One of the main challenges facing the construction industry is to continually find new ways of delivering construction projects effectively. Reports such as the Egan and Latham Report, Rethinking Construction in the UK etc., are all written as guidelines to help construction organizations and project teams focus more on the client and carry-out projects in line or parallel to the client’s business strategy to ultimately improve their services and project delivery. This continuous search for improvement and changes to facilitate bench-marking against best practices has called for more effective and dynamic approaches to the way things are done in the construction industry. These approaches include developing alternative procurement routes to ultimately improve communications between participants in the construction process and the adoption of an extensive variety of concepts, tools and techniques to develop collaboration and to enhance efficiency and quality. Other approaches include using IT (Information Technology) solutions to integrate the construction process with technology by electronic sharing of data and information in the design phase and the improvement of better components, materials and construction methods, including standardization and pre-assembly.
However, new markets demand a change in the way organisations operate and demand new concepts, tools and technology to improve the efficiency and quality of processes and products of construction firms, and researchers and practitioners in the KM field believe and continuously underline that KM is one of the concepts needed to meet these demands. They argue that it has become apparent that organisations need to manage their knowledge assets effectively and to continuously identify where knowledge resides in their organization, so that they can then organize it for employee use in their work processes. The aim of the dissertation is to explore, investigate and analyse whether the knowledge management (KM) concept enables construction organisations to deliver more efficient services and products, improved performance and enables them achieve their organisational objectives.
To appraise the academic and practice rudiments of knowledge management
To outline the implications of the KM concept on people, processes and products in construction organisations
To identify the main benefits of knowledge management, and assess whether the current perception and practice of KM in construction organisations allow them to have full access to these benefits and subsequent organisational benefits
To analyse through data collection in sample construction companies, the influence of KM in construction organisations and investigate its impact in delivering more efficient services and products, continuous improvements in processes and in gaining organisational benefits
To evaluate whether KM adds value to the construction industry as a whole
The dissertation is divided in seven parts which are follows:
Chapter 1: Introduction to the research work describing the background of the study, its aims and objectives, and the scope of the study.
Chapter 2: Literature review appraising the academics and practice rudiments of knowledge management. It essentially reviews the general meaning, history, aims, objectives and benefits, and the implementation of KM in organisations.
Chapter 3: Literature review discussing the introduction and benefits of KM in construction industry. It essentially reviews academic discussions on the introduction, relevance and the current practice of KM in construction industry alongside the current tools and techniques used.
Chapter 4: Research methodology discussing the technique for executing the research work. It essentially discusses the method of research chosen, selection of samples and the justification for conducting the research work using that distinctive method.
Chapter 5: Data analysis discussing the research carried out within the sample organisations. It essentially describes KM practices in each particular sample organisation, its awareness, objectives, benefits, barriers and its general impact so far in each organisation. An analysis of each sample organisations is also carried out in this chapter.
Chapter 6: Cross-data analysis tries to explore parallel and unparalleled factors (similarities, common issues and differences) which help to identify the impact of KM in different organizations or firms in the construction industry. These organisations are analysed and compared under these topics: KM awareness and motivation; KM strategy and implementation and KM impact.
Chapter 7: Discussions, conclusions and recommendations drawn from the research findings, interviews, data collection and data analysis. The limitations of the study are also discussed in this chapter.
For more tips on how to write your own construction management dissertation check out our Construction Management Dissertation Topics today. It contains many dissertation topics and dissertation titles, it will also show you what is needed to write your own project. I would be very grateful if you can share this post on Twitter or Facebook. Thank you.
Organization strategic plan is a process that identifies and defines the strategic and directive decision making on the resource allocation in order to pursue and achieve its objectives. Direction determination is an advantage and important aspect in the organization. It is because it helps to pursue the avenues and the course of action in dealing with key aspects in the organization. In this case, the organization strategic planning should capture the vision; mission, values and strategy in order to formulate its end vision. The main reason and rationale for international investments are for diversification purposes and high pension returns. One advantages that international security foreign stocks are volatile as compared to other American stocks. In this way, addition of international stocks will expose the international security portfolio and reduce normal risks without attracting low demands.
Such a position means that a 20% stock international portfolio and a 60% American stock portfolio will attract the same returns and attract lesser risks as compared to a 100% American stock. However, TMP Company should consider the fact that in case the international security market drops sharply; the foreign market correlation will rise significantly. Additionally, TMP Company should consider the negative aspects of international investing which includes attracting high transaction expenses, custody fees expenses, management expenses, operational expenses and tax expenses.
One disadvantage is the presence or interference of risks. Other risks and expenses include currency and political risks. In this way, the company should use this approach to consider the returns from investing internationally, which have been affected and influenced by movements of currency. It is because currencies can cause high volatility. TMP Company has various investing international options. These options include integrating mutual money of funds that purchase foreign international securities and purchase of foreign direct securities. This introduces close end finances to purchase foreign international securities. Organization strategic plan managerial process is interconnected to four important functions. These functions include the organization, planning, motivational and control. The only limitations and disadvantages to this would be a lack of liquidity. The other problems and risks associated with a few technical issues in the policy investments. It is necessary to note that investment risks are reflected in the future and not the in real time information, uncertainty in the political arena, custodial and trading difficulties.
Expected high returns are an international security advantage. This is because the company international security portfolio intends to ensure that the company gets good returns. The security investments have been identified as a successful endeavor which is sure to bring the company high returns. High returns in the company will put company resources into Action, improve employee efficiency levels, leads to achievement of the organization’s desired goals, builds friendly relationships and ensures stability in the work force. Direct investments created many dynamics, which are as a result of following foreign rules from foreign international countries. Many research studies have shown that high international investments of up to 60 % can help a great deal in the improvement of returns and risks benefits. Most intellectuals have recommended that in this case, a range of 10% to 30% is introduced as high returns are expected.
The other advantage is that it also considers the emerging markets. It happens because developing countries can enjoy multiple benefits by investing into the emerging markets. Additionally, making purchases in the emerging markets is much easier. It simply means that emerging companies can capture moving cash into attractive international entities. Another advantage is that the Emerging markets investments also help to allure faster growth in the economy. The company should realize that foreign international securities play a vital diversification part in the business. Adding these equities into the company’s portfolio will achieve fixed incomes and reduce volatility. Another benefit or advantage is diversification’s attributes to domestic market equity within the foreign market equity. Benefits of adding international securities to pension portfolios is that most investors have future return expectations as one of the key attributes, the investors are more comfortable with an allocation of investments from home markets. TMP should realize that risks can be assessed and calculated from historic fund tracking of errors in the benchmark policing. This risk is related to negative and uncertain effects or impacts for an uncertain potential future. The other problematic approaches on how to handle exceeding funds policies. It may result to high volatile conditions in the market. The market transient conditions are one of the causes that conform to policies against future risks. The other common risk is the time horizon risk. This risk is related to portfolio a measure towards such risks. It is important to no0te that 100 % of all investment portfolios have risks that is not seen.
Visible and Invisible Investment Risks
Visible and invisible risks can be both an advantage and a disadvantage. This is because it can be corrected early to ensure high returns or cause failure if not identified on time. It is evident that investment policies from pension or security funds mostly do not take the illiquid risks into consideration. Most companies prefer other investments like equity, capital venture and other real estate investments, which is not popular, and, therefore, is appropriately ignored for the purpose of risks assessment. It has been argued that Financial Crisis globally, has been centered in such securities. The risks that are not visible or that are invisible are acuter as compared to other risks. It is because these risks are not easily recognized. In this case, the company should put more effort into ensuring that the risk assessment takes place accurately and appropriately. The best strategy or key that is used to control invisible risks this risk are to develop risk assessment plans from international, notional instead of using market security values which are derivative from investments. For instance, consideration of $10 Million strategy for US security equity portfolio run by asset manager s from external quarters that is related to the purpose of the asset appropriator to plan for $50 million of number of index contracts futures. In Consideration to the assessment risk exposures on security funds, the international security trading is successfully completed. The security market is made up of multiple exposures to risks that are related to security funds increasing from many investment factors.
For TMP to successfully implement the various securities investing options, the company should consider integrating strategies for the implementations. These may include:
Portfolio Management Strategies
As a portfolio manager, I realize that challenges and changes are constant especially in complex and volatile international market. In this case, TMP is presented with many different opportunities in the emerging international markets, hedge funds, real estates, derivatives and many other types of investments. However, the company needs to come up with portfolio management strategies to ensure that they stay on top of the investment game. It simply means that the portfolio management strategies will help the company to monitor and shape investments in order to generate high returns and expose excessive investment risks. The portfolio management strategies are related to examination of fundamental issues related to investment effectiveness and risks reduction. The portfolio gives balanced a view on international markets, institutions, theories, practical applications and other principal concepts. The company should implement active management. This is because active management will ensure constant monitoring of the security investments processes.
Viability of Market Exposures
International security Portfolio management should have market exposures on assessments in terms of standard deviation and volatility. The performance is measured through marketing indices and error tracking. The portfolio may also be compared with other managerial portfolios in the market to ensure that the function objectives in the company are similar. Finally, the adjusted risk model may be introduced. The other effective strategy in portfolio management is the attribution of performance. It involves carrying out of the analysis on the overall manager performance from a financial point of view.
Asset Allocation Strategy
Most times assets allocation can be compared to placing eggs in one bag. It simply means that assets allocation is a single investment or security, which could cause the whole investment package getting, phased out in case the portfolio is not successful or lacks in specific details. In this case, diversification is appropriate to help in investment spreading in order to reduce risks. Assets allocation system is, therefore, an investment system that diversifies investments from securities and spreads the investments into cash, bonds and stocks. The investment allocation can account for more than 92% of return viability in relation to total holdings in the portfolio. The reason for this is different classes of assets have distinct reactions, history and characteristics in the same conditions within the market. Categorizing the assets can carry out diversifying security investments strategically. Cash, bonds and stocks have equivalently fixed rates under multiple segments that help to provide a basis of diversification to maximize initial returns and, therefore, reduce risks. Fixed and cash rate equivalents contribute to the provision of investment category assets choices. These are the core requirements that guarantee and provide securities on principal investments. It uses the general consideration of providing moderate returns from lower risks. In this way, funds value is stable, and the investments get assured. To promote assets allocations the employees of the company, and the management should take responsibilities for the investment decision-making. The employees are responsible for information provision and promotion of asset allocations. It means that the employees must be sensitized and made aware of the best practices in strategic investments as an integral and vital part of the company.
Policies Pertaining To Hedging
Hedging is simply a strategic risk management policy that offsets or limits the loss probability from commodity or investments price fluctuations, securities or diverse currencies. It employs many techniques that involve opposite and equal market positions. This technique is utilized to protect the company’s investment capital against inflation effects through high investments of notes, bonds, and shares in securities. Hedge comes from multiple financial attributes known as instruments, which include insurance, swaps, stocks and contracts forwards. Hedging strategies include currency future contracts, money market currency operations, future interest contracts, forward exchange currency contracts and equity short straddles amongst many others. Headgeable risks are categorized into credit risks, commodity risks, currency risks, interest rate risks, volumetric risks, and equity and volatility risks. The company should, therefore, consider future hedge in the company.
Hedging will allow the company an opportunity to tap into untapped markets. It means that the company could venture into markets with natural prospects and resources to ensure fast economic security growth. Additionally, market frontier economies have the potential to offer the company many opportunities in different investment areas such as investing in other financially efficient markets. Policies pertaining to hedging also help to measure a company’s performance. The performance is measured through marketing indices and error trackings. The portfolio may also be compared with other managerial portfolios to ensure that the function objectives in the company are similar. Finally, the adjusted risk model may be introduced. Categorizing the assets can carry out diversifying security investments strategically. Cash, bonds and stocks have equivalently fixed rates under multiple segments, which help to provide a basis of diversification to maximize initial returns and, therefore, reduce risks. It is also virtually important to consider the emerging markets. It is because developing countries can enjoy multiple benefits by investing into the emerging markets. Additionally, making purchases in the emerging markets is much easier. The main reason and rationale for international investments are for diversification purposes and high pension returns. It is vital to note that foreign stocks are volatile as compared to other American stocks. In this way, addition of international stocks will expose the portfolio and reduce normal risks without attracting low demands.
Successful Investment Markets
The company should invest in successful investment markets. The markets should have the probability to provide and allow successful financial security investments. In this way, the company will be able to increase its investments in successful investment markets. Successful investment markets can be a guideline to the company of other successful companies around the globe. This will not only motivate the stakeholders but will also open up this company to participate in successful investments markets.
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This report is an analysis of operating business in international environment. Having knowledge of the international business environment is of most importance for modern managers as all major business concerns are dealing worldwide for all types of business transactions and second thing is that almost all business are or desiring to be globalized. Hence a manager must have knowledge about these factors of international business environment.
Definition of International Economic Environment
One system all over the world which only used for the trade internationally among the developed and developing countries is called International Economic environment. It is a sub-field of economics that is concerned with environmental issues. Environmental economics is distinguished from ecological economics in that it emphasizes the economy as a subsystem of the ecosystem with its focus upon preserving natural capital. On the other hand, International Economic Environment means the environment in different countries, with conditions similar to the home environment of the institutions, influencing decision-making on capabilities and resource use.
Terms of International Economic Environment
There are three terms to spread out all over the world of International Economic Environment. If any countries want to be world trader he must follow the three terms to be real international trader.
The Law of One Price
There are also other two conditions must be satisfied before international economic exchanges can become beneficial for all involved. The sustainability of ecosystems on which the global economy depends must be guaranteed. And the economic partners must be satisfied that the basis of exchange is equitable; relationships that are unequal and based on dominance of one kind or another are not a sound and durable basis for interdependence. For many developing countries, neither condition is met.
Elements of Economic Environment
The elements of International Economic Environment are more important. It has five elements. Every elements is described below,
Economic Conditions: – Economic Policies of a business unit are largely affected by the economic conditions of an economy. Any improvement in the economic conditions such as standard of living, purchasing power of public, demand and supply, distribution of income etc. largely affects the size of the market.
Business cycle is another economic condition that is very important for a business unit. Business Cycle has 5 different stages viz. (i) Prosperity, (ii) Boom, (iii) Decline, (iv) Depression, (v) Recovery.
Following are mainly included in Economic Conditions of a country:-
Stages of Business Cycle
National Income, Per Capita Income and Distribution of Income
III. Rate of Capital Formation
Demand and Supply Trends
Inflation Rate in the Economy
Industrial Growth Rate, Exports Growth Rate
VII. Interest Rate prevailing in the Economy
VIII. Trends in Industrial Sickness
Efficiency of Public and Private Sectors
Growth of Primary and Secondary Capital Markets
Size of Market
Types of International Economic Environment
It has two parts:
Microeconomic part means focuses on the recent economic environment and the effect of location on business and performance. The Macroeconomic part means focus on the broader or spreader economic environment and the world economy as all in all.
International economics system
International economics is concerned with the effects upon economic activity of international differences in productive resources and consumer preferences and the international institutions that affect them. It seeks to explain the patterns and consequences of transactions and interactions between the inhabitants of different countries, including trade, investment and migration Such as:
Finance system: International finance system explains and researches the spread of money over the international financial markets, and the impacts of the exchange rates.
Trade System: Which studies products, goods, and services all over the world boundaries and it makes some policy to spread up its trading system.
Monetary Macroeconomics System: this factor research capital and macro flows all over the world.
Analysis of International Economic Environment
Economic Environment means the effect of the working on the business all over the world. It studies trade system, policies, structure, and nature of an economy, level of income, distribution of income and wealth etc. The economic environment explains the economic conditions of any countries where the international organization operates. The features of economic environment are related to the all economic activities effects. The roles of international economic environment are increasing gradually day by day. Cause it has various types of system which are explained above the report. It has many organizations like World Bank, WTO, and UN etc.
We can accurately grasp the characteristics of international marketing environment, determine whether the enterprise market opportunities, can select the appropriate target market, can develop the appropriate marketing mix strategy. In other words, the correct assessment of the international marketing environment, to conduct international business success is the basis for marketing activities. Generally, the larger impact of international marketing activities is mainly economic, political, legal and cultural environment. Enterprises to enter the market of a country, we must first analyze the country’s economic environment. A country’s economy through the market size and economic characteristics of the two factors are reflected in relatively prepared.
Characteristics of the international economic environment
International economics environment is worldwide sector. It has some own characteristics which help anyone to fine out the conditions, rising and declining of economy of any countries of the world. It helps them to find out the lickings of their economic system. International economic environment play role of its system into every country. It has own Trade Centre, like WTO. Annually it presses its growth and declining reports. Some bindings are given to those countries. All business sectors services are provide to that country.
Importance of Economic environment
The most general and important consequence is that we naturally and automatically give priority to the economy (the household of man and part of the socio-economic environment) over ecology (the household of our planet, which constitutes the natural environment), when it should be obvious (were we not blinded by our familiarity with and dependency on the status quo) that for medium and long-term human survival it has to be the other way around. Day by day the importance of the economic environment is increasing.
Challenges of International economic environment
A related characteristic of market economies that is relevant to managers concerns the nature of property ownership. There are two pure types-complete privet ownership and complete public ownership.
Nowadays there are many challenges to overcome all obstacle of developing world economy. But there are four challenges go ahead as a main features. Four challenges are now main factor for us.
China Economy: In this ultra-modern world, Chine is the big fact. Socialist, Scientist, researches that next era China overcomes USA and European economy.
Politicization of global economy: Politics is the main factor nowadays. Now every country is violated by political violence all over the world. Everyone wants to become higher than another one. So these types of economy are the challenges for the modern economic environment.
Poverty, inequality and insufficiency: Almost all over the many countries are live under the poverty line. There have no proper system and capital to improve them. However, inequality and insufficiency of the products and working system they are not developed. So, it is the challenges for it.
Greenhouse effect: Greenhouse effect is now an n important discussion all over the world. Economic environment is totally effected by this. So it is the fact.
Theme of global business environment
Shift in the locus of power from North to South
The locus of global economic, political, and demographic power has been shifting from the Global North (broadly speaking, developed countries) to the Global South (developing countries). Although this shift has been taking place for decades, the new intensity with which it is occurring and the changing implications that it has for business will shape the global business environment in the coming years.
For businesses, supply chain structures are less likely to follow the “make in developing, sell in developed” paradigm. Additionally, in a globalized talent pool, educated workers are coming from new places, so companies must raise the bar or get left behind. Furthermore, the entrance of new competitors means that some threats may not even be on the radar.
New models of consumer engagement
With ubiquitous connectivity, universal access to knowledge, and an increasingly global consumer environment, companies are being forced to redefine how they engage with consumers. These trends can be double-edged swords. Connectivity in social media, online mobility, mobile payments, and augmented reality offer new ways to market products and services to consumers, but they also add complexity and competition. Access to knowledge and broader globalization can create consumer opportunities, but the former creates intense price pressures, and the latter can cause organizational complexity—both of which combine to squeeze profitability.
Many companies are already at the forefront of engaging the new consumer, while others are still lagging behind, or worse, attempting to shoehorn outmoded concepts for consumer engagement into electronic avenues. Companies can gain an immediate advantage with the following strategies:
Invest in electronic and social media-based consumer engagement. This applies not only to consumer products companies and retailers but also to businesses in other industries.
New paradigms, changing business models, and constant innovation
From research and development (R&D) and consumer engagement to product design, manufacturing, and corporate governance, the paradigms that have defined business are changing. Technology-enabled global operations transformed R&D functions during the information technology revolution; now, educational achievements in developing countries and aging populations in established markets are changing them again. Technological advances on the horizon, such as three-dimensional printing, will change established manufacturing methods just as computer-aided design and automation did 20 years ago.
Redefinition of the social contract
In both developed and developing countries, citizens are demanding more from their governments, and governments are facing challenges in meeting their needs. The events in the Middle East illustrate citizens demanding greater representation and accountability from their governments, enabled by ever-present connectivity. The forms of government that are—or were in place are proving to be unequal to the task. In the developed world, constituents are insisting on more protection from various forms of volatility, be it economic, health, or security. Governments in these countries, however, are constrained by rising debt, changing global governance models, and a talent deficit. Some countries, such as China, are struggling with both sets of problems. As governments worldwide face new demands and new constraints, a wholesale reevaluation of the social contract is taking place.
The global war for talent
Changing global demographics combined with governments’ disparate ability to invest in education have caused a shift in the composition of global talent. Talent is increasingly located in developing markets, both in numbers (younger, growing populations) and in skill sets (more university degrees, especially in science and engineering). The global recession has accelerated this trend, with many developed countries reporting a reverse brain drain—highly skilled emigrants leaving their host countries to return home, where capital is more plentiful and growth rates higher, to find work or start businesses.
At the same time, technology has made global collaboration more prevalent, and changing business models and business needs have made knowledge workers more valuable. Product cycles are becoming shorter and technological competition more intense, placing greater pressure on companies to keep pace by identifying and cultivating the best minds.
The result of these new and accelerating trends is a global war for talent that will determine which companies—and governments—are able to innovate and prosper and which ones will simply follow.
This situation presents risks and opportunities. Highly networked companies are able to take advantage of a growing pool of global talent and, by doing so, raise the bar for their competitors, including the less well-networked. This heightened level of competition means that all companies, including today’s innovators, need to be alert to changes in the competitive landscape for talent. In addition to locating and connecting with the most talented people, companies will face greater pressure to retain the most talented employees. Retention mechanisms and core human resources skills will become increasingly important to keeping high-value, high-performing workers. The policies of various geographic locations will have to be scrutinized to choose countries that offer fewer restrictions on the migration of highly skilled workers.
Risk of International Business
In every sector risk is compulsory. Then no one stay behind the sector although he knows it is not good. In the international economic environment sector also have many risk. Most of the important risk is included below. To develop in this sector you should mind it.
Important of Studying International Economic Environment
By studying following gaudiness, everyone will be able to know what the main factor of International Economic Environment is. Without it no one can find out which countries are poor or rich. Following are the importance and objectives of studying International Economic Environment:
Increasing awareness of the one country political policies and economic system.
Learning the system of improving relation through appropriate communication.
Identifying the other developed countries economic policy.
Changing the Economic Market
The future of any institution depends on its law, rules and regulations and depending on economic, social and technological sector. Whether it’s emerging markets like China or Brazil impacting sales and production, demographical situations changing buyer’s behavior and challenging service models, companies need to adapt to turn threats and challenges into opportunities. Under this plan, the economic impact has to be estimated by the regulator. Usually this is done using cost-benefit analysis. There is a growing realization that regulations (also known as “command and control” instruments) are not as distinct from economic instruments as is commonly asserted by proponents of environmental economics. E.g.1 regulations are enforced by fines, which operate as a form of tax if pollution rises above the threshold prescribed. E.g.2 pollution must be monitored and laws enforced, whether under a pollution tax regime or a regulatory regime. The main difference an environmental economist would argue exists between the two methods, however, is the total cost of the regulation.
Relationship to other fields
Environmental economics is related to ecological economics but there are differences. Most environmental economists have been trained as economists. They apply the tools of economics to address environmental problems, many of which are related to so-called market failures—circumstances wherein the “invisible hand” of economics is unreliable. Most ecological economists have been trained as ecologists, but have expanded the scope of their work to consider the impacts of humans and their economic activity on ecological systems and services, and vice-versa. This field takes as its premise that economics is a strict subfield of ecology. Ecological economics is sometimes described as taking a more pluralistic approach to environmental problems and focuses more explicitly on long-term environmental sustainability and issues of scale.
Environmental economics is viewed as more pragmatic in a price system; ecological economics as more idealistic in its attempts not to use money as a primary arbiter of decisions. These two groups of specialists sometimes have conflicting views which may be traced to the different philosophical underpinnings.
Another context in which externalities apply is when globalization permits one player in a market who is unconcerned with biodiversity to undercut prices of another who is – creating a race to the bottom in regulations and conservation. This in turn may cause loss of natural capital with consequent erosion, water purity problems, diseases, desertification, and other outcomes which are not efficient in an economic sense. This concern is related to the subfield of sustainable development and its political relation, the anti-globalization movement.
Environmental economics was once distinct from resource economics. Natural resource economics as a subfield began when the main concern of researchers was the optimal commercial exploitation of natural resource stocks. But resource managers and policy-makers eventually began to pay attention to the broader importance of natural resources (e.g. values of fish and trees beyond just their commercial exploitation; externalities associated with mining). It is now difficult to distinguish “environmental” and “natural resource” economics as separate fields as the two became associated with sustainability. Many of the more radical green economists split off to work on an alternate political economy.
Environmental economics was a major influence for the theories of natural capitalism and environmental finance, which could be said to be two sub-branches of environmental economics concerned with resource conservation in production, and the value of biodiversity to humans, respectively.
The International Economic Environment is now an important demand for every country to make up them as a development country in the world. The article considers culture, religions of people from various countries, traditions, customs, which from the multicultural environment of international economic activity. Every manager should have through understanding of International Economic environment, only then he can drive the organization to the path of success. All over the world, all countries differ in conditions of: Stage of economic development, economic environment etc.
Balasubramanian, Arun: Towards a Philosophy of Environmental Education Regional Institute of Higher Education and Development, Singapore.
Sankar, S.: Environmental Economics, Margham Publications, Chennai. P. 7.
An Internal and External Business Environment Analysis of Ryanair
The objective of this research paper is to conduct an analysis of internal and external business environment of a service company. For this purpose airline global industry has been chosen as a case study because of its importance in the current economic and political scenario. International investment, world trade and economic growth are some important factors deriving this industry (Porter, 1986). The present paper will undergo strategic analysis of internal and external environment of Ryanair in relation to its performance in the global Airline industry. It will allow identification of factors that affect the profitability and popularity of a company. In the end recommendations will be suggested accordingly. Lets look at the Ryanair business environment.
Company Background – Ryanair Business Environment
Ryaniar has a long standing reputation amongst low cost airlines in Europe. Ryaniar Ltd was founded by the Ryan family in 1985 and within ten years of its establishment the company gained immense popularity because of its image as a low rent airlines. The company provides scheduled services between the UK and Ireland through its 297 Boeing aircrafts. The company still manages to maintain its image as popular airline of the world. The Ryaniar Company focuses on budget conscious leisure and business travelers for its services. People who choose other transport services to reduce the expanses of their travelling remain to but the primary target of the company. The company also aims to expand and improve its services in low fare market. The mission of Ryaniar Ltd is to become the most profitable and attractive low fare airline in Europe low cost carriage sector by brining continuous improvements in its services.
Currently the growth and development of low cost airline is being favored in the European Airline industry and it remains the main determining factor for the evolution of an airline company. Almost 18 percent of the transport supply is being done by low cost airlines and the seats are mostly limited to medium and short haul flights. These low cost carriages are also deemed important for the passengers who want to find seat for point to point moves.
Belobaba et al. (2009) writes that global airline industry has grown by 12 percent in 2010 and the major player in this context remains to be the United States of America. The market growth is further expected to increase in years to come. It is believed that by 2015 the growth will reach to $714 billion and the number of passengers will also grow to 3 billion. Domestic market shows the leading market segment in the global airline industry and America holds about 45% value of the industry. A number of challenges are also being faced by the global airline industry after global financial crisis. By 2010 many consumers started to cut back their leisure spending and relapsed air travel by train or other cheaper means of transport. This fall in revenue is mainly fueled by increased unemployment rate and economic uncertainty (Belobaba et al., 2009).
Some negative events have also declined the business of airline industry and amongst them rising fuel prices increasing the cost of operations are most common in the history. Several times they have put a dent on the industry’s operations. Along with that, other negative players are also there amongst them increased security threat, political unrest, uncertain and exchange rates are at the top of the list.
According to a report Published in the Telegraph UK the low cost sector has increased its growth by 12 pc in the last decade. However, even the low cost airlines are not free of the negative market affects that undermines overall activity of the industry but still they are making more business that the high cost European airlines (The telegraph, 2014).
After its establishment Ryaniar faced a great deal of competition. European Union deregulation in 1990 resulted in some substantial changes on the British industry. The most important of which is the focus of people on budget airlines offering comparatively shorter routes. These airlines provided a great deal of competition and grew on expense of traditional British airlines. Later increase in fuel prices after 2008 economic crisis also resulted in further decline of luxury airlines. Competition is also not very strong as the industry is not in a healthier state to support the business of expensive airlines and a number of airlines are under the threat of disappearance because of bankruptcy. European Union promotes low wage, low cost and low income flag carriers.
Challenges Faced By Ryaniar
Operating environment of the airline industry is being affected by a number of challenges that range from safety issues to consumer preferences, spending patterns, political instability, weather, security and natural disasters. All these factors affect the operating environment of Ryaniar Ltd also and most of them are beyond the control of the management of any airline. The expenses of flight cannot be controlled regardless of the number of passengers travelling in the plane. In addition to this, when shrinkage in airline industry happens, the remaining cost of operations remains the same that presents immense challenges to the management. Dobruszkes (2006) adds that operating environment of some low cost airlines has become favorable because they have adopted some cost reduction strategies that mainly include the management of the marketing cost, fleet reducing services, airport maintenance, route alteration and recharge policies. Appropriate techniques for maintenance of Engines, maintenance cost of hangers, management of staff cost and marketing cost to increase productivity are also adopted. In this scenario, companies that focus on small operating basis and start internet ticketing generate more revenues (Dobruszkes, 2006).
In the European market variation related to differences in the geography and scope of the airline persist. Most of the short and middle haul airlines focus on Western Europe and the distance for flight is 1.4 hours during this time an area of 634 kilo meters is covered. The total area covered by Ryaniar and most of the other low cost airlines is less than 1000 kilometers and in most of the cases international connections are not present. In addition to this, most of the low cost airlines influencing Easy Jet and Ryaniar are poorly penetrated in central and Eastern Europe markets. Some networks are also designed for tourists to take them to their desired destinations. These airlines do not focus on the capital city but they also maintain their attention to small cities and towns where low cost flights are easier to be managed (Mason, 2001).
Services Provided By Airline Industry
The services delivered by the airline can be divided into three main categories mainly including freight services, logistics and rail passenger’s airbus. Superior services are usually delivered to the clients that are willing to pay more. Product scope of Ryaniar Ltd is large as it promotes many services. It offers a range of destination around in Europe. In addition to this, hospitality, carriage, aircraft control system and assistance in booking rest houses is also provided. Like all other airports, services at the Ryanair airports are also available that include flat beds lounges and fast track security system.
Intangibility of Services
Ryanair business environment services are intangible and cannot be smelled, touched and tasted. It cannot be processed physically possessed.
Inseparability of Production and Consumption
Inseparability of production and consumption means the production of a service cannot be separated from its consumption by customers happen simultaneously. Customers buy specific type of product and take it home but services cannot be taken home, instead they are provided in a specific manner.
Perishability is another characteristic of the service that means once services are produced they cannot be stored because of which supply demand gap arises.
Heterogeneity means that variation in the quality of services because of which standardization cannot be maintained. This makes the maintained of quality of service delivery a difficult task for service providers.
Customer safety and quality issues are at the heart of any service sector and same is true for the airline industry. Here the quality of services acquires central place for the organizations. Quality of services is assured by the notion of truth that primarily reflects the importance company gives to handle each and every customer. Therefore, for service industries it becomes extremely important to design and manage activities in a way that can assure good quality services to the passengers (Janawade, 2013).
According to Janawade (2013) service quality management is still the subject of debate for the management of airline companies. The diversity of the airline services makes it harder for the administration to maintain good standard of services at each front. The quality of flight meals clean and airy airports, luxurious waiting areas, hygienic environment of washrooms, customer care and maintenance of airplanes are some areas of quality that remain the focus attention of the administration. Sometimes it becomes harder for the company to maintain superior quality services when budget is low and economic uncertainty prevails in the market. This is the reason for which some airlines fail to maintain good quality in-flight environment. The issue of measuring service quality has always been raised by the customers who pay a huge amount to travel across the world. Business class customers are often more cautious about the way they are treated at the airport and also in the airplane. Some other areas are also there that create major issues for the management and they include mishandling of baggage, late flights and misinformation (Janawade, 2013).
Along with the quality of services the rate of accidents and incidence also becomes the prime concerns for passengers who opt to travel in an airline. Total rate of incidents, rate of accidents, mid air collision and pilot’s deviations are some of the events that affect the safety of airline operations. The overall safety ratio of the global airline industry has declined in the past decade. Many technological issues arise because of poor maintenance of the aircraft. Moreover, the entire industry is under the threat of customer safety issues mainly generated by political unrest and legal bindings of the company. Airline industry remains the center of attention of the government and public as far as the passenger’s safety issues are concerned and many times these issues have resulted in serious debates that presented the industry with a number of challenges (Janawade, 2013).
There are a number of regulatory issues as well that affect the service delivery in the airline industry. Airline industry remains the center of attention of the government of a country and hence is mostly subjected to extensive regulations of the government. Many legal compliance and regulatory requirements are there for the industry. In the US airline industry FAA (Federal Aviation Administration) regulations matter greatly, which change from time to time and put airline industry under scrutiny. Same is true for other areas including Europe, Australia and Asia. Other acts such as transport security act result in federalization of some security procedures. Government of the UK keeps proposing increase in taxes that directly affect the revenue generation of the industry. In addition to all this, other regulatory changes are also expected that may range from security concerns to fuel emission and environment safety issues. All these factors may further affect the business deleteriously.
Success of Organization in the Management of Challenges
As stated above a number of challenges are being faced by the airline industry and they are regulated by the key players in the industry. Key players in the airline industry are those that have direct or indirect affect over the business and amongst them airline manufacturers, air navigation service providers and air-port construction teams are important, along with them, political atmosphere of a country and fuel price are also some intangible factors that affect the business of the airline industry. Policies and procedures of the ‘department of the trade and industry’ can positively or negatively affect then business (Mason, 2001). Along with this, employee’s turnover rate has become a major problem for the companies that tend to develop and make progress. A good human resource management system can aid companies to reduce turnover rate by keeping employees satisfied with the job. Companies with a high rate of employee’s turnover often face a great deal of pressure in terms of the management and training of their employees (Richard et al. 2001). The global airline industry has managed its growth by maintaining its operations in suitable limits of economy. Dobruszkes (2006) explains that European airline industry is the one that prefers evolution of low cost airline networks. Because of the demands and competition trend in the market this concept became famous after 1995. The European low cost airline scope has actually met by Ryaniar and Easy Jet that have felicitated customers who previously chose other transport system because of high rent of the airlines. Ryaniar airline alone has carried 70 million passengers in the year 2012 and is expected to increase its size.
Bamber et al. (2013) writes that though turnover rate of employees in an industry vary greatly with time and many factors play their part in this context. Sometimes nature of the job and low wage becomes the cause of a high turnover rate in case of some industry such as fast food and call centers. When compared to the other sectors the rate of employee’s turnover in airline industry is comparatively low (Bamber et al., 2013).
Richard et al. (2001) also say that airline industry show low turnover rate compared to any other industry of the world. Overall turnover rate of the industry is 9 percent that shows employees are not replaced very quickly over a particular time period. However, increased fuel prices and deregulation act in the late 1980s have made the industry less attractive. Operating cost has increased to a considerable extent and worker’s pay has reduced. Many other airline companies in the world including that of American and Asia have also decided a wage cut off to reduce the cost of operation within the system. In addition to this, 100,000 employees of only American airline industry were laid off after deregulation act. This has given rise to an uncertain working culture and some of the employees opt to find jobs in another industry that is less uncertain than the airline sector (Richard et al. 2001). Bamber et al. (2013) conclude in their research paper that airline industry needs to maintain its attractiveness in order to keep employees happy and contented with their jobs.
Forces Deriving the Airline Industry
A number of forces derive the airlines industry that range from customer satisfaction issues, strategic planning, point to point roots, terminal and aircraft facility, online booking services, reduced lines at the ticket corner and economy of scale. Along with customer safety other factors are also there that create management challenges for the airline companies. Staff safety at the airport is also one of the major concerns of the administration that results in poor working morale of the staff members.
Bamber, G. J., Gittell, J. H., Kochan, T. A., & Von Nordenflycht, A. (2013). Up in the air: How airlines can improve performance by engaging their employees. Cornell University Press.
Belobaba, P., Odoni, A., & Barnhart, C. (Eds.). (2009). The global airline industry (Vol. 23). John Wiley & Sons.
Dobruszkes, F. (2006). An analysis of European low-cost airlines and their networks. Journal of Transport Geography, 14(4), 249-264.
Hanlon, J. P. (2007). Global airlines: competition in a transnational industry. Routledge.
Janawade Z., 2013, customer perception quality of complex services, France, Paul Cezanne University, p. 2-14.
Mason, K. J. (2001). Marketing low-cost airline services to business travellers.Journal of Air Transport Management, 7(2), 103-109.
Porter, M. E. (Ed.). (1986). Competition in global industries. Harvard Business Press.
Richard, O. C., & Johnson, N. B. (2001). Strategic human resource management effectiveness and firm performance. International Journal of Human Resource Management, 12(2), 299-310.
The criteria to record and recognize the inventory is also explained as instructed under International Accounting Standard 2. Inventory is separated from the Non-Current Assets like plant and equipment which are held for sale at maturity and a further categorization of inventory is given in two forms like By-Products and Main products. The item which is normally sold out by the companies through ordinary course of its activities are termed as Inventory. Generally three forms of inventory are founded in any manufacturing companies which are Finished Products, Raw Material and Work-In-Process. All three inventories have different cost classifications and nature and should be measure on separate basis. There are four cost formulas to measure the inventory and are generally practiced in the US. Four formulas are LIFO, FIFO, Weighted Average Method and Specific Identification. This also explains the concept at which the reporting cost of the inventory is provided and Inventory should be reported at lower of Cost or Net Realizable Value (NRV). Cost is the value at which the inventory is purchased including purchase cost, carriage inwards and other taxes paid on the purchase whereas the Net Realizable Value id the amount at which the inventory can be sold out in the market less any expected expenses to complete the sale process.
International Accounting Standard 2 is one of the Accounting Standards issued by the Accounting Standard Committee to record and measure the financial items pertaining financial features. International Accounting Standard 2 encompasses the recording and measurement of Inventory. Inventory is defined in the International Accounting Standard 2 as “Assets which are held for sale in the ordinary course of activity by the company and it comprises Finished Products, Raw Materials and Work-in-Process. Inventories are the goods manufactured by the company in order to obtain the economic benefits from the sale to the customers. The main objective of the issuance of this standard is to separate the Non-Current Assets of the company from the inventory which is a Current Asset. Prior to the interpretation of International Accounting Standard 2, most of the companies have faced problems in the identification and recognition of the inventory and commonly the estimation and recording of the cost of inventory was a key concern for them. International Accounting Standard 2 has led the management to maintain and report the inventory at the reasonable and appropriate value. International Accounting Standard 2 defines the items of Inventory along with the methods to record the inventory. The methods which are being interpreted under International Accounting Standard 2 are FIFO, AVCO and LIFO. First in First Out (FIFO) is the method which explains that the oldest inventory should be sold out first and then the next one whereas the Weighted Average Cost Method (AVCO) means the inventory should be recorded by calculating the average cost of available inventory and then multiply this with the number of units in stock. Last in First Out (LIFO) is a method which is not being used currently because of some drawbacks attached to it as it promotes the system to sale the most recent purchases to be sold out prior to sale the old inventory. This Standard provides detail of each and every feature associated to the inventory and how to deal with that.
Due to the misappropriation of inventory there was a need to guide the companies as to record the inventories properly. This is why the International Accounting Standard 2 was issued and interpreted in a detailed way. If the company is involved in the sale and purchase of something then it is likely to hold inventory which can be in the form of Raw Materials, Finished goods and Work-in-process. Theoretically everything which is held for sale is termed as inventory but the question rises that either the plant and machinery held for sale are also termed as inventory then the answer would be ‘No’. Everything which is sold out through ordinary course of business is termed as sales and purchases eventually known as inventory. So the Non-Current Assets are not classified as Inventory under IAS 2. There are further 3 techniques are issued under this standard to record the inventory and inventory handling. First in First out (FIFO) is a method which tends to sale the oldest unit of inventory first and it makes sense as it would reduce the threat of inventory obsolescence. Weighted Average Cost Method (AVCO) is method which uses an average cost for all the units of inventory and records the inventory on this basis so there is no separation of recent and old purchases. Last in First out (LIFO) method promotes the sale of most recent purchases and there are more chances of obsolescence of inventory. Apart from these techniques the cost recognition criteria is also listed in this standard. As per International Accounting Standard 2, inventory should be recognized at lower of Cost or Net Realizable Value (NRV). Net Realizable Value is the value at which the inventory can be sold in the market or simple the market value. Theoretically this is the fair value concept and more appropriate to record the assets as it would lead to a fair appropriation of the assets of the company and no chance of being misled.
International Accounting Standard 2 defines the criteria to record inventory “Inventory should be recorded at lower of Cost or Net Realizable value (NRV). Cost is the amount at which the Inventory is being purchased initially and whereas the NRV is the amount at which inventory can be sold out. Net Realizable Value is the amount of cost less any expenses required to make inventory into a saleable state. Though there are some problems in the recognition of inventory because there are three types of inventories in a company which are subject to value at the most appropriate amount before recognition. Finished goods are required to be valued so that it can be recorded at lower of NRV or Cost as they do not require any further assessment criteria but Work-in-Process requires some extra work to make an appropriate valuation of inventory. There is a need to consider that how much material has been incurred to the product till that date and how many labor hours has been spent on the product. There is also a further calculation of overheads cost as to how much overheads should be allocated to the Work-in-process units as they are not yet completed so there is a need to calculate the amount of overheads. Generally the overheads are absorbed by the companies by using labor hours but mostly companies also use the machine hours as the absorption base. So this can ease the calculation of overheads allocation just simply cost of labor per hour multiply by the number of labor hours or machine hours incurred to the product. Generally the wastage costs, idle labor hours, storage costs and other costs like these are also included in the product cost. In most of the production processed two type of products are produced in a single process and are named as Main product and By-Product. By-products are the products which are produced unintentionally as these are not the ordinary items of the company for sale purposes but these should also be recorded as inventory because the economic benefits are expected to flow to entity from the sale of these products and the cost of such products can be measured at the joint process phase of production.
After the recognition of per unit cost, there are some formulas for the inventory valuation generally practiced in the US. LIFO, FIFO, Weighted Average Method and Specific Identification. Under IFRS and US GAAP all these formulas are same but the practice of some formulas are limited across the world due to the drawbacks attached to them and these methods are LIFO and Specific Identification. Main drawbacks to LIFO are much more in general as it promotes the threat of Inventory obsolescence and more risk in the incorrect valuation of the inventory. Due to this reason LIFO is discouraged across the world and now Weighted Average Method and FIFO are used extensively. In the past most of companies used the LIFO as their tax shields to reduce the profits and other manipulations but after the consideration of such issues the application of LIFO is now restricted and now limited to some states only.
There are some costs which cannot be the part of inventory in any case and they should be reported as an expense to the income statement. Most common examples of these costs are:
Abnormal Wastage of material
Abnormal Idle hours of Labor
Abnormal overheads due to the Abnormal Idle Hours
Reduction in the Net Realizable value of the inventory
There are some handling costs which are not important for the product but incurred and these should not be measured in the inventory cost as well
Admin expenses and other costs associated to admin department
This research provided a complete detail of the International Accounting Standard 2. The complete criteria and detail of the inventory recognition and measurement criteria is explained in this assignment. The measurement of the inventory is based on the management’s perception but with the introduction of this standard, all the criteria and relevant aspects have cleared. Management is guided thoroughly on the measurement of inventory and the recognition of the inventory instruments as to remove the ambiguity between the inventory and other assets of the company. Management has four different formulas to record the cost of the inventory and the most practical and generally accepted formulas are the FIFO and weighted average method. Management should use the cost formula among both of these as these are the recommended and practically accepted under IFRS and US GAAP. There would not be any problem in the inventory measurement if these rules are followed. Management is required to differentiate the By-products and Main products as both of these have different characteristics and benefits and need to be separately identified. The relevant cost should be ascertained to the inventory whilst the other should be charged to the expenses like abnormal wastage and labor cost etc.