Chinese Construction Industry

An Examination into Information Technology and Competitive Strategies within the Chinese Construction Industry

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This post evaluates the use and deployment of technology within the Chinese construction industry. As competitive environments are constantly changing in the contemporary business world, managers are devising various flexible approaches to respond to such uncertainty and complexity. Deploying strategic information systems is an important approach to address such the challenges of flexibility in business competitiveness. During the 1980s and 1990s, we saw considerable financial investment into business IT in search for “competitive advantage” in various industrial markets. There were many academic papers as well as consulting reports studying the competitive benefits of IT in business in order to persuade firms to invest in strategic information systems. Many business company sought to replicate the success stories of IT enabled business strategy, such as United Airlines, Thomson Holidays and all the other celebrated cases that have entered the information systems mythology. Although the last three decades have seen the high speed growth of investment in information technology by companies, the exact way of getting competitive advantage through information technology is still vague and hard to be concretely grasped. Large investment of information technology is also accompanied by over evaluation of IT and decline in organizational performance, as shown in many cases of failure in IT strategies. Especially in developing countries, many companies are trying to learn from economically advanced economies and initiate their large investment in information technology in order to improve their competitive advantages.

Chinese Construction Industry
Chinese Construction Industry

The rate of failure is particularly high in such developing countries. This increased uncertainty suggests the need for improved strategic planning and management of information systems, and the need for consideration of local socio-economic environments. The aim of the dissertation is intending to study the information technology strategies in a typical construction company and develop a deeper understanding of how information technologies create new competitive advantages for construction companies in Chinese context. The need for a link between information technology (IT) use and business strategy in construction industry has been identified and discussed over a number of years. The objectives are threefold in this dissertation. First, I will have a literature review of current research on IT strategies, competitive advantage and IT in construction industries. Secondly, I will conduct fieldwork in a Chinese construction firm, collecting data by questionnaires and interviews, trying to understand the current situations of IT adoption within the Chinese construction industry. Last but not least, I will present an analytical framework which is used to analyse the IT strategies in Chinese construction companies.

If you enjoyed reading this post on information technology and competitive strategies within the Chinese construction industry, I would be very grateful if you could help spread this knowledge by emailing this post to a friend, or sharing it on Twitter or Facebook. Thank you.

Sustainable Construction

The Impact Of Sustainable Development On The Construction Industry Faced With Economic And Legislative Challenges

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The most pressing issue in the 21st century is climate change. The positive advances in sustainable construction indicate the dedication to lowering emissions and making sure that sustainable living is widespread throughout society. The UK Government has instilled various climate change initiatives, subsidies and targets into the industry in attempt to boost the uptake of sustainable development in the construction industry. However, the pressures for building green detriment the ability to build low cost developments. The economic recession faced by the UK is inaugurating the conflict between sustainable development and value for money. In order to determine the consequences that the sustainable building culture has had on the construction costs a literature review was carried out on a number of resources containing Government reports, Regulations and Laws, manufacturers information, research from professional bodies and academic reports. A survey was also conducted, gathering the opinion of people with invested interest in the construction industry. The findings of this report suggest that at present, sustainable construction is costing more to implement during the initial construction phase, which is understandable due to the increased levels of technology installed. The majority of sustainable developments are occupied by business use, which indicates that zero carbon homes are not yet affordable as domestic homes. However, market trends suggest that in the future, once all homes are sustainably built, the prices will level off with the eradication of the prestige value.

Sustainable Construction
Sustainable Construction

The hypothesis of this research dissertation is that with more and more pressures and new legislation applied to sustainable construction this may be forcing contract costs to rise. With the client in mind, rising capital costs may hinder their objectives. It will be considered that there may be methods of lowering cost while still achieving an element of sustainable construction. The main aim of this research dissertation is to ascertain the relationship between sustainable construction and the costs associated with building green.

Sustainable Construction Dissertation Objectives

  • Review current legislation and framework in place to endorse sustainable construction
  • Examine the relationship between the initial cost of sustainable construction and the whole life cost of completed projects
  • Outline the trend in construction costs in relation to advances in sustainable construction
  • Explore the reactions and opinions of construction professionals on costs of building green
  • Determine recommendations to be used in order to best develop the sustainable construction industry while achieving the clients objectives

I do hope you enjoyed reading this post on sustainable development on the UK construction industry. There are many other titles available in the construction dissertation collection that should be of interest to construction management students and building professional. There are many dissertation titles that relate to other aspects of construction such as project management techniques, environmental management, building and construction methods to name a few. It took a lot of time to write this post and I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.

Human Capital Management

Human Capital Management in Banking

In an address to MIT graduates, Carly Fiorina, the legendary HP leader has been quoted as saying, “….the most magical, tangible and ultimately the most important ingredient in the transformed landscape is people” (Fiorina, 2000).

The pervasive question in strategic management on why some organizations are more successfully than many others is answered by their varying management of human capital (Hitt et al 2001). According to the resource-based view of organizations, organizations vary in their performances because of their varying resources and associated capabilities. Resources can be tangible and intangible. The intangible resources and capabilities are difficult to replicate and are socially complex and can be built or changed only in the long run (Hitt et al 2001). Thus, the competitive advantages produced from intangible resources are very unique, rare and difficult to replicate. The intangibility of human resource management is removed with an approach called human capital management which urges the organization to view its human resources as a financially quantifiable function – to analyze impact of people on contribution to shareholder value, to demonstrate value of HRM with ROI calculations and provide direction for future HRM practices (Angela & Armstrong, 2007).

Human capital theory views human resources and its skills as an asset of an organization and that the organization must strive to grow and safeguard this asset (Lepak & Snell, 1999). Human capital is a term applied to the approach of considering people as assets for the organization, putting people on the right side of the balance sheet, in a lighter vein. The human capital approach puts the HR function at a more quantifiable level thus rendering it strategically relevant. The approach enables the organization to orient and align its human resources to effectively meet organizational objectives (Lepak & Snell, 1999).

The scope of human capital management covers reporting the human capital of an organization. Such reporting enables stakeholders to develop another performance metric to evaluate the organization. The human value of an organization points to the potential it possesses for future performance, the strength of its internal processes and the sustainability of the business model.

The Implications of Human Capital Management

Human knowledge can be classified into articulable knowledge which can be codified and passed on easily and tacit knowledge which is based on organizational routines and social in context (Lane & Lubatkin, 1998). Tacit knowledge is unique and cannot be replicated and gained on the job and are unique in every organization for a particular role (Lepak & Snell, 1999). Hence there is a need to classify and segregate knowledge into core and peripheral assets.

The value of human capital is dependent on its potential to contribute to the organization’s core competencies and thus to achieve organizational objectives. The core assets contribute most and hence need significant continuous internal development and nurturing. As organizations move to more advanced technologies, the role of knowledge workers increases and hence the need to effectively manage core assets is more important (Lepak & Snell, 1999). Human capital is not owned by organizations, but merely secured through relationships (Angela & Armstrong 2007, p9) and hence the need to manage the same and ensure that the asset stays within the organization.

The pressures on efficiency and costs drive organizations to make or buy labor. This make or buy decision is based on the importance of a particular skill. Core assets cannot be outsourced and an organization that does this is under peril of losing its competitive advantage (Porter, 1985). Developing peripheral assets within the organization leads to higher overhead and transactional costs. Thus, these peripheral assets can be externalized or acquired from other parties for whom this is the core asset.

The implication of human capital management is that there is a positive correlation between leveraging human capital and organizational performance. The value of human capital is defined as the ratio of strategic benefits to customers derived from skills related to the costs incurred (Lepak & Snell, 1999). Human capital management forms the bridge between HR practices and strategic business performance. This argument places human capital management as a value creating activity for the organization. Thus, human capital is always measured in relation to the value it creates for the customer.

Investment in Human Capital – Theoretical Analysis

An employee gains knowledge on-the-job, by schooling and through other sources. The fact that an employee gains in experience and knowledge and thus becomes more skilled leads to the development of innate knowledge which is very important in the understanding of the uniqueness of a particular individual. What he gains through formal education is the foundation on which his social behaviors and personality are rooted within the organizational context. The other sources include access to information, inquisitiveness and developing skills out of the scope of the role (Becker, 1962). Hence, the education or the prior preparedness of the employee to be based within the organizational context in social behaviors and attitudes is very important to how effectively he is able to contribute to the organizational goals and objectives.

Human capital management focuses on the following HR processes (Angela & Armstrong, 2007 & Lepak & Snell, 1999):

  1. Resourcing strategies – the process of acquiring human capital, and managing them effectively to utilize them to achieve the organizational objectives. These strategies define the forecasting of skills required and the measures to acquire such skills through internal development or external acquisition – the make or buy decision. The make-or-buy decision also implies that the organization can outsource some of its competences to be effective, thus bearing significant ramifications for organizational effectiveness.
  2. Reward strategies – the fact that individuals expect return on their own investment in organizations – in skills and efforts spent on the job. Human capital theory encourages skill and performance base reward fabrication and to compensate an individual by fixing his market worth because the individual owns his own human capital. the fixing of the market worth of an individual is similar to accounting for the value of a physical asset, only that in human capital the value of an individual is in the skills and competencies of the individual.
  3. Retention strategies – the contribution by individuals to the organization make the organization find ways to retain this human capital either by increasing its valuation or by forming strategic alliances with its human capital for long term relationship. Thus, the role of promotions and awards play a part in ensuring that organizations are able to protect their human capital from leaving and thus aiding competitors. This multi-faceted approach to retention aids in reducing attrition and loss of human capital.
  4. Development strategies – organizations always try to develop their human capital – the core competencies of individuals. Core skills need to be developed internally and thus organizations go for training and knowledge acquisition for their employees. This increases the market worth of the employee by making him more skillful, and thus reiterates the importance of retention and reward strategies. The buying of core competencies results in the erosion of human capital in the organization, leading to loss of competency in many core business areas.

Valuation of Human Capital

The concept of human capital also means that the human capital has to be measured in financial terms and thus the significance and implications of the process be known. The economic value of people in the organization has to be accounted for through human asset accounting – for measurement, enumeration and analysis. Measurement and analysis help the human resources function to work at a more strategic level. It also provides investors and other stake holders with a better feedback on the working and sustainability of the business. There are three types of human resource accounting models (Bontis et al, 1999):

  1. Cost models, which consider the historical, acquisition and retaining costs of an individual or an asset
  2. Human resource model which also goes into non-monetary behavioral attributes
  3. Monetary models which account for discounted estimates of estimated future earnings

Human capital accounting models attempt to calculate contributions made by human assets by capitalizing expenditures in retaining the asset – salaries. Instead of putting total wage bill in the expenditure side in an income statement, a discounted cash flow of wages is classified as an asset in the balance sheet (Bontis et al, 1999). This requires a number of assumptions on the HR practice’s estimation. The average increase in wage per year and the tenure of expected employment are estimated for the workforce and all these cash flows for many years are discounted back to year one. The remaining figure is represented as the human capital value for the organization.

The assumptions made in the model explained above necessitate planning and predicting workforce strength and composition for many years ahead. Often, this proves very difficult to do accurately. Assumptions about tenure of employees, wage rises and turnover rates are not determinable accurately. Hence, all these models suffer from uncertainty and inconsistency (Bontis et al, 1999). Also, the practice of treating humans as assets is debated to be morally unacceptable as here it is assumed that the organization owns individuals.

HRA data can be utilized for three purposes (Bontis et al, 1999):

  1. To report human capital in audited financial statements for external stake holders
  2. Feedback on achieving strategic goals internally
  3. Developing future plans and strategy by assessing the uniqueness of the human capital prevalent in the organization

Only one of the purposes stated above needs auditing authentication – financial reporting. The other purposes are to help the organization assess and plan and strategize for itself the direction it has to take in evaluating its own human capital, its uniqueness and planning for additions or reductions or acquisitions of human capital. Hence, the focus of human capital management is in aiding in organizational effectiveness and thus to deliver more value to stakeholders. The lack of orientation towards human capital in financial statements is because of the fact that the field is constantly evolving and human capital management is still considered only a sustainability issues and not a purely financial issue.

Human Capital in Banking

The Service Organization Perspective

In service organizations human capital represents a significant portion of organizational value. In a service business, the service offered to customers is readily perishable, consumed immediately and irreversible (Kotler, 2002). When a product goes wrong or malfunctions, the company can satisfy a customer by replacing the product or just by a repair, but in service, the problem created cannot usually be reversed or rectified. The experience the customer gets when accessing the services is all the more important to ensure that the customer is satisfied. This goes a long way in achieving organizational goals. When a customer is accessing a service in a bank, he is effectively touching its employees. The role of employees in ensuring a great service experience for the customer is highly critical.

The above argument implies that the quality of service delivered can vary according to human capabilities – both the server and the served. The participation of the employee and the customer in a service rendering process is equally important. The role of the customer also plays a part in ensuring that the process goes effectively. Hence, customer management through interaction with employees forms the basis of customer satisfaction. Service delivery is just one aspect of the business. But intellectual capital is a very important part of a bank, as it works primarily on accumulated knowledge and experience. Relationships are another important reason why human capital is very important. Some information is codified and present at the push of a button, but much more is tacit knowledge within employees which need careful nurturing and planning. The tacit knowledge is more social..

Professionals gain knowledge through education (articulable) and on the job (tacit). Service professionals receive extensive education and training prior to entering the profession. The quality of the knowledge they acquire varies as per the quality of the scholars and teachers they have access to. Universities and schools are ranked and evaluated by the quality of teacher’s it employs. Individuals from the best schools and universities are said to possess the highest level of knowledge in their field and membership to elite social circles (D’Aveni & Kesner, 1993). Consequently, such professionals get the highest salaries, because of the knowledge and their social networks.

After completing their formal education, professionals enter organizations in trainee roles or apprenticeships. In these roles they acquire tacit knowledge, by observing and doing things in the organizational context (Szulanski, 1996). They bring in articulable knowledge from outside and develop tacit knowledge within the firm. The tacit knowledge thus developed during employment is a very important human capital component of the organization. Such firm-specific knowledge is unique cannot be replicated. This is truer in service organizations, where people are the first interface for customers and also for the bank.

Human Capital Management in Banking Industry

The broad nature of the discussions above indicate three well definable parts of human capital management – the implications of human capital management, how it is measured and how it is managed to create positive outcomes (Sherwin, 1983). As technology evolves, global expansion has become a reality, paving the way for fast growth, leading to significant challenges in human resource management. There is also an increased demand for more information from external stakeholders on human capital and its implications on organizational performance (Bontis et al, 1999). These challenges coupled together call for focus on human capital management in banks, with global footprint, widely dispersed service delivery networks and great diversity.

There are several levels of understanding human capital in the context of banks depending on the sophistication and detailing of the metrics and subsequent managing required (Whitaker & Wilson, 2007).

Impact of Existing Processes

The impact of the existing people management processes, mechanisms and systems forms the first level of understanding. The understanding required for this is that the organization must understand the people levers or capabilities that are critical to the business performance. Once these are understood, then metrics are developed to assess how well these capabilities are developed. This understanding helps the bank to understand present effectiveness of its processes and its people.

Strategic Focus

The next level of focus is the impact the organization’s people strategy has on business performance and quantifying the same. An example of a strategic people initiative is engagement. An organization can measure employee engagement through organization-wide surveys and playing it back to understand its correlation to business performance – key metrics like transactions per teller, profit margins and employee attrition (Bartel, 2004). This is possible only with the commitment of the top management of the bank and their understanding of such measurements and metrics. Thus, the dimension of managing human capital has to woven into organizational strategy and form the basis of evaluating business leaders.

Actionable Elements

After measurement discussed in the points above, it is important that the bank or the organization translates this into action to improve on its standing with those parameters and benchmarks. Improving processes to enable people to contribute more to the business is important. Else human capital management will be stuck at number of days of training per employee (Lepak & Snell, 1999). The bank must measure the highest employee engagement levels of managers across the organization and try to find attributes and qualities which lead to such high engagement levels and try to replicate this to other managers whose employees are not measuring up so high in engagement scores, taking the example of employee engagement in point 2 further. Thus, human capital management is much more than a measurement tool. It is a management style wherein the probability of achieving the organizational goals is improved.

Human Capital Management
Human Capital Management

Drivers of Human Capital Management – Banking

There are many human resource practices within the organization and these are organized into drivers which necessitate human capital approach. Human capital drivers for an industry can be divided into five categories with each driver having human capital practices associated with it (Massi & McMurrer, 2007):

Leadership practices

The role of leadership in any organization is important. In the financial sector, where the implications of a business failure are destructive socially, the importance of leadership practices is doubled. The most important consistent factors are open and effective communication, rational decision making and systems thinking. Unless these characteristics are displayed, there will be no coordination and direction for a bank, especially a large multinational bank.

Employee Engagement

Employee engagement starts with a good job design and ends with evaluation. The intermediate processes are workload and job stability. In the banking scenario, employees handle significant amounts of money, hence errors are bound to be costly. The evaluation of organization-wide data on employee engagement is a pre-requisite in any bank or financial services firm. Employee engagement scores must be actively used in assessing leaders and thus form a synergy between good leadership and engaged employees. This stops attrition.

Access to Knowledge

Organizations must have the information and its enablers within the reach of its employees. Also the data available from across the organization must be able to be consolidated and analyzed to create understanding and hence value to the firm. This is true with banks, where business locations are spread out, even across continents. Also, various divisions could be operating on different solution platforms, necessitating high level commitment o data integration and subsequent knowledge creation. Hence, access and availability of data is very critical to success.

Workforce Optimization

Effective training and well defined work processes, the right working environment and fair recruitment and reward practices ensure that individuals have a satisfying career experience with the firm and also for the firm to be able to retain its human assets. The process of evaluating this driver leads to make-or-buy decisions and reversing such decisions too. This is not just about cost savings through cutting jobs, but also about creating vital jobs to ensure effectiveness.

Learning Capacity

The organization must encourage innovations and promote systems thinking and a learning attitude among the workforce. This develops tacit knowledge and ensures that employees are well tuned to changes in their environment. This is true with financial institutions because of the fact that changes are frequent in this field and business is spread out globally. The ability of the firm to learn from within its processes creates cost saving opportunities and also work force optimization opportunities.

Human Capital Measurement in Banks – Implementation

In the Balance Score Card, the final quadrant, People, is the most difficult to quantify and report for many organizations. The information available to fill this quadrant is available as fragmented and un-integral data from across the globe for a bank. This is because the global organization implements different managerial systems which are incompatible to each other or use legacy systems. Even though data is available in most organizations and people know where the data is, they will not be able to compile this quickly, analyze and use it for decision making. Hence, the first and most significant driver for successful implementation of the human capital approach in banking is the availability of data. Unless contiguous data is available at the push of a button, there is bound to resistance in the system to utilize data which is available in various forms and formats.

Data is available for organizations from across the globe, across functions and divisions in business. Thus, integration of processes and the systems that run and create this data has to be accomplished and compatible with each other. Without integration, the intention will not translate to accurate measurements. Thus, an organization needs a single people management system and single global HR management system. This makes data available for strategic planning and analysis at a macro level. Thus, to implement a human capital management program within the organization, significant investments may be needed to create common platforms to enable people to utilize data more effectively and integrate the various divisions of the bank.

Banks are a people centered business, with people forming the core of the services offered and people being consumers of the services offered. Thus, the evaluation of the impact of people and their roles in ensuring customer satisfaction and to drive business performance is important (Bontis et al, 1999). Such a tool is the Human Capital Scorecard (HCS). The HCS enables an organization to (Whitaker & Wilson, 2007):

  1. Plan sourcing to meet growth aspirations
  2. Identify and analyze key human resource issues
  3. Informed business decisions by risk evaluation and priorities
  4. Monitor progress of strategic initiatives
  5. Tracking trends

The HCS has been successfully implemented by Standard Chartered Bank, throughout its global operations and various businesses (Whitaker & Wilson, 2007). The scorecard has measures inbuilt into it which help analyzing the effectiveness of human resources processes in helping business performance. Standard Chartered has automated its HCS enabling it to take out the scorecard for every division for every country in a matter of seconds. This is possible because of data homogeneity.

The use of advanced systems to compute and analyze global human resources data is applied in many banks with thousands of employees. Without such integration of systems and automation of the process of evaluating and compiling data, human capital can never be assessed and used as a basis for strategic plans and further evaluate performance. There are several software companies which cater to the need of banks in their human capital management initiatives. Such companies utilize data from other managerial systems such as ERP and CRM systems to compile and present data for human resource analysis (ACCA, 2009). Usually, the data required for implementing human capital management is available within the organization (Whitaker & Wilson, 2007), but the forms and content of such data will be radically different, arising out of legacy systems prevalent in different countries and divisions. This could lead to significant investments in managerial software and systems to ensure that data is available in the form it is wanted quickly.

Human Capital Management Solutions

Human capital management is available as customized software solutions for banks and other organizations. Such solutions specialize in extracting data from legacy ERP systems of the bank and integrate and present them in ways suitable to the particular bank. Their primary function is turn data into intelligence for the organization. This intelligence or relevant reports are alone are not enough, but the will to utilize this intelligence is more important.

We will now explore the case of human capital management solution implemented in two prominent and large banks:

Case 1: BNL –Gruppo BNP Paribas

BNL is one of the top Italian Banks raking in the top 60 among European banks. It is owned by BNP Paribas, a global financial institution which employs over 170000 people. BNL has approximately 16000 employees (SAS, 2010). This gives an indication of the complexities and the enormity of the human resource management function.

The objectives of a program implementation have to clear before embarking on the process. The bank wanted to implement a human capital management system with the following objectives:

  1. Using HR employee and line manager times effectively
  2. Identifying areas where it gets maximum return n investment in human capital
  3. Spending human resources budget in effective ways to align individual and organizational development needs

The solution was implemented in multiple stages, with the first stage being understanding of and evaluating existing human resource practices:

  1. Analyzing historical staffing and retention costs, estimating redundancies
  2. Effectively design career paths and skill maps
  3. Simplifying budgeting and reporting
  4. Analyze compensation components and simulating for synergies and cost-savings

Having analyzed the existing business processes, the bank then went on to creating intelligence. The solution’s second stage saw BNL adding more features and capabilities to the SAS solution:

  1. Efficiency studies – time and cost study
  2. Role and position analysis
  3. Performance analysis through scorecard models

The key challenge to the implementation lay in the extraction of vital information from the bank’s SAP R/3 ERP module and utilizing it in this solution. This involved significant complexities in configuring the solution for BNL. This is a major problem faced by organizations when implementing organization wide business solutions.

The successful implementation of the SAS Human Capital Management solution the bank has been able to generate return on investment because of the solution implementation. Also the solution put valuable information in the hands of human resource managers and line managers, thus reducing dependence on central planning but not reducing the quality of decisions made. This leads to significant time and cost rationalizations for the organization (ACCA, 2009).

Case 2: Standard Chartered Bank

Standard Chartered is a banking powerhouse head quartered in the UK. It employs over 60000 people in 1500 branches spanning 56 countries across Europe, Asia and Africa. The company has a high growth strategy and has doubled headcount and revenue post 2005 (Whitaker & Wilson, 2007). The organization manages human resources at a global level and places considerable importance on human resource management and is one of the pioneers in human capital management in banking.

Standard Chartered approach towards human capital management is guided by three principles (Whitaker & Wilson, 2007):

  1. Focus on the right talent at all levels for all roles and enabling human resources function to identify and retain high performing individuals
  2. Help individual employees utilize their strengths effectively and manage their limitations
  3. Develop exceptional managers and leaders who will help the bank achieve its human resources potential
  4. Manage and assess strategic human resource initiatives like diversity development

True to the classical implementation process of human capital management (Pfeffer, 1995), the bank at the first level analyzes the effectiveness of its people processes; understand the levers and drivers which contribute most to the core capabilities of the division or the organization (Lepak & Snell, 1999). The analysis happens on multiple metrics. The progress of high value individuals, their retention compared to the general population, talent management processes, succession planning for key roles are some of the processes that are measured to ensure that the various HR practices of the organization are being effective in their improvement of these key metrics.

The next level of understanding comes from the “so-what” angle. The inferences captured from the first level are taken to the level of understanding on how to make them better. The key drivers of human capital management and associated human resource practices are analyzed and taken to a new level of understanding. For example, leadership practices in the organization are assessed through various tools and practices across the various functional domains. Gallup scores from subordinates are also used. Then the efficacy of leaders is studied and exceptional leaders are unearthed through such an analysis. Standard Chartered does not stop with this but goes on to the level of understanding winning traits and characteristics of its most effective leaders and trying to replicate them across the organization.

The above discussion is a vital reminder that human capital management is more about action that access to information and understanding functional efficiency and processes. The action part is not brought out by any software or enterprise solution. The top management has to understand the essence of human capital management and utilize the data to further the achievement of organizational goals (Hitt et al, 2001). Unless this is done, the actionable elements of the concept will remain undone and human capital management will remain on paper and will not help the organization or its stakeholders in any way (Bassie & Mcmurrer, 2007).

To transform information to action, Standard Chartered uses a Human Capital Scorecard. This is an adaptation of the Balanced Scorecard and gives the top management the insights they need to make decisions regarding human capital. Data from across the globe is consolidated through a single global data warehouse and a Human Capital Scorecard is generated for every country and for every division to enable its leaders to make effective interpretations of the human issues in their sphere of action. The scorecard provides leaders with tools to effectively analyze trends and identify issues with the human capital and also to measure progress of previously started human resource initiatives. Thus, the leader is able to meet the human resource goals for his division or country and is also able to ensure that he is in line with the organizational goals and the specific goals set for his division.

The scorecard is generated annually, quarterly and in every month and the bank has automated the process to be able to generate country reports in 40 seconds. The reasoning of the bank for the high level of automation is to reduce the time spent on human resource planning thus making business leaders more efficient and also to ultimately make this tool available with its line managers, so that the dependence on headquarters will go down to make effective decisions. This saves significant costs for the organization.

To utilize the scorecard further, the bank sets a strategic planning agenda every year to evaluate and plan for human resource management annually. For example, in 2006, the scorecard highlighted the trend of attrition in the first year of joining by new employees. This led to increased focus on the induction process for joiners. The results of this action will be assessed periodically again through the scorecard. This process has brought increased rigor into the understanding, planning and action parts of the human resource function and involved other functional areas into effective human capital management.

The Importance of Human Capital Reporting to Stakeholders

There are other successful cases of human capital solutions implementations in the banking sector. For example, the Banca Carige, one of the oldest banks in Italy implemented an SAS Human Capital Management Solution to increase visibility and to make better HR decisions (SAS, 2010). The plethora of human capital management solutions available in the market indicates a high level of competency and popularity of the approach to banks.

The significant stakeholders for a bank are its shareholders, the Government, the society at large and the bank and its employees. For all these stakeholders, the primary concern with respect to the working of the bank is the need to have access to transparent, well-defined and quantifiable measure of the human resource strategy and the performance of its human resources to understand how the bank’s intangible elements are related to the bank’s worth and the efficacy of its decision making (ACCA, 2007). This creates the relevance of human capital reporting, with human capital becoming a metric of organizational performance and business sustainability. The employees of the bank are also important stakeholders. By defining its human capital strategy, the bank can focus on how to develop this capital for organizational growth. For example, Standard Chartered’s human capital goals for 2007 included the following points, affecting its employees (ACCA, 2007):

  • Embed sustainable lending training in core risk management training.
  • Review our approach to climate risk, including raising levels of awareness amongst appropriate staff on how to assess climate risk.
  • Upgrade the social, ethical and environmental (SEE) e-learning. Get external stakeholders’ input.

The market has started demanding significant data on human capital management as a sustainability issue and this has resulted in ranking in the US on human capital reporting. The fact that human capital reporting is deemed a sustainability requirement makes it imperative on organizations to go in for reporting. The Dow Jones Sustainability Index features human capital reporting as criteria in rating organizations (Sustainability Index, 2008). Association of Chartered Certified Accountants (ACCA) 2007 ranking rated Wells Fargo in the top 5 among Fortune 100 companies in human capital reporting (Creelman, 2007). The importance of human capital reporting is gaining statutory importance with many countries making it mandatory for organizations. In Denmark it is a statutory requirement in management reports, while in Austria, it is mandatory in all universities (Eubusiness, 2006).

In the small entrepreneurship context, human capital reporting creates investment opportunities for banks by showing them enterprises with great promise (Eubusiness, 2006). The downside of why most SMEs do not report human capital is lack of awareness in how to report human capital and lack of clear guidelines. Thus, banks could significantly benefit from companies and SMEs reporting human and intellectual capital in their annual and management reports. So the gaining of popularity by human capital measurement and reporting can aid banks both internally and externally.

Financial institutions have created human capital strategy papers for specific periods, which strategize the human capital approach and link it with its strategy and organizational objectives (FHFA, 2009). By doing so, banks are able to create an environment where human resources function is treated as a profit center and as one which yields business benefits which are tangible and measurable.

Human Capital Reporting – In Practice

In many countries, human capital reporting, or for the matter, any form of extended reporting is optional. When human capital reporting is viewed from the CSR perspective alone, it creates a number of reporting formats, which result in incomparable reporting structures which are not of use for observing industry trends and the value of the philosophy. Hence, there is a growing demand among intellectuals for a consistent reporting structure or pattern which will enable the further development of knowledge based on understanding these reports (Cuganesan, 2007). The genuine interest taken by some leading banks have created a need for other banks to adopt human capital reporting.

Standard Chartered Bank has been a leader in human capital management and reporting. It is one of the first organizations, along with Royal Bank of Scotland to measure and report human capital. It recognizes that human capital is intangible and hence difficult to quantify as directly related to cost and financial implications, as the variables are too complex to decipher and harness. Hence, it uses proxies which are tied to performance, like cost of training, cost of increasing workforce, etc. to arrive at relationships between factors in human capital which it deems to be important and its actual performance, at a national and an international level. It reports these proxy relationships as individual metrics, indices and ratios, which indicate a certain level of competency or worth for the bank (Bentley, 2007). Royal Bank of Scotland also reports similar indices and ratios to quantify its human capital to its stakeholders. Though various standards have been adopted by various nations, the reporting is still not mandatory, meaning that organizations need not report, even if they do they can do it in their own ways.

Conclusion

Banks are service providers to retail customers and business. They are faced with a number of challenges – high competition, geographical business spread, high headcount and significant emphasis on people and service quality. People deliver quality here, and not machines or computers. Hence, the way banks and financial institutions manage their people is very important and in fact the most important factor in success.

Human capital management which emphasizes the role of employees in an organization as its assets is best suited and is very important for banks in today’s complexities in financial services. The rapid advancement in technologies have enabled banks to serve customers far away and also allowed banks and customers access to each other from far apart. Thus, the role of intangibles is more important than tangible advantages. Thus, a person could be using phone banking more frequently than a bank teller. Significant levels of automation have taken place and it would seem as if the whole banking process would be automated and there would be no people working in banks.

But human beings create this technology, knowledge and manage it. Hence, the underlying factor for success is always going to be the human edge, the edge of the employee. The worth of an employee is far more than the salary he gets paid, he is worth the knowledge he possesses. Unless this knowledge is quantified and billed accordingly, the organization cannot realize its full value and hence is bound to discount in unwarrantedly. This is more so in banking, where business relationships hold the key to retaining and acquiring customers.

References

Angela Baron & Armstrong Michael (2007). Human Capital Management: achieving value added through people. Kogan Page.

Hitt MA, Dacin MT, Shimizu K & Kochhar R (2001). Direct and moderating effects of human capital on strategy and performance in professional service firms. Academy of Management Journal, R 2001a, Vol 44, pp 13-28

Fiorina C (2000). Commencement address. Massachusetts Institute of Technology, Cambridge, MA, June 2nd 2000.

Lepak P. David & Snell A. Scott (1999). The human resource architecture: toward a theory of human capital allocation and development. Academy of Management Review, Vol 24 No 1, pp 31-48

Lane PJ & Lubatkin M (1998). Relative absorptive capability & interorganizational learning. Strategic Management Journal, Vol 26 No 4, pp 27-38

Porter M (1985). Competitive advantage: Crating and sustaining superior performance. NY: Free Press.

Becker S. Gary (1962). Investment in human capital: A theoretical Analysis. The Journal of Political Economy, Vol 70 No 5/2: Investment in Human Beings (Oct 1962), pp 9-49.

Bontis Nick, Dragonetti C. Nicola. Jacobsen Kristine & Roos Goran, (1999). The knowledge toolbox: a review of tools available to measure and manage intangible resources. European Management Journal, Vol 17 No 4, pp 1-20.

SAS – BNL (2010). How BNL – Gruppo BNP Paribas has captured the full value of human capital.

D’Aveni RA & Kesner IF (1993) Top managerial prestige, power and tender offer response: a study of elite social networks and target firm cooperation during takeovers. Organization Science, Vol 4, pp 123-151.

Szulanski G(1996) Exploring internal stickiness: Impediments to the transfer of best practice within the firm. Strategic Management Journal, Vol 17(Special Issue), pp 27-43.

Whitaker Debbie & Wilson Laura (2007) Human capital measurement: from insight to action. Organization Development Journal, Fall 2007.

Kotler Philip (2002) The Principles of Marketing, 9th Ed. India: Prentice Hall.

Bassi Laurie & McMurrer Daniel (2007). Maximizing your return on people. Harvard Business Review, March 2007.

Bontis Nick (1999) Managing organizational knowledge by diagnosing intellectual capital: framing & advancing the state of the field. International Journal of Technology Management, Vol 18 No 5/6/7/8, pp 433-463.

Sherwin Rosen (1983) Specialization & Human Capital. Journal of Labor Economics, Vol 1, No 1, pp 43-49.

Bartel P. Ann (2004) Human resource management & organizational performance: evidence from retail banking. Industrial & Labor Relations Review, Vol 57 No 2, pp 181-203.

Pfeffer Jeffrey (1995) Producing sustainable competitive advantage through effective people management. Academy of Management Executive, Vol 9 No 1, pp 55-72.

SAS (2010) How to predict if your employees are about to walk out the door.

Creelman Research (2007) GE, IBM best at human capital reporting.

ACCA (2009).Discussion Paper of Human Capital Management Reporting. Association of Chartered Certified Accountants, June 2009.

EUBusiness (2006). Report highlights benefits of intellectual capital reporting for SMEs.

Sustainability Index (2008) Dow Jones Sustainability Indexes Annual Review, September 4, 2008.

FHFA (2009) Strategic Human Capital Plan, 2009-2011.

Cuganesan Suresh, Carlin Tyrone & Finch Nigel (2007) The practice of human capital reporting among Australian financial institutions. Journal of Finance & Accountancy, pp 1-6.

Bentley, Ross (2007) Human Capital: How do businesses measure the impact the staff have on the business? Personnel Today.

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Population Ageing

Population Ageing

Population ageing is an issue of global importance; it has the potential to pose serious challenges to a nation’s infrastructure, economy and health sector. The world today is witnessing an increase in the proportions of the population of older people. This increase has the potential if not checked to pose challenges to nation’s well-being. It is well known that old age is accompanied by several physical disabilities, illnesses and senility, it therefore goes to follow that there is a strong impact of increasing population age on both the labour force and health care sector.  In the paper, impacts of increasing population ageing were discussed with particular emphasis placed on how the trend is currently affecting India. The paper also takes a look at the key challenges population ageing pose to the economy and health care sector of India.

Population ageing is an issue of global importance; it has the potential to pose serious challenges to a nation’s infrastructure and health sector. Knodel (1999) describes populations ageing as a shift in the age distribution of a country’s population whereby the share of citizens with old age increase in population and those of younger age suffer a decline relative to the nation’s population. Population aging of population form an important part of the demographic transition process for any country. Generally, the definition of the aged population can be construed to refer to citizens who are age 60 years and above in a country’s population. Some researches on ageing have suggested that the role of fertility is greater than that of mortality in the population ageing process (Irudaya Rajan, 2010; 2007; 1999).

Population Ageing
Population Ageing

Source: (www.study-aids.co.uk, 2015)

In the twentieth century an occurrence of high fertility and low mortality rates led countries to put forth policies that were aimed at controlling the resulting population boom. These policies resulted in the increase of elderly citizens due to controlled birth rates and therefore fewer young citizens. This decline in fertility, still experienced today, would lead to an increase in the elderly population in the future. Equally this demographic shift has led to strong socio-economic changes as there is a great distance between young and old generations and a corresponding distinction in their experiences. Although the increasing population age is as a result of demographic transition process, the dire changes in cultural and socio-economic conditions are resultant of corresponding change in nations’ traditional systems due to urbanization and migration.

This paper will try to highlight some of the challenges that are posed by increasing population ageing. Particular focus will be paid to India and areas of discussion will centre on the economic and health care sectors of the country.

Global Population Ageing

Old age is not easy to analyse or define as it a function of relative social and physical interpretation. However, one uniform fact is that elderly citizens have multiple needs and these needs need to be supported, cared and catered for in any socio-economic setting.

In a report published by the World Health Organisation, developed counties have citizens with higher age profile (i.e. they generally have older citizens) while less developed nations have more number of old people. The report further indicated a rapid growth of older citizens in the less developed nation, predicting a 250 percent increase between the years 2010 and 2050 as compared to a smaller 71 percent increase in the more developed nations (World Health Organisation, 2011). Globally, the population growth of aged citizens is faster than that of any other age class. In developed countries a projected increase rate of 45 per cent in half a century thereby rising from 287 million to about 417 million by 2050 and 440 million by 2100 (Irudaya Rajan, 2007).  For less developed countries however a more rapid increase has been recorded with an increase rate of 3.7 percent annually from 2010 to 2015 and a projection of 2.9 percent annual increase before 2050 (Irudaya Rajan, 2007). Focus is placed more on the developing countries due to the vast numbers of aged citizens that are present in such countries. This demographic class seem to be increasing in population and deteriorating in living conditions. It has been suggested (Irudaya Rajan, 2007), that the reason for such large numbers of aged citizens lies in the extensive populations of these developing nations.

India and Population Ageing

The population of older people had been projected to rise dramatically in the next few decades. Reports indicate that while majority of the countries that will experience population ageing will be less developed nations, 50 percent of these countries will of the Asian continent (Irudaya Rajan, 2006).  India will likely be one of the most affected nations (Irudaya Rajan, Mishra and Sarma 1999). Reports as at 2008 showed that India had more elderly citizens than any other country in the world except from China; this figure was recorded as 90 million. Just 7 years prior (i.e. 2001), the population for older persons was recorded as 77 million indicating a 14 percent increase (Irudaya Rajan, 2010). Also, from 1961 to 1991, a total of 5.6 per cent increase was recorded for elderly population in the country and 7.1 percent increase from 1991 to 2001 (Irudaya Rajan, 2010). A United Nations report states that population share of Indian citizens of ages 60 and above will rise from 8 percent in 2010 to 19 percent 1n 2050 (United Nations Population Division, 2011). This remarkable shift in the population share of the older citizen would bring with it a variety of serious challenges to the country that may be social, political, and economic as well as health- related (Population Reference Bureau, 2012).

Figure 1: shows population aging forecast from 2001 to 2050

2001 2011 2021 2031 2041 2051
60 and Above
Number (millions) 77 96 133 179 236 301
% of total pop. 7.5 8.2 9.9 11.9 14.5 17.3
Sex Ratio 1028 1034 1004 946 1008 1007
70 and Above
Number (millions) 29 36 51 73 98 132
% of total pop. 2.9 3.1 3.8 4.8 6 7.6
Sex Ratio 991 966 770 930 891 954
80 and Above
Number (millions) 8 9 11 16 23 32
% of total pop. 0.5 0.7 0.8 1 1.4 1.8
Sex Ratio 1051 884 866 843 774 732

Source: (Irudaya Rajan, 2006)

The table above (fig1) shows a steady increase in the population of citizen of 60 years and above across the decades.

In India, there is a higher population of males as compared to females, and this may be as a result of higher life expectancy for males at birth when compared to females recorded in 90s. Also there is the occurrence of excessive female mortality at infancy and adolescence (Irudaya Rajan, 2010). What is more remarkable is that although females in India generally experience mortality at tender age, thereby given them lower life expectancy at such ages, they generally have a higher life expectancy at older ages (Irudaya Rajan, 2010). This implies that they older they are, the older they live.

Implications of Population Ageing for Economy

In the coming years, India will experience increasing population age which will result in the reduction of working-age citizens to support the aged citizens of the country and consequently the old age dependency ratio. Old age dependency ratio is defined as the ratio between working age (15-59 years) population and the population of aged citizens (above 60 years of age). Index of ageing is the ratio between the population of aged citizens and that of younger population (0-14 years). Fig 1 below shows the current and forecasted values old age dependency ratio and index of ageing ratio in India from 2001 to 2051.

There is a marked increase for both old age dependency and index of ageing ratios. In 2001, old age dependency ratio in India was recorded to be approximately 11.9 and may rise as high as 29 by 2051.

According to Husain and Ghosh (2011), living conditions of aged Indian citizens is particularly poor despite the rapid economic growth observed in the country recently. There is a generally low income and little or no saving due to low earnings, majority of aged citizens are situated in the rural regions without access to banks (Population Reference Bureau, 2012).

In India there is a lack of universal social security which leads people to retire at old ages (Irudaya Rajan, 2005). Usually, senility and reduced efficiency sets in as from 70 years old cutting employment short. Sickness and disability- accompaniments of old age- are also major reasons of retrenchment. While in work service majority of Indian workplaces set aside portions of salary for their employees in the way of contribution which is then released at retirement. A bonus gratuity is also paid along with final salary upon retirement. Only few cases Less than (11 percent) see salary earning employees receive pensions in addition to their provident funds. This scenario described is a recipe for poverty. Generally people only retire when they are too old or too sick to work for either themselves or a hiring company, therefore they are dependent on provident funds set aside from their salaries while in service which in most cases is less than 30% of their salaries while they were working. In effect the standard of living of these citizens is greatly reduced and the cost of living increased due to added challenges like health care, welfare, family etc.

Implications of Population Ageing for Indian Health Care Sector

Health care is of key importance in a nation’s society. Healthy production citizens are a function of a good, effective health care system. The rising population of aged citizens in India will have profound effects on the health care sector. If more citizens are of older ages (i.e. 60 years and above), the health care services will have to modify their resources to accommodate this demographic shift (Chatterji et al., 2008). For instance, population aging in India has the potential, if not properly checked, to result in an increase of chronic disease and other health related issues (Chatterji et al., 2008). This means that health clinics will be face with more and more cases of chronic diseases thereby increasing cost of maintenance.

It is usually the case that old people are generally of worse health than younger ones, since old age is often accompanied by recurring and numerous physical ailments and illness (Irudaya Rajan, 2007). Senility and neurosis are also features of old age, these two ailments often lead poor mental health.  In India, there are reports of particularly serious and poor health cases amongst elderly citizens, especially in the rural areas. In their report, Nadal, Khatri & Kadian (1987) reported that majority of the aged populace were suffering from at least one of diseases like; poor eyesight, cough, whooping cough, bronchitis, asthma, tuberculosis of lungs, dental problems or anaemia. Irudaya Rajan (2007) reported that as the age of older citizens increase there is an increase in the rate of sick and bed-ridden patients.  Darshan, Sharma & Singh (1987) named blindness and deafness as the major physical disability occurring in Indian old people.

References

Chatterji, S., Kowal, P., Mathers, C., Naidoo, N., Verdes, E., Smith, J.P. and Suzman, R (2008). The Health of Aging Populations in China and India. Health Aff (Millwood). 27(4), 1052–1063

Darshan, S., Sharma M.L. & Singh, S.P. (1987). Health Needs of Senior Citizens Population Ageing. In M.L. Sharma and T.M. Dak (Eds.) Aging in India. New Delhi: Ajanta Publications

Husain, Z. & Ghosh, S. (2011). Is Health Status of Elderly Worsening in India Population Ageing? A Comparison of Successive Rounds of National Sample Survey Data. Journal of Biosocial Science. 43(2), 211-31.

Irudaya Rajan, S. (2005). Chronic poverty among the Indian elderly. In A.K. Mehta & A. Shepherd (Eds.), Chronic poverty and development policy in India. New Delhi: Sage Publications).

Irudaya Rajan, S. (2006). Population Ageing and Health in India. Centre for Enquiry into Health and Allied Themes (CEHAT)

Irudaya Rajan, S. (2007). Aging, pensions and social security in South Asia. In S. Irudaya Rajan (Ed.), Social security for the elderly: Experiences from Population Ageing in South Asia. New Delhi: Routledge.

Irudaya Rajan, S. (2010). Demographics, population ageing and employment in India. ILO Asia-Pacific Working Paper Series

Irudaya Rajan, S., Mishra, U.S. & Sarma, P.S. (1999). India’s Elderly: Burden or Challenge? New Delhi: Sage Publications and London: Thousand Oaks.

Knodel, J. (1999). The Demography of Asian Ageing: Past Accomplishments and Future Challenges for Asia, Population Ageing Lies Almost Entirely Ahead. Asia-Pacific Population Journal.

Nandal, D.S., Khatri, R.S. & Kadian, R.S. (1987). Population Ageing Problems in the Structural Context. In M.L. Sharma & T.M. Dak (Eds.) Aging in India (Pp. 106-16). New Delhi: Ajanta Publications

Population Reference Bureau. (2012). India’s Population Ageing Problem. Today’s Research on Aging.  Program and Policy Implications

United Nations Population Division. (2011). World Population Ageing Prospects: The 2010 Revision. New York: United Nations

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General Motors Marketing Analysis

General Motors Marketing Analysis

Company Profile of General Motors

When it comes to automobiles, one of the most recognized brands out there is General Motors. The American multinational corporation based in Detroit, Michigan designs, manufactures and sells vehicles as well as automotive parts.

With a history that dates back to 1908, General Motors has had a critical role in both the American as well as global auto industry. Some of General Motors well-known brands presently in the market include Buick, Cadillac, Chevrolet and General Motors. The company builds cars and trucks through its other units: General Motors Daewoo, Isuzu, Opel, Vauxhall and Holden units.

The present General Motors that we know today is a result of a company split following a government backed Chapter 11 bankruptcy reorganization. In November 2010, General Motors had its initial public offering, which was one of the highest ever recorded (General Motors, 2014).

Marketing Strategy and Environmental Scanning

The core of any effective business plan is a marketing strategy that will outline how a business will set out to deliver its products to the satisfaction of its customers. Success requires effective marketing in order to remain competitive in today’s global market.

Organizations, regardless of its size must be able to identify and understand external influences to be able to adapt to the present realities that will ensure the company’s survival and success (Albright, 2004: 39).

Plans are based on forecasts which in turn are based on assumptions about what is to be. Scanning the horizon of possibilities is a prudent measure that companies take in order to identify new developments that will test past assumptions or provide insight on new perspectives to possible future threats or opportunities (Gordon & Glen).

A vital tool that will aid companies to focus on strategic and tactical plans is environmental scanning. Environmental scanning is the internal communication of external information about issues that may potentially influence an organization’s decision-making process. It helps organizations flush out external threats thus enabling them to maneuver appropriately (Albright, 2004: 40).

General Motors Marketing Analysis
General Motors Marketing Analysis

Environmental scanning may act as an early warning system that will detect and warn companies about important changes and “danger zones” allowing for plans to be altered as necessary. Futurists do environmental scanning in one way or another, all with the ultimate goal to distinguish what is constant, what changes, and what constantly changes. The basic goal of a scanning system is simply to find early indications of possibly important future developments to gain as much lead-time as possible (Gordon & Glen).

Stoner and Freeman (in Costa & Teare, 2000: 156) defined strategic planning as “the development of long range plans for the effective management of environmental opportunities and threats in the light of corporate strengths and weaknesses.” It is therefore accurate that through scanning or the so-called “realized” approach identification and management of environmental opportunities as well as threats can be helpful in the fundamental management of competitive advantages of companies.

In addition to this, environmental scanning can be classified under different areas including social, economic, technological, and political/regulatory. An analysis of these different areas will give an organization a comprehensive assessment regarding the organization (Ginter & Duncan, 1990: 91).

Previous experience on the environmental scanning process has revealed that too much priority is given on the short term which has led to a limited understanding of information. This has led to a basic goal of extracting information, customer service, and the like which ignores the other factors present in the general environment (Costa & Teare, 2000: 157).

The General Motors Way

In analyzing the advantages of General Motors as an organization, there have emerged a number of key strengths including its industry knowledge. With its long history in the automotive field, General Motors has an expertise many can replicate. Time and time again it has been a proven industry leader. In addition to this, technology and innovation has critically improved the company’s products and services and as such have provided customers with key technological advancements that are not only necessary but highly demanded.

Analysis of Strategies, Strengths and Limitations

Recognizing the abovementioned realities, there are still a number of areas of improvement that General Motors needs to focus on including its human resource inefficiency and mediocre scientific achievements, to name a few.

From a marketing standpoint, these situations are potential marketing threats. These internal and external issues hurt the image of General Motors as a company.

In the recent years, General Motors has undergone a number of changes, including its marketing strategy. With a new vision and communications platform called “Find New Roads,” General Motors aims to be the touchstone for the brand as it develops new products and technologies for sale in more than 140 markets (Evans, 2013).

With regards to General Motors efforts, a well done environmental scan has enabled it to identify the realities of the industry and understand its key competition and potential difficulties in meeting the challenge of competitors (Albright, 2004: 40). In this key aspect, General Motors has been able to realign its focus and capitalize on the opportunities that can be found in Asia, specifically China.

In reconsidering its emerging-market strategy, General Motors has been working towards positioning itself for emerging markets of its Chinese partner SAIC Motor Corp (Shirouzu, 2013).

Globalization is a market reality; in order to improve upon the new direction of General Motors to move towards Asia, strategists need to take its efforts a step further and stress test their scanning models. Geographical expansion brings about different considerations. It’s important that through analysis, General Motors can determine the circumstances of desirability as well as risk and restrictions (Beinhocker et al, 2009: 56).

By delving into developing markets, General Motors will be able to think about producing a lower end range of vehicles that consumers from developing markets would be keener on purchasing. An environmental scan would show that emerging markets are not as badly hit by financial setbacks and thus still possess a higher growth rate which equates to an increasing buying power. This would mean while other regions would have slower auto sales, areas in Asia could be a strong sales point.

Scanning would also bring about competitive intelligence as a result of an analysis of competitors and competitive conditions in particular industries or regions. This would enable managers to make informed decisions about marketing, R&D, as well as long-term tactical business strategies. It enables managers to cast a wider net and analyze information about the various sectors of its external environment that will support forward planning (Choo, 1999).

In the case of private transportation sales, a market like China has a high demand for automobiles and it can be safe to say that there will not be any environmental emission deals coming up soon. This can show this as a great potential for profit given the smaller investment, rapid production and low initial costs.

The process looked into identification of emerging issues and trends as well as situations and drawbacks that may affect its success and future. This new strategy opens a lot of opportunity for rapid sales (Shirouzu, 2013).

This example as well as others shows that General Motors has made efforts to stay ahead of the game but this is not enough. General Motors marketing strategies have a need for more improvement. It’s been noted that while their global presence cannot be underestimated, their focus and primary marketing strategies are centered on a limited number of countries. Each country requires its own marketing approach given each economy and marketing conditions vary from each other. A much more tailored, innovative and globally applicable strategy must be applied to achieve multiple targets on a larger scale.

As an example, consider nature, in the last few years, the market has seen an increase in the demand for alternative fuel technologies. Environmental scanning would flag this as rising market trend that General Motors needs to look into. Research and development must be supported to work towards being able to address this future pattern. The company must look towards tweaking its image to make it more concerned for the environment to achieve credibility in this area.

However, the company is already lagging behind its competitors, specifically Toyota. Although General Motors has been producing more efficient products, it is not rising to the challenge that its rivals have been able to in the last few years.

As mentioned earlier, there are various aspects that a scan can look into, be it social, economic, technological and the like. For businesses like General Motors, given its size and holdings, focus tends to be on the economic but such a one-sided scan can lead to misrepresentation or error in analysis leading to a gap between the goal and the outcome which puts an organization in jeopardy. It is imperative scans be as holistic as possible. This is related to the earlier recommendation on the unique marketing strategies per region. A wider analysis of current and potential change and the assessment of the impact of changes on the organization (Ginter & Duncan, 1990: 91)

In reviewing the marketing strategies of General Motors as discussed in their annual reports, their efforts bulk in the areas of publicity, direct marketing, sales promotion as well as traditional advertising.

Conclusion

For General Motors to continue on its path to growth and success, its marketing strategy must be on point. A vital component of its marketing system should include a comprehensive environmental scanning process.

The process should emphasize market research that focuses on specific target markets with strategic identification and unique approaches per market. There should be a parallel unique point of sale concept per targeted area that takes into consideration not only competition and economics but a holistic review of the various factors affecting market conditions.

Relatedly, strategic expansion will require optimal strategies form increasing sales. Realities of this shift in economic power, especially in emerging markets, should focus on affordability and practicality with a balance of quality and optional luxuries.

The research has revealed that General Motors has taken steps in the right direction but fail to grasp the full extent of the shifting patters in the global consumer market.

References

General Motors (2014) About Our Company, [Online]

Evans, H. (2013) General Motors Develops New Global Marketing Strategy, [Online]

Albright, K.S. (2004), Environmental scanning: radar for success, Information Management Journal, May-June, p.38-45.

Shirouzu, N. (2013) ‘General Motors rethinks emerging market strategy, hedges on China partner’, Reuters, 27 Jan.

Costa, J. and Teare, R. (2000) ‘Developing an environmental scanning process in the hotel sector’, International Journal of Contemporary Hospitality Management, Vol. 12, No. 3, p.156-169

Beinhocker, E., Davis, I and Mendonca, L. (2009) ‘The 10 trends you have to watch’, Harvard Business Review, 87, 7/8, pp. 55-60, Business Source Premier, EBSCO Host,

Ginter, P.M. and Duncan, W.J. (1990) ‘Macroenvironmental analysis for strategic management’, Long Range Planning, Vol. 23, No. 6, p.91-100

Gordon, T. J., and Glenn, J. C., ‘Environmental Scanning’, AC/UNU Millenium Project, Ver 2, p. 1-33.

Choo, C. W., ‘(1999) ‘The Art of Scanning the Environment’, Bulletin of the American Society for Information Science, vol. 25, No. 3.

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