Organizational Change Management

The purpose of this report is to analyse the case study on D2 which is an auto-components manufacturer undergoing major structural changes to minimize costs and implement innovation and technology. While managing the change, the organisation had to face different kinds of issues. Thus, the report would be identifying the issues and proposing relevant solutions and their implementation to manage change effectively, by using the 5D-Framework which comprises of definition, discovery, dream, design and destiny.

Definition

When a company undergoes change, there are a series of opportunities and challenges that it has to face. Change is not a onetime occurrence but rather could take years to be implemented. When an organisation is undergoing strategic change, it needs to re-formulate its mission and strategies and thereafter align all its business operations with the overall strategy (Cummings and Vorley, 2009). While managing strategic change, implementation is more challenging than just designing the change.

Lack of Communication Alignment

Therefore, one of the primary issues witnessed in the D2 case was that the management would have difficulty in implementing the change due to improper communication channel used for communicating the strategy to the rest of the employees. Apart from this, having a balanced strategic change is also a significant challenge since in order to achieve the balance, the organisation needs to assure that its internal management and resources are aligned with each other and with the external opportunities (Bordum, 2010).

Environmental Pressures

Apart from this, environmental pressures are another reason why organisations undergo change. In order to be aligned with the environment, there is a certain organisational structure and a strategic positioning required. One of the key issues in the case was that there has been an outpaced growth of technology over the years and in order to meet that pace it needed to undergo significant innovation and get rid of the obsolete technology. This required greater strategic flexibility which then bore a cost to the organisation since the employees resisted the change and job insecurity arose (Skordoulis, 2013). Moreover, owing to the environmental pressures, it was significantly cutting costs and thus, had to face a trade-off between lowering costs and smooth flow of work. The smooth flow of work would be disrupted since to lower costs, it would have to shut down some of its manufacturing facilities that are not producing enough and would have to redeploy staff to other geographic regions which would require a lot of planning and control. According to Alessa and Kliskey (2012), responses to environmental change management is required which can be done through change agents. These agents can be of three types: the initiators, the supporters and the opportunists. These environmental change agents would assure that the company’s strategy is in correspondence with the changes in the external environment. In the case of D2, the changes in technology were an environmental pressure which required a change agent to manage it effectively and efficiently.

Leadership Issues and Resistance to Change Management

Change management can be of many types, varying from a change in structure to a change in culture, leadership style, operations, systems and strategy. At times one change may lead to another change and while doing so, organisations encounter a number of issues. Another key issue evident in the case was the autocratic leadership style and a centralized management as a result. In identifying the change management areas, the management itself first made decisions and formulated the strategy, and then later informed the employees. As the case stated that the decision was yet to be announced and the workers in UK might be shock to hear it since the firm had made heavy investments in the manufacturing plants. Moreover, while redeploying the employees from one geographic region to another, cultural issues might also be faced which would require heavy investments in training. Thus, a greater resistance might be expected from the employees since they were not part of the decision making process and the organisation’s interests might then be in conflict with the interest of the employees (Banutu and Shandra, 2007).

Trade-off between managing change management and maintaining core competency

Lastly, and most importantly, since the company’s operations are dispersed geographically and one of its core competencies is the pace and quality of its product development, in change management , the company might lose out its current strategic position or the core competency it has, thus, assuring that the pace and quality product development remains the same while re-structuring its manufacturing operations, would be very challenging for the company. Furthermore, change management is not following a planned approach. This might cause D2 to lose out its competitive position in the market which would then be difficult to re-obtain since by focusing on cost reduction rather than value addition, maintaining the sustainability of operations is less likely to happen.

Leadership Issues and Employee Resistance to Change

Discovery

The underlying problem chosen for in-depth discussion is the employee resistance to change and the leadership issues in bringing about the change. As stated in the case, D2 required an urgent need for change management therefore it cannot go slow in bringing about the change and would require major transformations in its structure and human resource. While deciding which operations to shut down and which ones to expand, it has been taking into account the external environment and the returns it would get out of it. However, in doing so, it has neglected the reaction that might be expected from the employees, and which could majorly impact and hinder any change management process that happens in the organisation. Resistance to change usually occurs when employee needs are not addressed; their goals and organisational goals are not aligned; there is communication gap between the different hierarchical levels as well as in horizontal communication; when there is downsizing and mistrust is created among employees; when there are major cultural issues to be faced as a result of change management ; and when employee participation in decision making is lacking (Bovey and Hede, 2001).

5D-Cycle Organizational Change Management

Furthermore, when the leader fails to apply a transformational leadership style where he articulates the vision and re-defines the strategy, the resistance increases further as employees are unclear about the goals and objectives they need to achieve as individuals as well as collectively (Eisenbach et al., 1999). The management needs to keep a balance between the organisational needs and the human needs since ultimately it is the human resource that needs to implement the change (Griffin and Moorhead, 2011). The key issue in the case of D2 was that a feeling of mistrust and insecurity was occurring not only in the U.K. region where it plans to close its facilities but also among the employees working in other subsidiaries located in Spain since the change management process is not communicated effectively and the decision making authority is vested in the hands of a few senior managers indicating that bureaucratic leadership style is more evident in the organisation which means that the increased level of formality between the management and the employees and the lack of communication would result in a decrease in employee morale, and hence, a decline in performance.

In order to address the issues, the leadership styles need to be changed. According to Bamford and Forrester (2003), using a middle-out approach would be of significant advantage in addressing the issue. This would involve giving the middle management the authority to lead the change under the supervision of the top management. In doing so, employee needs would be addressed in a better form since the line managers are more closely linked with the operational level staff and thus would be able to provide adequate feedback to the top management of how to create a link between the overall strategy and the needs addressed. Greater teamwork and participation of the workers would also be required to increase their motivational level and making the flow of communication more efficient. Leadership issues are also one of the reasons why organisations fail in managing the change. Uncertainty often accompanies change and as a leader, one needs to minimize the uncertainty levels and create an environment of greater employee commitment and trust. According to Ahn et al. (2004), globalization and change of technology at an accelerating pace requires that effectiveness in leadership has become immensely important, which is demonstrated through the leader’s adaptability to different management styles that involve greater coordination and engagement among all members of the organisation. According to Ashman (2012), ‘redundancies have become an unwelcome necessity across all sectors of the economy’, and while strategy and procedure in change management are important, the third element, psychology, is not given much attention which focuses on how employee emotions need to be dealt with to prevent any resistance to change management. Thus, this requires that to avoid such issues the message is communicated accurately while the sensitivity of such messages is taken into account adequately (Ashman, 2012).

Dream

One of the ways in managing the issues is to adopt a planned change management approach. The 3 step model of Lewin is applicable here which suggests that the organisation needs to plan change management in three stages: unfreezing, moving, and re-freezing (Burnes, 2013). In the case of D2, a sense of urgency was created and the change was seen more as an emergent one rather than a planned one. However, to make the change more sustainable, carrying out the planned approach would decrease employee resistance, since the unfreezing stage would first help in abandoning the old ways of doing work and preparing the employees for change. For instance, D2 could have addressed the issue of mistrust among its employees in other regions as well as in U.K. by defining the need for change and how it would benefit the organisation as a whole. It should then also point out the alternative employment opportunities available and how these would be a better platform for their growth. The moving stage then would involve applying the change process such as re-structuring, changing leadership styles, re-articulating the vision or changing the strategic position. This is when D2 should start shutting down its facilities and redeploying the staff where expansion is happening. The moving stage would then be followed by the re-freezing stage where the new practices would be adopted in a more permanent basis by providing training and aligning the new behaviors with the organisational strategy and culture (Bamford and Forrester, 2003).

Another potential solution of managing organisational change would be to conduct training programs and adopt situational leadership style. The situational leadership theory states that there is no one best style of management and the leader would have to either adopt a relationship-oriented style or a task-oriented style depending on the situation being faced (Griffin and Moorhead, 2011). Similarly, motivational levels of employees would also have to be taken into account and the purpose of the chosen leadership style would be to boost employee morale and assure that they have a positive attitude towards the change.

Also team building should be the ultimate focus of the organisation. This should involve self-managing teams, cross-regional/cross-cultural teams and cross-functional teams (Sisaye, 2005). The purpose of having such teams would mean greater diversity and flexibility among employees as well as greater coordination between different divisions and manufacturing facilities. By having cross-cultural teams, the employees would be more familiar with the cultural differences between Spain, France and U.K., thus, any issues arising as a result of change in culture could be better handled through cross-functional teams. The team performance model suggests that in order to create a team there needs to be orientation, trust building, goal clarification and commitment; and in order to sustain that team there needs to be implementation, high performance and renewal (Cooperrider and Dan Whitney, 2001).Therefore, the employees and the management should get involved in formulating the teams before the change management process and since this change is more about implementing new technology while cutting down the costs, the teams may focus on how the technology can be implemented. This would also be accompanied with extensive training to avoid any ambiguity among the employees.

The firm’s strategy of achieving cost leadership while maintaining the pace and quality of product development requires that it should, it focuses on value addition. This would mean cutting down costs by minimizing any wastage of resources and streamlining processes. At the same time, it would also be adding value through the innovative tools and technology used. This strategy would have to be defined by the leader after taking employee opinion and feedback using the bottom-up approach and would then have to be implemented across the organisation.

Design

In order to implement the proposed solutions, careful planning and formulation would be required. The use the planned change model can be implemented by having a leader who first identifies the potential areas that require change in terms of employee attitude and behavior Also, while addressing the need for change, the leaders should first conduct a field force analysis to identify the factors that are for and against the change (Schwering, 2003). The leader could then use the forces that can help in driving change as an advantage. This would include the consumer demand for more innovative auto components, availability of technology, upgraded technology in the other two manufacturing facilities and the identification of a new strategy. The drivers against change management would include employee resistance due to increased mistrust, decrease in morale in case of deployment and fear of exploring the new methods of working. Thus, once the forces are identified, in order to overcome any barriers, training programs should be conducted throughout the change process, that is, the unfreezing, moving and re-freezing stage. These training programs should involve two way communications which would mean delivering the new company strategy to the employees and also taking their feedback on what concerns they have and how they think it can be improved further (Hoag et al., 2002).

Apart from this, in helping leaders being aware of different leadership styles, leadership workshops should also be conducted. These might include assessment centres and activities where the management can be given different scenarios and asked to adopt an appropriate leadership style (Cummings and Vorley, 2009). The workshops would then be concluded with feedback and suggestions. Also while change management is being implemented, the performance should be monitored and measured more frequently in order to understand employee behavior and their progress. In case of teamwork as well, the leader would have to assure that there is no group think that could result in in-group conflicts, and the goals of the team are aligned with that of the organisation (Raza and Standing, 2011). The management would have to be more decentralized in its approach by practicing open door policies and being on the floor to address employee needs. The alternative employment opportunities available for the employees need to be clearly identified before the change process in order to conduct the implementation smoothly. Similarly, while communicating the new strategy to the employees, the opportunities available to them should be delivered first, which could act as a buffer to the disappointment they might have on hearing the shutting down of operations.

In order to cut down costs while maintaining the core competency, the organisation should align its operations with the new strategy. This would mean implementing change management simultaneously. The firm should first start expanding its operations in France by investing in new technology and setting up the production design, it should then plan out staffing requirements and communicate the strategy to the employees in the U.K. as well as Spain regarding how the expansion could help organisation grow and how the operations in U.K. might decline the overall progress of the organisation. Online video conferencing or virtual teams can also be formed where there could be cross-regional communication to assure that all its units are at the same pace and the goals of the organisation are communicated clearly across. Also by using internet as a platform for communication, organisation would be further saving on its time and costs in coordinating the teams.

Destiny

In implementing the proposed solutions, the possible limitations that might be faced include the heavy investment costs associated with training. This would conflict with the overall strategy of the firm of cutting down the costs. Therefore, in order to minimize the training costs, the management can focus on more informal ways of training such as in-house training where the costs of additional trainers and location can be saved. Similarly, the organisation could identify change agents who are trained and competent enough before the change takes place and then these agents could help other employees in carrying out the change (Griffin and Moorhead, 2011).

Furthermore, in identifying leadership styles, one of the factors that have been ignored is the number of cultural issues. For example, the effectiveness of relationship-oriented style is not only dependent upon the organisational situation but also on the culture where it is operational. There might be differences in terms of collectivism and individualism, and power distances (Kirsch et al., 2012). To overcome this limitation, the leader can identify the similarities in culture that can help employees adjust in the other two regions and make them aware of the differences to avoid any cultural shock.

While implementing the solutions, another possible limitation is the effectiveness of the feedback. Employees might be reluctant to speak up any negative feelings regarding the process or the feedback might be unstructured and more intuitive rather than formulized. To overcome this limitation, the management can take anonymous written feedbacks and then re-evaluate performance after the feedback is taken into account, in order to measure its effectiveness.

Thus, by strategizing the change process and aligning the structure, the culture and the processes with the overall strategy, implementing the change process would be more effective, reducing any potential resistance of the employees through greater involvement and empowerment in decision-making. Also by applying the three-step planned approach to change, the employee attitudes would be more positive towards change, removing any ambiguities that might exist regarding the strategic change.

References

Ahn, M.J., Adamson, J.S.A. and Dornbusch, D., 2004. From Leaders to Leadership: Change Management. Journal of Leadership and Organisational Studies, 10(4), pp. 112-123.

Alessa, L. and Kliskey, A., 2012. The Role of Agent Types in Detecting and Responding to Environmental Change Management. Human organisation, 71(1), pp. 1-10.

Ashman, I., 2012. A New Role Emerges in Downsizing: Special Envoy. People Management and Change Management, pp. 32-35.

Bamford, D.R. and Forrester, P.L., 2003. Managing planned and emergent change within an operations management environment. International Journal of Operations and Production Change Management, 23(5), pp. 546-546.

Banutu, M.B. and Shandra, M.T.B., 2007. Leadership and Organisational Change Management in a Competitive Environment. Business Renaissance Quarterly, 2(2), pp. 69-90.

Bordum, A., 2010. The strategic balance in a change management perspective. Society and Business Review, 5(3), pp. 245-258.

Bovey, W.H. and Hede, A., 2001. Resistance to Organisational Change Management: The role of cognitive and affective processes. Leadership and Organisation Development Journal, 22(7), pp. 372-382.

Burnes, B., 2013. Kurt Lewin and the Planned Approach to Change: A Re-appraisal. Journal of Change Management Studies, 53(8), pp. 111-134.

Cooperrider, D.L. and dan Whitney D., 2001. Change Management A positive revolution in change: appreciative inquiry, on Robert T. Golembiewski (ed.), The handbook of organisational behavior.2nd ed., New York: Marcel Decker.

Cummings, T.G. and Vorley, C.G., 2009. Organisation Development and Change Management. 9th ed. Mason: Cengage Learning.

Eisenbach, R. et al., 1999. Transformational leadership in the context of organisational change.Journal of Organisational Change Management, 12(2), pp. 80-88.

Griffin, R.W. and Moorhead, G., 2011. Organisational Behavior: Managing People, Change Management and Organisations. Mason: Cengage Learning.

Hoag, B.G., Ritschard, H.V. and Cooper, C.L., 2002. Obstacles to effective organisational change: The underlying reasons. Leadership and Organisation Development Journal, 23(1), pp. 6-15.

Kirsch, C., Chelliah, J. and Parry, W., 2012. The impact of cross-cultural dynamics on change management. Cross Cultural Management, 19(2), pp. 166-195.

Raza, S.A. and Standing, C., 2011. A Systemic Model for Managing and Evaluating Conflicts in Organisational Management Change. Systemic Practice and Action Research, 24(3), pp. 187-210.

Schwering, R.E., 2003. Focusing leadership through force field analysis: new variations on a venerable planning tool. Leadership and Organisation Development Journal, 24(7), pp. 361-370.

Sisaye, S., 2005. Management control systems and organisational development: New directions for managing work teams – Change Management. Leadership and Organisation Development Journal, 26(1), pp. 51-61.

Skordoulis, R.T., 2013. Strategic flexibility and change: an aid to strategic thinking or another managerial abstraction? Strategic Change Management, 13(5), pp. 253-258.

View Business Management Dissertations Here

Multi-Asset Portfolio Dissertation

How The Role Of Property In A Multi-Asset Portfolio Has Been Affected By The Credit Crunch

View This Dissertation Here

The existing literature argues property’s role in a multi-asset portfolio to be a means of risk reduction opposed to a method of returns. However, with the recent credit crunch having an adverse effect on the property market, this study will look into the affect it has had upon property’s role. To reach this finding, a combination of primary and secondary data will be used.

The secondary data was obtained through a literature review and the primary data from interviews and a questionnaire. The findings were that the credit crunch has left the UK property in a position where it can offer investors opportunity to make capital gains and a secure income through rents. This has led to property’s role now being mainly focused on returns but still included as a means of risk reduction.

In a multi-asset portfolio an investor will likely include property to diversify and better their overall returns. However, with property values falling, it is likely investors were wishing to pull out of this asset class, cut their losses and venture elsewhere due to their risk adverse attitudes. A negative correlation when comparing property with stocks and bonds makes the later pair appears the way forward. Reason being; they should theoretically be outperforming the current property market rectifying diversification in a multi-asset portfolio.

If investors make this decision and reduce the amount of real estate, levels of diversification will decrease, increasing specific risk. The chance of disposing their property is extremely slim however because of property’s liquidity being further extenuated by a market downturn. Property is evidently not offering the attributes investors’ want, yet they are unable to dispose of this unwanted asset. This puts investors in a very difficult situation of being left with a depreciating asset in their multi-asset portfolio.

A possible solution to this would be identifying potential emerging markets, such as Latin America and India, which may offer the desired benefits currently unattainable in the UK. So with property still existing among UK fund managers’ portfolios the role it now offers must be determined. This dissertation will be based on three key assumptions namely:

Investors’ main reason for including property in a multi-asset portfolio is to reduce risk
Due to the poor performance of property in recent years, investors are reducing the property exposure in a portfolio and replacing it with more traditional methods such as bonds
Even with the recession being a global problem, certain investors feel there are still benefits from international property investment

The opening chapter of this dissertation has been produced to give readers an understanding of the overall study and what the upcoming chapters will be exploring. Chapter two will be a literature review analysing applicable company publications and academic literature, relating to the use of property within a multi-asset portfolio. It will clarify why various investors wish to include property, its characteristics, alternative assets to invest in and overseas investment.

Each of these points will be tackled in their own independent section. The following chapter (three) will exhibit clearly the use of methodologies used throughout the dissertation to find out how the actions of investors has changed towards property during the credit crunch. Within the chapter it will also justify why these research methods were best suited for this field of research. The fourth chapter will bring together the results from the literature review, interviews and online questionnaire, clearly explaining what has been identified.

The final chapter of the dissertation shall be the conclusion. It will summarise the key findings answering the aims and objectives outlined at the start of the paper, identifying how the role of property within a multi-asset portfolio has been affected by the credit crunch. It will also make clear the limitations of the study and recommendations for similar studies in the future.

This research will help support many other studies that have been carried out over the years in regard to property’s role within a multi-asset portfolios. This paper will differ to previous studies, carried out by the like of Bryne and Lee, as it is primarily focusing on an economic downturn opposed to data over long periods with varying market conditions. There is a distinct lack of existing literature on this matter. By shedding light on this aspect, it will give an investor’s insight on how property is best used in a multi-asset portfolio during a struggling market.

If you enjoyed reading this post on multi-asset portfolios, 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.

Marketing Plan Essay

Marketing Plan

In this essay the discussion focuses mainly on the importance of a marketing plan and the role it plays for the development of businesses. In due course the nature of a marketing plan and the key elements of it are also discussed. Whether the elements of a marketing plan are linked or independent? This key issue is discussed elaborately explaining the links between different elements of the marketing plan.

A marketing plan is different from a business plan and these differences are also highlighted in this essay. The essay would not be considered complete if the misconceptions about a marketing plan are not discussed. There are some misconceptions prevailing about marketing plan and they are discussed briefly in the essay. The essay has been concluded with a brief summary of the discussion made here.

Role and nature of marketing plan

Before discussing role and nature of a marketing plan it is important to understand what is marketing. Marketing is a function of an organization which involves several processes of creation, communication and delivery of value to customers and management of customer relationship in such a order that the organization as well as its stakeholders are benefited.

In other words, it is a process to identify, anticipate and satisfy customer with profit. It is science and art to create change in the market for the benefit of the organization. Understanding the need and want of the market and to earn profit is called marketing. Marketing is done with a strategic plan (Hatch & Schulz, 2003).

A marketing plan is a written document describing the external and internal business environment, aims and objectives of the organization, its strategy, plan of action and control. Marketing plans for different companies vary according to the requirements and the strategy of the company.

Occasionally some companies have only one plan and they call it a business plan but a business plan includes plans of all the functions performed by a company like Research & Development, Production, Financial Management, Human Resource Management, IT as well as Marketing. Hence, a marketing plan is only a part of a business plan (Einwiller & Will, 2002).

A marketing plan is built on the strengths of an organization to exploit it for the maximum benefit of the organization. An integrated and well coordinated marketing plan makes an organization proactive and not reactive. It successfully communicates the purposes and the intent of the senior management. It sets the objectives for actions and it is target oriented. A written plan provides the scope for adjustments (if needed) and monitoring of marketing activities.

Besides these reasons marketing plans are used for understanding the needs and wants of the customers for their satisfaction. Customer satisfaction is the prime objective of any marketing plan and that can be measured by meeting their needs and wants efficiently. Needs and wants change with time. Hence, a satisfied customer may be dissatisfied tomorrow with the change in need and want. This makes marketing a rigorous and continuous process. (Ferrel and Hartline, 2005).

A marketing plan is based on the information and data from various sources and lack of reliable data is one of the biggest difficulty in making a marketing plan. Complete firm’s picture, product line, present and future of the situation, internal and external environment and customer satisfaction are the key features of a marketing plan. Structure of a marketing plan vary from company to company. (Mathewson, 2009). Generally a marketing plan is structured in the following manner:

Executive Summary

Challenges

Situation Analysis

Customer Analysis
- Concentration of customer base for particular products
- Decision Process
- Value Drivers
- Type
- Numbers
- Company Analysis
  - Focus
  - Strengths
  - Weaknesses
  - Market Share
  - Goal
  - Culture
  - Climate
    - Economic Environment
    - Technological Environment
    - Political and Legal Environment
    - Social and Cultural Environment
    - Collaborators
    - SWOT Analysis

Following environmental factors are needed to be organized for the SWOT analysis of a business environment

Strengths and weaknesses of the organization should be considered as internal attributes or internal environment
Opportunities and Threats are to be considered as external attribute or external environment
Competitor Analysis
- Market Share
- Market Position
- Strengths
- Weaknesses

Market Segmentation

Segment 1
- Description
- Sales percentage
- Wants of the customer
- Way of using the product
- Support
- Way of reaching them
- Price
- Segment 2
  - ABC

Alternative marketing strategies

Selected marketing strategy

Product

Brand
Quality
Scope
Warranty
Packaging

Price

Price list
Discounts
Terms of payments
Financial options
Options for lease

Distribution (Place)

Channels for distribution as intermediaries, distributors, retail and direct
Motivation of channels
Evaluation of channels
Locations
Logistics as supply, transportation, warehousing, etc.

Promotion

Promotional programs
Public relation
Advertisement
Budgeting
Estimating results of promotions

Long term and short term projections

Conclusion

Appendix

Exhibits

Recommended reading

In some cases the structure of the marketing plan of a company is not as detailed and extensively elaborated as above and it is short and simple but focused. It depends on the size and the need of a company. Even a simple marketing plan should be structured as follows:

Summary of Strategic Situation

Objectives and Targets

Positioning

Budget

Sales projections

Strategy for product

Strategy for price

Strategy for distribution

Strategy for communications

Market research

Conclusion

A marketing plan is used to serve the end result of building a customer base and creating an environment which could lead a company to success. It serves other functions as well such as a marketing plan is used for introduction of a new product into market, for exploring new markets for a product, for setting up gals and targets and achieving it and for establishing, directing and coordinating between sales and marketing efforts of a company. The potential differences between different structures of marketing plans depend on the nature of the business of the company and their requirements. The end results are same for all the marketing plans.

Elements of marketing plan and links between them

The key elements of a marketing plan are Executive Summary, Challenges, Situation Analysis, Market Segmentation, Alternative marketing strategies, Selected marketing strategy, Product, Price, Distribution (Place), Promotion and Long term and short term projections. These elements are interdependent and complementary to each other.

Executive summary is the brief overview of the content of a marketing plan. It describes the objectives of the plan. It has the description of the strategies of the company for marketing, Before discussing the plan and the strategies for marketing in detail the marketing managers prefer to discuss the challenges which may come across in marketing or the challenges of the market for the company. The business world is changing very fast and the growing competition in the business world is reducing the margins of the businesses and extensive marketing is required to meet this challenge which is again very expensive. Challenges can only be tackled in favorable situation which further requires situation analysis (Hatch & Schulz, 2003).

Situation analysis is done to understand various situations or it can be said that situation analysis is of several types like customer analysis, company analysis and climate analysis. Customer analysis involves factors like number of existing customers and expected number of new customers, types of customers, decision process of customers, value drivers for customers and finally the concentration of customer base for particular products (Einwiller & Will, 2002).

The end result of a marketing plan is satisfaction of customer and customer analysis is a very important. Analysis of company means study of strengths and weaknesses of the company, the market share of a company for a particular product, the culture of the company because the output of a company also depends on its culture, the goal of the company and the focus the company has to achieve that goal. Then comes climate which means environment of different types like economic environment, political and legal environment, social and cultural environment and technological environment. In some marketing plans they are also analyzed as external and internal environment (Ferrel and Hartline, 2005).

Collaborators are also called as stakeholders by marketing managers. Stakeholders may have stakes in the company in different ways that is why there are different types of stakeholders. Stakeholders range from customer to the top management of the company which includes workers, employees, suppliers and many others and a good marketing plan must not overlook their stakes. The company keeps the required data about its stakeholders for various purposes including making a marketing plan (Mathewson, 2009).

SWOT analysis means study of strengths and weaknesses as well as study of opportunities and threats. A good marketing plan must analyze the strengths and weaknesses of the company, product as well as customers. Similarly it should analyze the opportunities for the company, product and the opportunity of the market. Opportunities never come without threats and it will be mistake if the threats are not analyzed in a marketing plan. For SWOT analysis information are needed to be collected from both the internal sources of the company and from the market (Freeman, 1984).

There is hardly any business without competitor and the success of a marketing plan substantially depends on the proper analysis of the competitors. Marketing managers must know the position of the competitor in the market, the market share of competitor for a particular product or different products and strengths and weaknesses of the competitor.

Marketing mangers divide the market into different segments and the process is called market segmentation. Needs and wants of all the markets are not same and the market managers have to analyze which segment of the market is useful for a particular product. The factors needed to be kept in mind for market segmentation are the percentage of sales in that segment, description of the segment, what do the customer need or want, how do they use the product, how to reach them, whether the price is suitable for them, etc. They need to collect the information from the external sources. (Mullins, Walker, Boyd and Larreche, 2005)

Every plan should have an alternative plan which can be used if needed. Efficient and experienced marketing managers always ready with an alternative marketing plan. The plan which they execute is called selected plan. Marketing plans have detailed description of the factors like product, price, promotion, distribution, etc (Mullins, Walker, Boyd and Larreche, 2005).

Product is the key factor of the marketing plan and it revolves around it. Ultimately product is the tool through which the company reaches to customers and wishes to satisfy them meeting their needs and wants. It is the responsibility of the marketing manager to ensure branding f the product and to analyze the quality of the product and the scope for it in the market, Proper packaging of the product with genuine warranty adds value to it. After all it is the product only which decides the success and failure of a company.

Price is another key factor and it should be relevant to the market, customer and the competitor. Customers always prefer quality product at affordable price. The marketing managers offer some options for the market to make the offers attractive. They offer discounts, different payment options, financial support and sometimes options for lease. All these information should be provided clearly in the pricelist (Jones, 2005).

Distribution ensures the success of a product and alternatively of a company. All these efforts of marketing will go waste if an adequate system of distribution is not set up. Distribution of products is done by various methods like making channels for distribution such as distributing through intermediaries, distributors, retail or direct. These network need to be evaluated regularly for its proper functioning and the stakeholders associated with the distribution network must be kept motivated. The selection of location for the network should be done carefully and proper care of regular supply, transportation and warehousing must be taken (Dickson, 1996).

Last but not the least another key factor of marketing is promotion and promotion is done by following promotional programs, making public relation, advertisement, budgeting and finally estimating the results of promotion.

Some elements of a marketing plan are interlinked while others are independent. For example, challenges can be estimated by understanding the situation and pricing can be done by valuing the product and the promotion of the product is done (Freeman, 1984).

Assumptions

There are many misconceptions about marketing plan. The most common misconception of customers is that they generally think that the companies make marketing plans to manipulate things and the aim is to deceive. In fact, a marketing plan is made to ensure satisfaction to customers. The aim of a marketing plan is to reach to the customer to satisfy his needs at the affordable price. The advertisement sometimes becomes illusionary and creates confusion (Jones, 2005).

The most common misconception of companies is that a marketing plan and its implementation is an expensive and difficult to measure process to evaluate the return on investment on it. Actually a perfect marketing plan ensures tangible return on it. A marketing plan is made by marketing manager after extensive research and it is aimed to ensure success and earn profitability for the organization. Companies think that investment in marketing plan can be made only if the cash flow allows for it. In fact, marketing plan is the factor which ensures the cash flow and projects in advance the rate of cash flow if planned and implemented efficiently (Dickson, 1996).

Conclusion

A marketing plan is a key to success for any business but unfortunately many businesses confuse marketing plans with investment on advertisements with no assured returns. A marketing plan is a simple act of bringing products and services to market and providing right message to right person at right time. Actually marketing plan can only assure the success of a business by guiding businesses to follow the processes required for its success. Those processes include how to analyze marketing environment, how to decide marketing segment, how to choose the marketing mix. Marketing mix includes five important Ps of a marketing plan. They are Product, Price, Promotion, Place and Process.

References

Hatch M. J. & Schulz, M. 2003. Bringing the corporation into corporate branding. European Journal of Marketing, Vol 37(7/8), pp; 1041-64.

Einwiller, S. & Will, M. 2002. Towards an integrated approach to corporate branding – an empirical study. Corporate Communications, Vol 7(2), pp; 100-9.

Ferrel, O. and Hartline, M. 2005. Marketing Strategy, 3rd Edt.Thomson

Mathewson R. 2009. Misconceptions about Marketing, Maple Marketing

Dickson, P.R. 1996. The static and dynamic mechanics of competition: a comment on Hunt and Morgan’s comparative advantage theory. Journal of Marketing | October 1, pp; 102 –

Freeman, R. 1984. Strategic Management: a stakeholder approach, Boston

Jones, R. 2005. Finding sources of brand value: Developing a stakeholder model of brand equity. Journal of Brand Management, Vol 13(1), pp; 43-63.

Mullins,J., Walker Jr, O., Boyd Jr, H. and Larreche, J. 2005. Marketing Management: A Decision-Making Approach, 5th Edt, McGraw-Hill / Irwuin, Sydney

View Marketing Dissertations Here

Marketing Plan Relevant Posts

Marketing Budget Ethical Considerations

Marketing Concepts Research Dissertations

Activity Based Costing

Financial Management Concepts and Their Application – Focus on Activity Based Costing

The process or the technique of determining the cost of a service or a product is called cost accounting system. The costs are assigned to cost objects only after collected and classified by the cost accounting system. It is used to estimate the cost involved in developing, designing, purchasing, producing, servicing, distributing and selling different services or products. The heart of cost accounting system is cost allocation and Activity Based Costing (ABC) can be considered as a type of cost allocation. In this essay, different approaches to cost allocation and activity based costing are described. The methods used for cost allocation and activity based costing. Activity based costing received focus when attempts were made to improve the methods of cost allocation. The different ways of implementing cost allocation and ABC approaches in for- profit organizations (corporations) and in real world business enterprises (Akyol and Bayhan, 2005).

Like any other approach involved in business activities cost allocation and activity based costing also have their strengths and weaknesses and a detailed study of these factors ensures the successful implement of these account systems. The costs associated with these account practices are very crucial and they must be considered very carefully in terms of benefits earned by implementing cost allocation and ABC approaches. These systems could be viable only if they are implemented efficiently and they gain efficiency and profitability.

The study further discusses about the main objectives of cost allocation and ABC approaches and the relation between various factors like resources, costs, cost drivers and activities. It also signifies the methods of cost allocation like direct allocation, step- down allocation and reciprocal allocation. Activity Based Costing (ABC) has been discussed elaborately for allocating costs to services or products and the different steps involved in the process. The recommendations made in this paper could be used by the users as guideline for charging the fixed and variable costs of one department to other department of the organization (Peter B.B. 1997).

Cost Allocations and Activity Based Costing (ABC)

The process or the technique of determining the cost of a service or a product is called cost accounting system. The costs are assigned to cost objects only after collected and classified by the cost accounting system. Therefore, the process by which some costs or groups of costs are linked with one or more cost objectives, like divisions, departments and products, is basically called cost allocation. Generally, cost objectives which are responsible for causing costs are allocated costs. Costs are linked with cost objectives by selecting appropriate cost drivers. A cost driver is called cost allocation base when it is used for allocating cost. Major costs are allocated, such as cost of raw material for a manufacturing firm or cost of building material for a construction firm are allocated to departments, projects and jobs on an item basis by utilizing cost drivers like quintals of raw materials or tonnes of building materials consumed where as other costs, considering individually, may not be so significant that they need to be allocated individually (Peter B.B. 1997).

They are pooled and then they are allocated together. Hence, a cost pool may be defined as a set of single costs allocated to cost objectives utilizing an individual cost driver. For instance cost of everything which are measured in square meters and occupy space like rent of the building, cost of utilities and janitorial services can be pooled together for allocation. Or all the operating expenses of the registrar’s office of a university can be pooled together and it can be allocated to the respective colleges as per the quantity of students enrolled with each department.

In brief, the costs caused by the same factor should be given in the same pool. Those factors are called cost driver. In practice, many terms are used by the companies for describing cost allocation. Such terms can be attributing, trace, allocate, reallocate, distribute, assign, burden, load, reapportion, apportion, etc. For describing allocation of costs to cost objectives any of the above mentioned terms could be utilized interchangeably (Cooper and Kaplan, 1988).

The type of methodology used to measure the cost and the performance of different activities, cost objects and resources is known as the Activity Based Costing (ABC) and it is one of the most important aspects of the organizations engaged in specially manufacturing or service. For the traditional accounting systems based on costs it is regarded as the best alternative epitome of the accounting system. Presently, the organizations engaged in manufacturing and service sector are forced by the global competition for increasing productivity and reducing associated costs and for this they have to be greatly automated and more integrated and flexible.

They can only sustain in this competitive world if they adapt to a mechanism of calculating costs which is more than accurate. Activity based costing is regarded as the best alternative of the traditional methods of cost accounting and it is used now a days for assigning costs, using various cost drivers, to activities, further for allocating costs to products on the basis of use of these products for these activities. ABC is used to reduce the stake of distortion and gives information about costs accurately by utilizing various activities as cost drivers (Akyol , and Bayhan, 2005).

According to activity based costing, the total cost of a product or a service is calculated by adding the cost of all value added activities involved in the production with the cost of the raw material. It can be explained in different words as the activity based costing method is used to link the cost of activities performed for usages of the resources of the organization (inputs) to the final outputs like services, customers and above all products. Purchasing, engineering, technology, design, quality control and production are prime activities required for a product and each of these activities use resources of various types, for example the working hours of the supervisors or engineers. The activities performed by these resources are measured by cost drivers (Peter B.B. 1997).

The costs that can be associated directly to the product, as per traditional systems of cost accounting, are labor and direct materials. As per activity based accounting system, there are two types of activities – a. value added activities and b. non- value added activities and generally non- value added activities are reduced for improving the performance. ABC is quite useful in calculating costs accurately but it involves extra effort and expenditure for collecting the information required for cost analysis. These difficulties which come across in designing a cost model can be reduced by using a tool properly designed (Peter B.B. 1997).

Cost allocation and ABC approaches in for-profit firms (corporations)

Cost allocation and cost accounting systems are very crucial for any organization and in case of for- profit firms it become vital for the financial managers to be very careful about all the financial consequences within the organization or outside the organization. No any organization can make profit if their managers don’t consider the cost allocation factor seriously. The objective of cost allocation is to;

compute valuations of assets and income and
justify costs and attain reimbursement

For computing valuations of assets and income, cost allocation is done to projects and products for measuring costs of goods sold and inventory. The purpose of these allocations is to provide frequent service to financial accounting. Managers often use the resulting costs for performance appraisal, motivating employees and other managers and planning.

Most of the time prices depend on costs and an accepted bid is to be justified subsequently. This could be understood by citing the example of Boreal which is the largest company of Canada supplying scientific equipments and apparatuses to schools. It has a diverse line of products, hence the process of costing product is comparatively complex. Recently, a combination of several costing techniques for determining the cost of inventory and making allocations was used. The company has many departments for production and for each commodity the activities of production vary from each other. Three guidelines were kept in mind for making allocations:

Fair allocation
Verifiable and rational allocation
Its impact must be known on people using or working with it

.The current input costs and changes in operating costs were reflected by the revised Inventory Costing System. These information were used for making cost allocations(Akyol , and Bayhan, 2005).

ABC approach proved to be beneficial for the company for following reasons:

Recalculating selling price
Calculating selling prices of different offers including mixture of products or quantity of products
Deciding about whether to produce a product in- house or to purchase from market
Calculating taxes
Calculating profits

The importance of allocations is quite visible in the above example and furthermore it has many intended uses (Peter B.B. 1997).

Different ways of implementing Cost allocation and ABC approaches in real-world business enterprises

In real world business enterprise the ways of implementing cost allocation and ABC approaches are different and they depend on the need and requirement of the enterprise. There is no any defined way of implementing cost allocation and ABC approaches in the real world business enterprise which can be implemented universally. The following example of a transmission company (PJM) illustrates the understanding of the ways of cost allocation. It classifies various methods of transmission cost allocation used in the United States and the world. The following five categories don’t stand alone but give a general idea about cost allocation (Cooper and Kaplan, 1988).

The costs of transmission can be allocated:

Between generation and load
Amount of usage
Generation or peak consumption
Basis of flow
Basis of monetary impact

These allocations can be implemented by following methods:

Direct Method – As per the name suggests, by direct method, any other service departments are ignored when the cost is being allocated for the department directly to the operating (revenue – producing) department. It can be explained as, the services provided by facilities management to personnel may be ignored as it is a kind of support provided to personnel by facilities management. The cost allocated for facilities management depend on the square meters area used by the production department only. Similarly, the costs of personnel department are allocated to the production department only depending on the number of workers working with it (Akyol , and Bayhan, 2005).

Step- Down Method – It is recognized in the step – down method that the activities of different services are supported by activities of other service departments including production department also. In this method, the allocations are made in a sequence. It starts with the service department providing the greatest service in terms of costs to the largest number of other service departments. It ends with the service department providing the least service in terms of costs to the least number of other service departments. For example, in this method, the cost would be allocated to facilities management before it is allocated to personnel department because facilities management provides more support to the personnel as compared to the support provided by personnel to the facilities management. Once the costs are allocated to facilities management, no costs are allocated back to personnel even if some services are provided to the facilities management by the personnel. The costs of personnel allocated to the production department include the costs allocated by facilities management for personnel (Peter B.B. 1997).

Reciprocal Allocation Method – In the reciprocal allocation method the cost is allocated after recognizing that the services are provided to each other by different service department including production department. This method is considered as the most ideal and correct method due to its ability to cost the relationship between different departments completely for the cost allocation to the service departments.

For example, as shown in the above methods, in this method the costs of the facilities management are allocated to the personnel department and the costs of the personnel department are allocated to the facilities management department before they are allocated to the department of production. The costs of the services are allocated first which are provided between two service departments (Cooper and Kaplan, 1988).

It can be noted that the costs can be affected greatly by the method of allocation selected. For example, using a direct method of allocation can make an operation more expensive in comparison to other methods like step- down method or reciprocal allocation method. Similarly, finishing can be an expensive operation if non- direct method of cost allocation is used.

Analysis of ABC’s potential strengths and weaknesses within a company

A number of indirect overhead manufacturing costs can be turned into direct costs by using activity based costing systems. Direct costs mean the costs recognized specially with selected cost objectives. ABC enables managers to select appropriate cost drivers and activities to recognize numerous overhead manufacturing costs and cost objectives as simply as traditional accounting systems enable them to recognize direct material costs and direct labor costs.

ABC based systems classify most of the costs as direct cost which is not the case in traditional accounting systems. ABC system gives great confidence to managers as far as costs of services and products are concerned because they have more information (Özbayrak, Akgün and Türker, 2004).

On the other hand ABC systems are comparatively complex and expensive to traditional systems and it is not affordable by all companies. ABC systems are used by both manufacturing and service industries because of the following reasons:

Margins are shrinking due to increasing competition and companies ought to know their accurate margins for their services or products
Increasing complexity in the businesses has diversified products, services and even customers. The consumption of resources of the company also varies across customers and products
Introduction of new technologies are increasing the share of indirect costs and presently in manufacturing world indirect costs are more important. Automated machines are replacing direct labors.
Life cycles of products are shortened by changing technology and it has become difficult for companies to spare time for making price or cost adjustments once error are found

The costs of developing and operating systems are reduced substantially by the use of computers (Cooper and Kaplan, 1988).

Steps needed to ensure a successful implementation of ABC

An Activity based costing system requires four steps for its designing and successful implementation:

Determination of key activities, cost objectives and resources to be used is to be known and analyzed by the managers. They also need to identify the output measures (cost drivers) for each activity and resource.
A map is needed to be drawn by managers which should be based on process and be able to represent the activity – flow and resources supporting cost objects
The third step requires collection of operating data and cost

The last and final step requires calculation and interpretation of the new information based on ABC. A computer is required for the last step because of the complexity involved in activity based costing systems. The process of using ABC information for improvement of operations is known as Activity Based Management (Cooper and Kaplan, 1988).

The associated costs & benefits

The three main purposes of cost allocation are:

Motivation
Measurement of asset and income
Justification of cost or cost- plus contracts

By considering the above mentioned benefits of ABC system the cost involved in its implementation becomes regardless as the system enables to make calculations accurately which is very important for determining the profits. The cost involved in the implementation of ABC system is so high that it is beyond the reach of small enterprise but the benefits are so important that big enterprise cannot manage without it (Özbayrak, Akgün and Türker, 2004).

Efficiency gains

Activity concepts are utilized by Activity Based Costing systems which enables it to link successfully the costs of product to the knowledge of production. For example, what is the process of producing a product or service, what is the time required for the performance of an activity, and finally what is the amount of money required for performing the activity? These all questions are answered efficiently by ABC system of accounting (Cooper and Kaplan, 1988).

Profitability implications

ABC systems are used for inventory of products and determination of income. This is done by using the physical units or method of relative-sale-value. It is becoming popular gradually due to its ability of assigning costs to various activities within an organization, tracing costs to products or services depending on cost drivers measuring the reasons for the costs of the activity. It helps in improving profitability of the organization by quality improvement and waste elimination.

It also increases profitability by focusing on quality, reducing inventory, making production cycle short and by flexibly using human resources and operating assets. As these factors are non- value added activities and it results in reducing operating costs and increasing profitability (Özbayrak, Akgün and Türker, 2004).

Conclusion and recommendations

The traditional systems of accounting are gradually becoming irrelevant in the present competitive business world when things are changing very fast. Traditional costing system under costs the product because they are not able to consider the hidden costs involved in production. ABC systems enable to cost accurately and hence to calculate profitability accurately. Sometimes traditional methods over cost the product due to their incapability of calculating costs accurately and the price of the product become incompatible in the competitive market.

In nut shell it can be said that businesses have to adopt the Cost Allocation and ABC systems to sustain in the competitive business world. It is an expensive practice but keeping its utilities in mind the cost becomes negligible because it enables businesses to calculate profitability accurately without which business has no meaning.

References

Akyol D.E., Tuncel G. and Bayhan M. 2005. “World Academy of Science, Engineering and Technology”, Vol 3

Peter B.B. 1997. “Activity-Based Costing An Emerging Foundation for Performance Management”

Özbayrak M., Akgün M. and Türker A.K., 2004. “Activity-based cost estimation in a push/pull advanced manufacturing system,” International Journal of Production Economics, vol. 87, pp; 49–65

Cooper R., and Kaplan R.S. 1988. “How cost accounting distorts product costs,” Management Accounting, vol. 69, pp; 20–27

Kim G., Park C.S. and Kaiser M.J. 1997. “Pricing investment and production activities for an advanced manufacturing system,” Engineering Economist, vol. 42, no. 4, pp; 303-324

Gunasekaran A. and Sarhadi M. 1998. “Implementation of activity-based costing in manufacturing,” International Journal of Production Economics, vol.56-57, pp; 231-242

Ben-Arieh D. and Qian L.2003. “Activity-based cost management for design and development stage,” International Journal of Production Economics, vol.83, pp; 169-183

Lewis R.J. 1995. “Activity-based models for cost management systems,” Quorum Books, Westport, CT

Köker U. 2003. “Activity-based costing: Implementation in a sanitaryware company,” M.Sc. Thesis, Department of Industrial Engineering, University of Dokuz Eylül

Cokins G. 1997. “Activity-based cost management making it works,” McGraw-Hill. Inc.

Elliot, B. & Jamie E. 2004. “Financial accounting and reporting”, Prentice Hall, London, p. 3,

Goodyear and Earnest L.1993. “Principles of Accountancy”, Goodyear-Marshall Publishing Co., p.7

Singh W. and Ramnik. AICPA committee on Terminology. Accounting Terminology Bulletin No. 1 Review and Résumé.

Friedlob, Thomas G. & Plewa, Franklin J.1996. “Understanding balance sheets,” pp; 1

Carruthers, Bruce G., & Espeland, W. N.1991. “Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality”, American Journal of Sociology, Vol. 97, No. 1, pp: 40-41,44 46,

View Finance Dissertations Here

Briefing Process Construction Projects

What Are The Contributions Made By Client Facing Project Managers To The Briefing Process Within The UK Construction Industry?

View This Dissertation Here

For the past fifty years or so briefing has been highlighted as one of the problem areas within the UK construction industry. Various UK government reports have reflected these inefficiencies from the Banwell (1964) report to the Egan (1998) report. The government reports put emphasis on the importance of improving customer focus in the construction industry. The brief establishes the requirements of the client and hence the objectives of a project. As the client facing project manager is concerned with achieving the project’s objectives, this dissertation seeks to establish what contribution the client facing project manager has on the briefing process. In order for this investigation to progress the following research will include a literature review of the briefing process and qualitative research of the client facing project manager’s involvement in the briefing process. Primary data obtained from the qualitative research will be analysed and conclusion will be drawn. Analysis of results of the investigation showed both negative and positive issues for the client facing project manager on contributing to the briefing process.

Negative issues include lack of education of the briefing process; there is a lack of understanding with regard to good practice implemented and poor undertaking of strategic briefs. Positive issues include an appreciation of the briefing process and an appreciation of the impact of a project upon the client’s core business; traits of leadership implemented to the briefing process and a willingness to gain knowledge in order to develop a strategic brief. The conclusion of the investigation is that the client facing project manager needs to gain further competence in order to contribute effectively to the briefing process. The dissertation objectives are as follows;

To evaluate the involvement of the client facing project manager in preparing the brief for their client
To assess the client facing project manager’s perception of the briefing process
To examine what tools and protocol the client facing project manager uses to develop a brief
To gain an insight into any barriers that exist which would hinder the client facing project manager from implementing a strategic brief
To examine the client facing project manager’s understanding of the briefing process
To assess if the type of client influences the client facing project manager’s involvement in the briefing process
To carry out an objective investigation, in analysis and conclusion

Briefing is an iterative process in trying to interpret client requirements and involves consultation with project stakeholders during its development. A good brief should capture the client’s requirements in a clear and precise way. As briefing is an iterative process, communication and coordination is important as a large amount of information is being passed between parties involved in the briefing process. The process requires decisive decisions to be made that can have implications on cost in later stages of a project. Central to the briefing problem is that the client does not fully express the project objective and is oblivious of the alternatives open to it. On the brief taker’s side there is difficulty in trying to decipher the requirements of the client. With uncertain information moving between parties, misinterpretation is a high risk and may only be avoided by repeated iterations around the problem.