staff retire later by changing the normal retiring age to 65. Ground staff would retire 60 or 63, cabin staff would have to work extra 10 years, and Pilots at 60 rather than 55 and if USA agrees the age limit they might go up to 65. In other changes the inflation proofing would be restricted to 2.5% a year. That means if prices shoot up at any time in the future, the real value of pensions for retiring staff will be severely reduced. As a result, current staff will find that their pensionable salary - already set at just 85% of gross salary - will be even lower than their actual pay. Thus pensions may become increasingly disconnected to final salaries. Now the next step is that under BA laws the company would consult its employees about this plan for about two months and would also talk to trade unions and, crucially, to the schemes trustees - they hold the power to approve or reject the changes before bringing in any change. There are also some issues related to this like there is little room for individuals to make a choice on when they retire on a full pension and secondly the company may also be misleading its staff in the way it is communicating the changes to the scheme. References 1. Dismay over "tourist tax" plans. Retrieved March 23rd, 2006, from http:// http://news.bbc.co.uk/2/hi/uk_news/england/cornwall/4793780.stm. 2. Author: Roisin Woolnough. How to set up an incentive scheme.  Retrieved March 23rd, 2006, from http:// How to set up an incentive scheme.htm 3. Author, by William J. Flannery, Jr. Importance of training.  Retrieved March 23rd, 2006, from http://www.wjfinstitute.com/articles_10.htm 4. Overcoming resistance to change.  Retrieved March 23rd, 2006, from http:// http://mars.wnec.edu/~achelte/ob1/lprob17/tsld014.htm 5. Characteristics of a good leader.  Retrieved March 23rd, 2006, from http:// www.angelfire.com/il/adventureclub/leader.html 6. The Top 10 keys to effective, flexible management of others.  Retrieved March 23rd, 2006, from http:// topten.org/Content/tt.AE4.htm 7. How to Train Your Employees to Be More Effective.  Retrieved March 23rd, 2006, from http:// www.trainingsys.com/articles/trnojt.html 8. The Top 10 keys to effective, flexible management of others.  Retrieved March 23rd, 2006, from http:// topten.org/Content/tt.AE4.htm 9. EU approves new bird flu measures. Retrieved March 23rd, 2006, from http://news.bbc.co.uk/2/hi/europe/4721798.stm 10. Ian Pollock (Thursday, 23 March 2006). British Airways to cut pension costs Retrieved march 23rd, 2006, from http://news.bbc.co.uk/2/hi/business/4837872.stm Read More