Design Environment And Principles In Businesses

QUESTION 1

A BUSINESS MODEL WITH WOOLWORTHS P/C

INTRODUCTION

Woolworths specializes in the sale of products in supermarkets. It operates in a very competitive environment where many companies are in the same field. Despite the odds, Woolworths has designed new models that have effectively improved its profitability, market share and expansion.

First and foremost the company has designed a new marketing methodology aimed at increasing the sales revenue/ turnover. One of the design principles it has adapted in relation to new marketing methodologies is promotions in form of free samples and trade offers. The approach is setting their sales agents at strategic places who vigorously advertise their products in an open ground. At this point, prices are reduced for those who want to buy the products. The company has also modified the brands of some of its products to look attractive to the consumers. Customers are usually attracted to new brand names that suggest quality, and those with attractive symbols and logos. The other principle the company has used is how it does its packaging. New attractive packaging models are now being used. They have various changes in the shape and physical appearance of the packaging materials, the colour mix of those materials. Lastly, Woolworths has moved from heavy reliance on the media for publicity purposes to other new principles. These include sponsorship of sporting clubs. In return the clubs print their items with the name “Woolworths”. The end result of this new marketing model is increased turnover rates as result of the created awareness.

The other new model innovated by Woolworth is that of strategic planning. The company through its management is now reviewing its mission and objectives and defining the strategies which will accomplish the objectives. In order to achieve the objectives of the new model of strategic planning, Woolworths has identified various principles for this mission. First, the management is now analyzing both the internal and external environment with the aim of finding out how this environment affects its business operations. Through the analysis of the external environment, the company has now expanded by building more of supermarket chains. It is also planning to enter into joint a venture with another company. With these principles of strategic planning Woolworth is sure of expanding its market share as well as improving on its profitability.

The other principle geared towards strategic planning as one of its models is portfolio and risk analysis. Through the financial department the company has analyzed and obtained a new product mix that would reduce its risks like unsold products, product obsolescence etc. This has been effected through an intensified market research on product use and consumer behaviour. [1]

Woolworth’s last new business model is service- profit chain. This is a model that emphasizes on people and their importance on the success of an organization. ‘People’ here means both the customers and employees of Woolworths. They have ensured that their employees are satisfied in terms of remuneration packages and the general working conditions, like safety and health. The design principles behind realizing the objectives of the service –profit chain in regard to employees are: overtime payments, supply of protective cloth wear to employees, installation of additional fire – fighting equipments and proper safety and maintenance of machines. This has resulted into a motivated workforce and has seen the improvement of turnover from $m31354.50 in 2005 to $m37734.2 in 2006.

The new model also focuses on the maintenance of loyalty of the customers.  Every business must create and keep its customers. This is the only way in which it can grow in terms of the profitability. The principles that Woolworth has designed for the service- profit chain in relation to customers are: selling high quality products and setting fair prices. The setting of fair prices has made customers to buy goods in bulk a factor that has improved profits. The company also ensures that there are no stock outs and that there is always a constant replenishment of goods. All these are geared towards maintaining the loyalty of their pool of customers thereby increasing its revenues.  

 QUESTION TWO – “TRUST CONDOM” BRAND

This is a high profile brand of condoms, which are used when doing protected sex. This brand is meant to serve different democratic groups for different functions. The marketers of this brand first target the young who normally practice sex for pleasure. This is the 18 -24 demographic. The rationale behind this is to protect them against sexually transmitted diseases including HIV/AIDS. When the target group is the old (say 35 years and above demographic), the reason is to control population through procreation as well as for health purposes.

The young people are supposed to practice certain demographic values like social tranquility. They are supposed to conform to moral principles that govern their behaviour in society. But the marketing of the brand to the young people has brought about sexual freedom thus violating the cultural practices they are supposed to observe like “no sex before marriage”.

The other values that this demographic (18-24 years) are to observe include religious practices. This is a very important demographic value for a population at this age bracket. This means that any products being advertised in the market and which are prohibited among the youth, companies must desist from using certain cultural memes that may attract this group. The marketers of this products usually use very attractive and easy – to – understand memes that can easily woo the young into using trust condom. They very well know that it is the group in dire need of these sexual protective devices. Cultures such as homosexuality are deemed not to be right. The practice is morally unacceptable but the continual usage of cultural memes would tend to advocate for such unacceptable cultural practices.

In their marketing of the condoms, the trust company has applied a lot of cultural memes in ensuring that their message is conveyed. Some of these are pictures of people on billboards, in sexual moods and holding a packet of trust condom while smiling. The messages are very simple – that you’ll have something to smile about after using the device. And for those fearing both sex and condom usage especially the 17 -24 demographic would build an attitude of confidence on the usage of the product. At the bottom of the boards are messages like “Mr. X has his, do you have yours? Any person including the  35 -50 demographic would interpret to mean that using the brand is just something normal. [2]

Once the company has developed a certain meme, it does a lot of market research to test its fame/ suitability before publicizing it. The objective here is to come up with a meme, written in simple English, can attract attention and interest quickly.

Other cultural memes in their marketing of the trust condoms rotate around health and safety in their usage as well as ease of use/ comfortability. On their packaging is a picture portraying how user- friendly they are. Infact even the picture itself gives such a conclusion in one’s mind. Other messages such as “studded with extra protection” meant to attract attention and create interest on the users have also been printed. Here, the complex and health and safety guidelines on how they should be used can easily be ignored by the users. Dangers on usage and erosion of the demographic values as a result of its usage are easily ignored. Anybody looking at such a meme would conclude ‘oh, I need it”

The values discussed above are quite important for the respective demographics. It is important for the 17 – 24 demographics to abstain from sexual behaviours. At their age, these are people who should be building their future careers, through education. Also at this age bracket, one might not be able to decide on what is good or bad to do, moral and immoral etc. The cultural memes of the trust company in marketing their trust condoms therefore interferes with the adherence of such demographic values.

On the other hand, procreation is a very important value amongst many people’s cultures. Even biblically, it was God’s wish that people must multiply. The cultural memes therefore tend to interweave with this value especially within the 35 -50 demographic. In conclusion, companies usually employ cultural memes when they know that fair marketing strategies based on the truth may not successfully sail through. And that is why Trust company employs such techniques to market their “trust condom brand”

 QUESTION THREE (ABC)

The ABC Company is a flower manufacturing company in the UK. The products are used domestically and others sold across the Asian countries and the U.S started only recently i.e. 1992, ABC Company’s performance in the sector has made it one of the top ranking flower manufacturing companies in the world. Their success is owed to a number of factors, as discussed below:

 HIGH QUALITY PRODUCTION

The flower manufacturing industry is one that requires high quality production for any company to thrive in it. ABC p/c has laid emphasis on quality production that has eased marketability and demand of its flowers world wide. Even at high prices, the firm still maintains a steady sales turnover rate. This has impacted favourably on its profits as profit is a factor of sales volume and selling prices. In the year ended 31st December 2005, the company sold 300,000 tonnes of flowers. For the period ended ended 31st December 2006, sales rose to 450,000 tonnes. This alone was a 50% increase (i.e. 450,000 – 300,000/300,000X 100%) from the previous year.

 FINANCIAL OPERATIONS

The sustainability of ABC p/c is owed to a financial restructuring on its operational and financial operations. First, the management has embarked on a cost saving plan for its operational activities by cutting irrelevant costs. It has established the cost accounting department headed by a cost accountant. The roles of the cost accountant would be among others budget preparation, cost analysis and the application of costing techniques such as the CBA (cost Benefit analysis). It has also incorporated a Management accountant whose role would be to prepare management reports.

Still on the restructuring of its financial operations, ABC plc has moved from external borrowing to the use of equity to finance its assets. This has reduced its financial risk associated with the usage of fixed capital rather than equity. The triple bottom line effect of this positioning is that the profits (economics) have increased due to a reduction in financial costs (interest). It has also increased the confidence of the investors (people) who channel their investments on lowly geared companies. In the year ended 31st December 2005, the leverage (gearing) ratio was 14% but it improved to 11% in the period ended 31st December 2006.

                SOCIAL RESPONSIBILITY

ABC plc has started analyzing the impact of their actions on society, showing concern and responding appropriately. They have based the argument for social responsibility on the premise (assumption) that organizations have an obligation to care for society. The concern for social responsibility has impacted positively on the environment. This is because the managerial principle on the environment has been the control of pollution as a result of its activities. The flower production industry usually depletes water reservoirs but to them, technologies have been devised such as water recycles. This has resulted in the saving of this limited resource. Apart from having a positive impact on the environment, the society has also benefited as this is the water they use for their activities like irrigation.[3]

Most of the flower farm’s work is purely manual and does not require a lot of expertise. Instead of employing its workforce from far ABC p/c employs the local people to work on its farms. As a result, the financial capabilities/ strengths of the community have been boosted. To further assist society, ABC p/c has embarked on the construction of schools and hospitals and roads.

CORPORATE GOVERNANCE

Finally, the management of the company has embraced corporate governance as a tool for sustainable development. Corporate governance is the process through which corporations/ organizations are well government to achieve the desired purpose, goals and objectives. ABC p/c has applied this management tool through the practice of transparency and accountability in its operations. It has also established a positive and more accommodative corporate culture. This has had positive effects on the employees who in turn have felt motivated and improved their efforts/ capacity.

In summary therefore, because of these positive steps of high quality production, social responsibility and corporate governance the ABC p/c has adapted, it has been able to cut a niche and gain a competitive edge.

REFERENCES:

Robin Wood (2001) Managing Complexity, Prentice hall publishers, New York

Wikipedia the free encyclopedia (2007) strategic planning, retrieved on 28th April, available at www.wikipedia.org

Wikipedia the free encyclopedia (2007) cultural values, retrieved on 4th may, available at www.wikipedia.org

Stephen C. Harper (2003), Business, McGraw-Hill Publishers, New York