Strategic Planning

Strategic Planning Explained

View MBA Projects Here

Title: Strategic Planning – When we travel we usually have a clear destination in mind. We know what mode of transport we want to use, how long it will take to get there, who is travelling with us and what route we are going to take. This is because we have spent a bit of time beforehand planning our trip.

You would not simply turn up at an airport with no luggage or ticket and expect to end up at your ideal destination (although some more adventurous people might argue that is the best way to travel). Instead you would have to waste time with last minute paperwork, have limited options, you may end up going to a less desirable place or even have to go home and start again.

The same can be said of strategic planning a business or organization. If there is no clear plan then the owners or management have no way of knowing what outcome they want to achieve or how to get there. Successful organizations use strategic planning to map out the best way to achieve their desired outcome.

A strategic plan is a document created specifically for an organization and clearly states the core values, mission statement and objectives. It covers the available resources such as staff, supplies and technology and states how these are to be used for the advancement of the overall business. It is a valuable tool that can be used to measure progress at any stage and to determine when all the objectives have been met. Strategic planning is the process used to create a strategic plan.

This post will look at the following points.

  1. Who uses a strategic plan?
  2. What are the key elements or features?
  3. Why use a strategic plan? What are the benefits?
  4. When to use strategic planning?
  5. How to use strategic planning effectively?
  6. What are the potential problems?

Who uses a strategic plan?

These days businesses both large and small use strategic planning. While it is not essential to have a strategic plan in place when starting a business it is certainly advisable. It is important to note at this stage that it is not a business plan. A business plan is generally focused on facts and figures such as budget forecasts, prospective markets, products and the like. Simply put, a business plan outlines the ‘who’ and ‘what’ of an organization. A strategic plan looks at the ‘how’ and ‘why’. It involves the creation and implementation of strategies to shape and guide how all resources are best used.

A plan can be created by a single person, outsourced consultants or by a dedicated committee over a period of time. The larger the organization, the more beneficial it often is to involve a greater cross-section of relevant people. For example a national software development company may choose to include staff from upper and middle management, sales, research and development, marketing, accounts, production and dispatch. The owner of a small chain of bakeries may find it more beneficial to use the experience of a business advisory service either on a once-off or an ongoing basis.

What are the key elements or features?

Strategic planning is a process, not a one-off action. The process involves a series of discussions or meetings between interested parties in which key ideas and concepts such as corporate culture and common goals are brainstormed and analyzed. As with planning a holiday, strategic planning looks at:

  • “Where are we now?”
  • “Where do we want to go?”
  • “Why do we want to go there?”
  • “How are we going to get there?”
  • “How do we know when we have reached our destination?”

Through this process a document is created that communicates all the values, goals, strategies, procedures and desired outcomes at every level of the organization.

After a series of drafts the plan is laid out in a final document that then becomes a valuable resource for management, employees and anyone else connected to the business. The final format may be unique to the organization or based on one of the numerous templates available. The completed strategic plan is often produced as a printed booklet and also as an online resource.

Why use strategic planning? What are the benefits?

The starting point

The use of a strategic plan benefits an organization in many tangible and intangible ways. The main benefit is in the process itself. The ongoing analysis and reflection through a series of steps allows for organic growth and development. Those with a clear, proactive plan are more likely to achieve an outcome that meets their specific goals and once implementation begins they have a clear pathway to follow.

Many businesses fail within their first few years due to lack of careful strategic planning. If they do manage to keep going, they may find the rate of growth disappointing or they may move from obstacle to obstacle without being able to see way ahead. They may waste a lot of time and money ‘putting out spot fires’ simply reacting to unplanned situations as they arise.

Trailblazing corporations such as Google and Apple not only know where they stand in the world market now, they know where they intend to be in 5, 10 and even 50 years time. Their strategies would be flexible enough to allow for changes in technology and the market conditions.

Shaping the future

To begin with, companies need to establish how they want to be positioned in the marketplace and what themes will form the backbone of their corporate culture. Defining these core ideals will shape the whole nature of the resulting plan.

A very successful company with unique and readily identifiable ideals is The Body Shop. Founded by Dame Anita Roddick in 1976, Anita’s first store was initially set up as an income source for her family but her personal experience and beliefs set the scene for the company culture that followed. She had travelled widely and was interested in the different ways in which women around the world looked after their bodies. Growing up in post war Britain also influenced her thoughts on recycling, giving value for money and on general consumer culture.

“Anita believed that businesses have the power to do good. That’s why the Mission Statement of The Body Shop opened with the overriding commitment, ‘To dedicate our business to the pursuit of social and environmental change.’ The stores and products are used to help communicate human rights and environmental issues”.

More than 35 years later, The Body Shop now has an outstanding global reputation. The ongoing commitment to the original core values such as recycling, sustainability, ethical trade, and community involvement have benefited many thousands of people across the world.

“There is no doubt that The Body Shop and Anita have always been closely identified in the public mind. Such was the inspiration she provided, that The Body Shop has become a global operation with thousands of people working towards common goals and sharing common values. That’s what has given it a campaigning and commercial strength and continued to set it apart from mainstream business”.

Visions, missions and values

One of the key benefits of the strategic planning processes is that it creates an opportunity for an organization to carefully consider why they exist in the first place. “Why are we doing this?”

They can break this concept down further into vision, mission and value statements.

A vision statement portrays the ideal future that the organization would like to achieve. In the case of a not-for-profit group this statement would depict the ideal outcome for the community whereas the vision statement of a corporation would naturally be more focused on growth and profits. In either case, this kind of statement serves to establish the purpose of the organization.

While it may be tempting to write a long, flowery vision statement that would look good on an inspirational poster, it is far better to keep it simple and relevant to the company. The following vision statement for technology giant Samsung is short but very well focused. It clearly shows the desired outcome for both the company and the people it serves.

“Samsung is dedicated to developing innovative technologies and efficient processes that create new markets, enrich people’s lives and continue to make Samsung a digital leader”.

Mission statements relate more to what will be done. It takes the vision a step further and briefly outlines the core approaches that will be used to allow the vision to be fulfilled. McDonald’s needs no introduction as a corporation. They are not only an internationally recognized brand, but they are also an outstanding example of how having a well constructed mission statement impacts on every aspect of the company.

“McDonald’s brand mission is to be our customers’ favourite place and way to eat and drink. Our worldwide operations are aligned around a global strategy called the Plan to Win, which centre on an exceptional customer experience – People, Products, Place, Price and Promotion. We are committed to continuously improving our operations and enhancing our customers’ experience”.

A carefully considered value statement becomes a valuable tool for all employees to refer to as a guide when making complex decisions. While some organizations may not take the time to create this third type of statement, in reality they make value-based judgements constantly. Whenever they have to make a choice to establish what is more important to them that are a value based decision. For example; when deciding what area of the market to focus on, where to base their production or what to include in a staff development program they need to reflect on their core values. If these are clearly stated and easy to access, then that decision becomes much easier to make.

The Coca-Cola Company uses a handful of value statements but they are extremely efficient and effective.

“Our values serve as a compass for our actions and describe how we behave in the world.

  • Leadership: The courage to shape a better future
  • Collaboration: Leverage collective genius
  • Integrity: Be real
  • Accountability: If it is to be, it’s up to me
  • Passion: Committed in heart and mind
  • Diversity: As inclusive as our brands
  • Quality: What we do, we do well”.

One thing all of these successful brands have in common is that their branding is uniquely identifiable. They stand out from all their competitors and ensure their market position because they knew their destination from the outset and they have maintained their focus ever since.

On the other hand, businesses that have not given thought to how they can offer a unique experience to their customers run the risk of getting pushed out of the market by more pro-active competitors. They may manage to stay afloat with a steady turnover but it is very unlikely that they will grow significantly in the long term.

Drafting the map

The next step in the strategic planning process is to carefully map out how the company’s goals will be implemented. This stage is beneficial in a number of ways.

The plan helps to define how all the available resources can be used most effectively to achieve these goals. This includes employees, raw materials, production equipment, initial capital and much more. These are no right or wrong answers when it comes to making these types of decisions. Individuals have their own preferences and biases so in order to avoid successive board members or employees making decisions that move away from the original company goals it is vital for them to have clear cut guidelines to follow.

An example of this would be if the organization had a very strong environmental emphasis in its’ value statements, then the person responsible for managing the company car fleet should consider things like fuel types and efficiency, materials used and possibly other more sustainable methods of getting the employees to work. It would be counterproductive for them to order fuel-guzzling SUV vehicles for inner-city travel even though they are generally cheaper than electric or hybrid cars.

Having a strategic plan does not mean that the resulting procedures have to be rigid and mapped out to the last minute detail. Imagine having a travel itinerary so strict that it doesn’t allow for interesting detours or changes in the weather. Having broad guidelines and boundaries enables an organization to respond to changes in both internal and external conditions as they occur.

The Global Financial Crisis unfortunately saw the demise of many organizations across countless industries. Some businesses have products or services that have gone out of fashion or have become more automated. There are many reasons why a business that was doing well suddenly faces an unforeseen roadblock that can cause everything to grind to a resounding halt.

The ones that survive are those who have people who think ‘outside the square’ and come up with new areas to focus their attention. The printing industry used to be very labour intensive with staff needed to set the machines or create the lino cuts by hand. Computers have rapidly changed many of these processes to the point where the majority of printing is now produced digitally.

Modern printing businesses now offer customized products such as books, calendars or posters in small quantities that would not have been feasible with the large manually operated presses. They have found new paths that are still compatible with their original goals even if the goalposts have been shifted slightly. The companies that did not have the desire or flexibility to keep up with the changes in technology have now largely gone out of business.

An intangible benefit of the strategic planning process is the increase in job satisfaction for those involved at every level. Knowing that their contribution is valued and appreciated encourages people to participate more fully and gives them the confidence to put forward new ideas.

This is true not only for businesses but for other organizations such as community groups and local councils. Whenever there is an open and clear communication pathway and people can see that their ideas are well considered they are far more likely to step up and take ownership of their proposals.

To refer back to the values of The Coca-Cola Company above, “If it is to be, it’s up to me”.

“Are we there yet?”

While the strategic planning process is usually ongoing, organizations do need to periodically review if they are still on the right path. Using the previous holiday analogy, imagine that you are in your car with your family, you have all your luggage well packed and are driving along the same highway your parents used to take so you don’t consult the map. Slowly you realise that you don’t recognise the scenery and the signs don’t make sense. You’ve missed a turn off and now face some choices. Continue on the same road and just ‘make do’ when you get somewhere that could be ok to stay? Turn back and keep trying different roads that look as though they might be right? Or do you pull out the map (or consult your GPS), work out where you went wrong and find your way back to the original route?

When organizations start showing signs of losing their path, those that continue anyway will most likely end up in a position they don’t really want to be in. That could be a poorer financial position, they could have missed some great opportunities or they could have drifted away from their original goals and values. The same could be said of those that do attempt to address the problems but not in a cohesive or organized manner.

By having a well focused plan and referring to it regularly an organization can determine when the goals have been achieved and whether the plan has been successful. The desired outcomes can be measured using Key Performance Indicators (KPI’s) and other measures. These could include indicators such as increased profit, more patronage or participation or faster turnover.

The following flowchart shows how all these planning factors interact.

Strategic Planning
Strategic Planning

When to use strategic planning

The nature and size of an organization usually determines how often strategic planning should be carried out. New companies or those in rapidly evolving markets may need more frequent planning reviews than other, more stable organizations.

A brand new company would develop a strategic plan at the same time as their business, marketing and financial plans. The original plan would require more time and effort than subsequent reviews.

More established companies or organizations should review the progress of major strategies quarterly, however most areas could be reviewed annually. They could then do a new strategic plan every 3-4 years. The faster an industry or focus area is changing, the more often the plan should be reviewed or re-done. The key is to keep the plan fresh and relevant to the current situation.

A new plan should be developed at the start of a new venture or development stage. This could include opening additional stores, adding a new department or moving into a new community or market.

Strategies can also be altered when internal feedback shows a definite need. If an aspect of the plan is clearly not working at ground level then the employees or other parties should be able to communicate this to the decision makers. Communication is a two-way process so an effective plan would have provisions in place for receiving feedback and responding to it accordingly.

Most people would be familiar with the classic board game Monopoly. The stages of this game make a good analogy for the stages of strategic planning. At the start of the game (the opening of a new business or venture) the players move in a fixed direction with known resources and pathways. As the game progresses, players have to make decisions about how to use their resources. They may choose to widely invest or to hang onto their capital according to their personal strategy (or lack of one).

Passing ‘Go’ could represent the end of the financial year or the end of a project. At this stage the players (competitors) have changed the status of their finance and assets. Some may have even ‘gone to jail’ or collected bonuses along the way. This is a time to review their initial strategies and to alter them as needed in order to win the game. Regular review and changes to strategy leads to more profits and a stronger enterprise.

How to use a strategic plan effectively

People power

Initiating a strategic plan needs planning in its own right. The key decision makers (business owners, board members, etc) need to decide who to involve in the planning process and how and when it will take place. Ideally they would include people with established skills in areas such as group facilitation, meeting management and conflict resolution. These people may already be part of the organization or they may be external consultants or facilitators.

If the right people exist within the organization already it is very beneficial to include them in the planning team as they are more likely to be passionate and focused. It is more meaningful to them and gives them a sense of ownership and belonging.

Inviting people from different departments or with varied experience has many advantages too as it helps them see situations from different perspectives. For example an accounts person may not understand why a higher priced piece of equipment could be more beneficial to the company until an engineer shows them that it generates more units per hour or is safer to operate.

The team members participating in the meetings may vary as each meeting will have a different agenda and desired outcome. If there is uncertainty as to whether to include a specific person in a meeting it is generally best to invite them anyway. They may not have much to say but they could also put forward the best ideas of the day.

Outside knowledge

Hiring a professional planner as a facilitator also has many advantages especially if their experience is related to the industry of the organization. It would be similar to the choice between planning a holiday yourself online and seeking the services of a travel agent.

Of course there will be costs involved but as with any aspect of business, utilizing resources that will ultimately lead to increased profits is always a sound investment

The level of involvement a professional consultant has can vary greatly from several meetings with an individual consultant to a series of meetings over several weeks with a dedicated team. This would be influenced by the size of the organization and the amount of time and capital they have available.

Using an impartial moderator in meetings may help to manage conflicting ideologies and personalities. They are generally trained to consider all points of view with respect and to present them to the group without bias. They can keep the group on track rather than going off on tangents not relevant to the core strategies.

A professional consultant also has the advantage of being able to look at the whole organization objectively and provide a fresh perspective. They should have a strong working knowledge of current industry trends and be able to accurately compare similar organizations.

Getting started

Having the right people sitting around the table does not guarantee a successful planning meeting. They need a purpose and a pre-planned agenda to follow. This is where the vision, mission and value statements come into play. These can either be read aloud, given as handouts or be visible on a large screen or board. They don’t have to be discussed in great detail but they should be available for quick reference. These statements will set the scene for the meeting and provide a focal point whenever a decision on important matters is required.

In the first meeting one of the vital tasks the members need to undertake is a SWOT analysis. This stands for Strengths, Weaknesses, Opportunities and Threats and it is used worldwide as a key tool in assessing the current status of any given group or organization.

SWOT Analysis

Quality staff
Positive corporate culture
Strong market position
Unique products
Research and development

Lack of training
Supply Chain gaps
Poor cash flow
Not enough staff
Outdated systems

Niche markets
New technology
Competitors weaknesses
Change in tactics
Production capabilities

Sustainable finance
Location issues
Government policies
Loss of key contracts
Economic conditions

The first two components, Strengths and Weaknesses, assess the internal aspects of the organization. Planning team members use a variety of discussion techniques such as brainstorming to produce a list of what they perceive to be the major factors in each of these two categories. Some factors may be immediately apparent but others may not come to light until the discussion process starts. This is especially true of weaknesses as people can be uncomfortable with talking about any flaws and may take them personally.

For example the sales team might have doubled their new customer list but deadlines for outgoing orders may have been missed due to insufficient stock being supplied.

Data showing the external factors that influence the direction of the organization can be sourced from various reports, economic trends, patterns and customer feedback. This data is often collected by internal staff but professional planning consultants can also provide valuable information on the status of the industry.

A SWOT analysis brings together all the components that make up the picture of what is currently happening in the organization. What it doesn’t do is make recommendations on how to act on that information. That step comes later in the planning process.

Setting priorities and themes

Before moving on to strategy development, the planning team needs to review all the information gathered through the SWOT analysis and decide which areas need the most urgent attention.

Collecting the data can be a major time consuming exercise in itself. It would generally include reports on areas such as sales history and forecasts, industry trends, research and development and customer feedback. This information would need to be gathered and collated well before the planning meetings start. It may take the form of spreadsheets and charts, surveys and reports.

These days that process can be made faster and more efficient through the use of compatible or fully integrated database, accounting, sales and workflow applications. Automated data collecting applications are readily available and could save lots of time and money.

Deciding priorities can be a challenging exercise as it is influenced by personal opinion. A useful approach can be to ask team members to prioritise the lists generated in the SWOT analysis individually and then poll the top responses. Some weaknesses may call for urgent action before anything else can take place such as the purchase of new applications to manage the incoming data.

The planning team also need to refer back to the original vision, mission and value statements and break these down further into several key areas or themes. The factors listed in each section of the SWOT analysis can be grouped under these themes.

Strategic themes form the link between the organization’s vision and the actions required to achieve them. The themes can be used to develop a strategic framework by forming the pillars or pathways. Each theme can be given its own set of aims and desired outcomes as shown in the previous strategic planning flowchart. Examples of strategic themes could include:

  • Organizational outcomes
  • Customer outcomes
  • Working together
  • Capable and engaged people
  • Embracing change

It is important not to have too many themes on the table at the same time. Generally two to five themes are manageable. Undertaking more can create too much pressure for the team and not allow each theme to be tackled thoroughly. Less urgent themes can be handled in future strategic plans.

Action time

This stage of the planning process creates the guidelines for implementation within each strategic theme. It maps out the steps that need to be taken, who will be required to take those steps and how their progress will be measured.

For example, the theme of ‘Embracing change’ might cover the acquisition of new equipment and the hiring or training of staff to operate it. The steps involved would need to include the selection of a person to manage the entire process with a team to support them. They would need to research types of suitable equipment, how many operators would be required, what training they would need and then create budget forecasts for the accounts department.

The strategies generated though this process should be measurable and have a reasonable due date for completion. Using a variety of Key Performance Indicators (KPI’s) at this point is a way of measuring and evaluating if the strategy aim has been successfully achieved. KPI’s could include:

  • The purchase of new equipment within budget and before the due date
  • Satisfaction ratings given by customers at the conclusion of a sale
  • Having all the required staff trained within a set timeframe

Mission accomplished

The final strategic plan does not need to be a huge document but it should be clearly communicated throughout the organization and be readily accessible (not locked on one computer or sitting on a lonely shelf). Everyone involved should be aware of their individual responsibilities and the strategies they need to use to achieve the desired results.

There is never an end to the strategic planning process. Once the goals of the initial themes have been reached they should be reviewed periodically and new plans put in place as required. An organization that regularly reviews its strategies and takes action on them is one that will ultimately be very successful.

What are the potential problems?

Ideas vs strategies

If the leaders and the planning team are not clear on the difference between the abstract visions or goals and the concrete strategies required to achieve them then they run the risk of creating a plan with no real substance. They could create a lovely looking document with poetic vision, mission and value statements but without clear cut strategies to achieve them the goals will always remain floating somewhere just out of reach.

Ignoring the finished product

For a strategic plan to be an effective tool then it needs to be utilized and updated constantly. Why spend all that time, money and effort creating the plan and then not use it?

The people and their roles

Selecting or hiring the wrong people to develop the plan is a real gamble. Leaders may like the power that comes with their role but they may not be effective communicators or delegators.

Leaders must be willing to make the tough decisions and follow them through. They must always be conscious of the organizations’ goals and adhere to them at all times in order to keep them on track.

If responsibility is delegated then it must be followed though. There is no point in assigning a key task to someone and then not checking on their progress. This could potentially cause major gaps in the whole process and make it less likely to succeed.

Other members of the planning team may lack the commitment or motivation to participate fully. For example they may feel their ideas are not seen as being valid or they may not have a clear understanding of what the organization is trying to achieve.

Ideally the team should consist of the same core group of people for as long as possible or as new people are introduced, some of the original members should still be involved. This not only ensures a sense of continuity but those involved will retain a sense of ownership of their tasks.

Too much, too often

Planning too frequently uses up valuable time and resources. It can take many days or weeks out of the teams’ regular work times which can be very disruptive. The resulting stress could become a deterrent for them to be involved in future planning activities.

Too little, too late

Not scheduling planning sessions frequently enough could mean that opportunities are missed or that people are drifting away from the desired pathway. Getting the timing right allows planners to respond to changes in the internal or external environment with relative ease. It also means that if some individuals or groups are not on track they can be guided back to the path without losing too much time or money.

Ignoring the signs

Not being aware of potential roadblocks or economic fluctuations could stop planners in their tracks. They need contingency plans so that when the first signs of a problem appear they can take appropriate action. Avoiding these potential problems through proper planning and forethought gives an organization a much greater chance of achieving success.


Strategic planning helps organizations to clarify and understand their philosophical goals and gives them the tools to develop these goals into clearly defined business strategies.

By having targeted approach to planning an organization creates the opportunity to increase market share and profits.

When run properly it gives all those involved in the planning process a sense of belonging and purpose. It is important to remember though that a system is only ever as good as the people who use it. Plan ahead and plan well and everybody benefits.

View MBA Projects Here

MBA Project Globalization

MBA Project Globalization


Over the past few decades, the global scenario has changed considerably with increased interdependence amongst nations and economies. This intertwining amongst nations and sharing of ideas and technology has been termed as “Globalization”. Globalization has been a buzzword of late, with heated discussions about its pros and cons. Some consider it to be a blessing for mankind while others take it as a curse. For some it has brought about material prosperity while others have become unemployed due to it. This paper tries to analyse the effect of Increased International Trade and Globalisation on the US economy. The first section discusses the pros and cons of Globalization while the second section discusses how globalization has lead to increased foreign trade. Thereafter, it discusses the effect of globalisation and increased foreign trade on the American economy.


Trade is believed to have taken place throughout much of recorded human history, whether as barter or in exchange of currency. Till the 1800’s, trade was limited due to difficulties in transportation, communication and restrictive trade policies. However, in the mid 19th century, with advent of free trade and nation advantage concepts, trade started to pick up (Daniels & Sullivan, International Business and Operation).  Although international trade has been present throughout much of history, for example Silk Route, its economic, social, and political importance have increased in recent centuries, mainly because of Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing. Worldwide, countries are doing away with trade restrictions and lowering trade tariffs, thereby supporting free trade and making the world a global village (Daniels & Sullivan, International Business and Operation).

Globalization – Boon or Bane

The global economy is no longer an individual event and USA no longer plays the dominating role. This is apparent from the fact that ten years ago the World Trade Organization had only 80 members whereas now it has 153 members (WTO Data, 2010). Also countries like China and India are getting more bargaining power day by day. Globalization is the deepening relationship and broadening interdependence amongst the different countries of the world. The World Bank defines globalization as “the growing integration of economies and societies around the world.” This integration of regional economies into a global village has lead to increased international trade, investment, capital flows and technological advancements. Technological advancements such as the internet and cell phones have literally reduced the world to a Global village. Globalization has both its critics and it supporters. Some interpret it as a way of countries losing their cultural identities and becoming “Americanized.” Others see it as a way to reduce costs and to increase profits and efficiency. The debate over globalization is perceptible in demonstrations against the WTO in Seattle in the fall of 1999, against the Summit meetings in Quebec and Genoa and against several annual meetings of the IMF and World Bank. While on the other hand, supporters of globalisation look forward to a global village, linked together by the Internet, and enjoy the ever-increasing material well being (Daniels & Sullivan, International Business and Operation). The United States is seen by much of the world as the strongest supporter of globalization – in fact, as pushing it on everyone else. Over the years, globalization has resulted in increased foreign trade and capital flows, thereby contributing immensely to the domestic economy. In the 1990s, globalization and free trade, resulted in integration of China and the former Soviet bloc into the trading system thereby lowering inflation and opening new markets. However, as the emerging markets got stronger, the prices of commodities started rising immensely and competition from foreign workers lowered the average US wage rates. Jeffrey Garten, professor of international trade and finance at the Yale School of Management, points out that in 2000, the world’s wealthiest countries accounted for about 70 percent of the global economy, compared with 30 percent for developing economies. These rates are slowly but surely reversing. Thus, USA has seen both the positives and the negatives of globalization.

International Trade

One important effect of globalization is the increased interdependence among nations which has demanded increased liberalization of markets, the dismantling of almost all trade barriers (Lee, 2005; Czinkota and Ronkainen, 2007). As a result, the forces of globalization have necessitated trade liberalization (Martin, 1993), leading to increased international trade, not only in good and services but also currency and capital. Ever since independence, America has been a supporter of Free Trade. In 1988, USA signed a Free Trade Agreement with Canada that progressively eliminated tariffs over a ten‐year period, thereby making Canada USA’s premier trading partner. Further, in 1994 the Mexican Government, in pursuit of market reforms, signed the North American Free Trade Agreement (NAFTA). The passage of the NAFTA agreement signalled the continuing support of U.S. policy‐makers for the worldwide march toward free markets and further economic globalization (Paul. S Boyer, 2001). The above agreements lead to immense increase in trade and greater market efficiency. However, by 1999 USA had a huge trade deficit of around USD 200 billion (Paul. S Boyer, 2001). The trade boom of the 1990’s had ended in a recession marked by serious job losses and the nations policy of “free trade” was being questioned. President George W. Bush insisted that America’s economic future lay with the global economy, but early in 2002 political pressures led him to slap import duties on cheap foreign steel. However, he was forced to withdraw it in 2003 due to retaliation against US exports and WTO sanctions (Paul. S Boyer, 2001)

Globalization MBA
Globalization MBA

Competition and Business Restructuring

International competition goes hand-in-hand with globalization. A company that has been very successful in the domestic market may suddenly find itself facing competition from a yet unheard of company from the other end of the globe. Survival in this new business environment calls for improved productivity, reduction in costs, up gradation in technology and advancements in supply chain management (O’Reilly, E., & Alfred, Diane., 1998). For example, In the 1980s American automobile manufacturers began losing market share to Japanese competitors who offered American consumers higher quality cars at lower prices (Brewer, G., Managerial Accounting). However, from the consumer’s point of view, increased competition promises greater quality, reduced prices and a greater variety of goods and services. China’s entrance into the global marketplace has proved that globalisation leads to competition and changes the business environment. For example, from 2000 to 2003, China’s wooden bedroom furniture exports to the United States increased by more than 233% to a total of $1.2 billion. During this same time, the number of workers employed by U.S. furniture manufacturers dropped by about a third, or a total of 35,000 workers (Fishman, T., 2005).

In a 2002 speech, the Economic counsellor to the US Embassy, Mr Lee Brudvig, said, “We have not resisted the free flow of money, goods, services, and ideas. Rather, we have subjected our companies to market competition and limited the role of government on the whole to that of facilitator, regulator and, when necessary, safety net provider. As a result, we have seen a massive reorganization of business structures. Whereas in 1960 manufacturing accounted for 27 percent of GNP, by 2001 it had dropped to below 15 percent.” The changes brought about by technology and productivity is causing both markets as well as organisations to undergo restructuring.

Labour Market Developments

An important trend in labour markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled (Slaughter, M., & Swagel, Philip., 1997). Studies have shown, for the advanced economies as a whole, that trade with developing countries has led to about a 20 percent decline in the demand for labour in manufacturing, with the decline concentrated among unskilled workers (Swagel, Philip., 1997). This trend has produced dramatic rises in wage and income inequality between the more and the less skilled. In the United   states, wages of less-skilled workers have fallen steeply since the late 1970s relative to those of the more skilled (Slaughter, M., & Swagel, Philip., 1997). According to a study conducted in 2007, the impact of trade flows in 2006 increased the inequality of earnings by roughly 7% (Bivens,J., 2007). The study goes on to prove that although “liberalized trade” is a win-win proposition for nations, it reduces the income of most workers. Workers employed in industries directly in competition with low-cost imports from abroad can expect to see immediate job dislocation and/or downward wage pressures.

The rise of labour abundant nations, like China and India, has increased the global labour pool. The price of labour-intensive commodities falls as a result of this increase in the global labour pool, and these falling prices harms the labour in professional-abundant nations like the United States. DVD Players, clothing and call centre operations, all provide examples of reduction in prices due to expansion in the global labour pool (Slaughter, M., & Swagel, Philip., 1997). Outsourcing and offshoring, has further increased unemployment and decreased national earnings. 22-29% of the U.S. workforce has been rated as potentially offshorable over the next one or two decades (Blinder, 2006). The implied loss due to offshoring would push these wages well below the 1979 levels, completely undoing the entire increase in these wages over the past three decades. The trade adjustment assistance (TAA) program has been formed as a way to compensate globalization’s victims in the United States. In 2006 TAA allocated $655 million in income supports for workers harmed by globalization, and, another $200 million for training. As quoted by Bradford, Grieco, and Hufbauer in their study, “While the gains from increased trade generate a permanent rise in income, the associated losses are temporary. Nevertheless, they are very real, and are concentrated on a small fraction of Americans”.

Financial Market Globalisation

Financial globalization has been one of the most important trends in the world economy in recent decades. Financial globalization has been one of the most important trends in the world economy in recent decades (Lane and Milesi-Ferretti 2003). International financial liberalization was also accompanied, in a

somewhat chicken-and-egg causal relationship, by the abandonment of the Bretton Woods system of adjustable exchange rate pegs and the shift to floating exchange rates among the major currencies or regional currency blocs (Eatwell 1996). When currency fluctuations are considered, it is the exchange rate between the US dollar and the euro that gets the most attention. This not only reflects the size of the respective economies using these two currencies, but also the fact that the US dollar is the most widely traded currency today. That’s because it effectively serves multiple roles: as an investment currency; as a reserve currency for many central banks. According to an IFSL research conducted in April 2007, the US dollar was involved in 86% of foreign exchange transactions, followed by the euro (37%), which proves its importance (Safar, L., 2008). The report further states that foreign currency trading increased by 70% in 2008 compared to 2004. This increase in currency trading makes it imperative for companies to learn to deal with exchange fluctuations and how to benefit from all situations. The US dollar has fallen since January 2004 against the euro as well as against most major European and Asian currencies. This has caused many companies to introduce a “fluctuation clause” in their contracts to protect themselves from losses due to exchange rate fluctuations and has also lead to the development of many financial instruments to help companies hedge their currency risks. However, times such as these when the dollar becomes weaker often works well for US producers with a larger proportion of their costs being in dollars but selling worldwide. International revenues not only translate to higher US-denominated revenues, but they also contribute to higher margins which can be achieved globally (Safar, L., 2008). For example, Q1 2008 for instance marked a milestone for Google, whose international revenues exceeded US revenues for the first time. Revenues from outside of the United States represented 51% of total revenues in the period, compared to 47% in the first quarter of 2007 and 48% in the fourth quarter of 2007. In Q2 2008, this had increased further to 52%. According to Google, “Had foreign exchange rates remained constant from the second quarter of 2007 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $249 million lower.” (Safar, L., 2008). Nothing can be predicted with 100% accuracy when it comes to exchange rates, and the only thing that can be safely said is that there will be no “business as usual” when it comes to currencies.

Political and Institutional Changes

According to CIA Global Trends 2015, 2000,” The rising tide of the global economy will create many economic winners, but it will not lift all boat. It will spawn conflicts at home and abroad, ensuring an even wider gap between regional winners and losers than exists today. Regions, countries and groups left behind will face deepening economic stagnation, political instability and cultural alienation. They will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it.” One of the most important and necessary features of the current process of globalization is the proliferation of international organizations. Scholars point to the emergence of expanding web of international treaties and institutions, which regulate and adjudicate on matters of interstate behaviour. The number of international organizations rose from 61 in 1940 to 260 by 1996 (Barnett 2002:110). Since 1995, when the World Trade Organization (WTO) was formed, transnational corporations have increasingly influenced political leaders to push international trade laws in the same direction of liberalization and deregulation. In addition, existing international organizations like the IMF, the World Bank and the GATT/WTO have transformed their roles substantively, gaining further powers and responsibilities (Camillery and Falk 1992:94-7; O’Brien et al. 2000). The United States has enjoyed a position of power among the world powers, in part because of its strong and wealthy economy. Due to this reason, the United States enjoys considerable bargaining powers in the WTO and World Bank. With the influence of globalization and with the help of The United States’ own economy, the People’s Republic of China has experienced some tremendous growth within the past decade, and now enjoys as much bargaining power, if not more, as USA. If China continues to grow at the rate projected by the trends, then it is very likely that in the next twenty years, there will be a major reallocation of power among the world leaders. China will have enough wealth, industry, and technology to rival the United   States for the position of leading world power (Fishman, T., 2005).

Crime and Terrorism

At the end of the 20th century, a new phenomenon appeared—the simultaneous globalization of crime, terror, and corruption, an “unholy trinity” that manifests itself all over the world. This unholy trinity is more complex, however, than terrorists simply turning to crime to support their activities or merely the increased flow of illicit goods internationally. Rather, it is a distinct phenomenon in which globalized crime networks work with terrorists and both are able to carry out their activities successfully, aided by endemic corruption. Crime groups and terrorists have exploited the enormous decline in regulations, the lessened border controls, and the resultant greater freedom, to expand their activities across borders and to new regions of the world. The United States has been one of the worst sufferers of this new “global” terrorism. Since September 11, 2001, numerous resources have been shifted in the United States and elsewhere from addressing trans-national crime to fighting terrorism. It has increasingly become clear, that for a nation to advance, it has to keep its crime and terror activities in check.

Cultural and Other Issues

The growth of cross-cultural contacts has helped the United States participate in a new World Culture. It has helped Hollywood reach remote corners of the world while at the same time Bollywood has reached out to the Americans. Globalization has also lead to greater international travel and tourism thus greatly benefiting the tourism industry. WHO estimates that up to 500,000 people are on planes at any one time. (WHO Data, 2009). In 2008, there were over 922 million international tourist arrivals, with a growth of 1.9% as compared to 2007 (UNTWO Data, 2009). Globalization has also increased the number of illegal immigrants entering USA. The Rockridge Institute argues that globalization and trade agreements affected international migration, as laborers moved to where they could find jobs. The Mexican government failed to make promised investments of billions of dollars in roads, schooling, sanitation, housing, and other infrastructure to accommodate the new maquiladoras (border factories) envisioned under NAFTA. The 1994 economic crisis in Mexico, which occurred the year NAFTA came into effect, resulted in a devaluation of the Mexican peso, decreasing the wages of Mexican workers relative to those in the United States. Unemployment, corruption, low wages and few opportunities cause Mexican laborers to look for greener pastures and migrate illegally to the United States.


Globalization leads to increased international trade and reduction in trade barriers, which is beneficial for all the trading nations. Increased globalizartion has increased competition in the global economy, making it tougher for organisations to survive, and leading to greater productivity, efficiency and quality. This has in turn lead to the rise of countries like China and India, which are rich in labour. Due to the rise of labour abundant nations, the US labour market has suffered with fewer jobs being available for unskilled workers and lowering of wages. Further, outsourcing and offshoring have lead to loss of jobs and unemployment. In order to establish a set of trade rules and monitor the trading nations, institutions like WTO, IMF and World Bank have gained in importance. The United States hold a very important place in all these institutes, due to its strong economy and political power. Thus, it has a huge bargaining power when it comes to trade regulations. Overall, globalisation has affected America both positively as well as negatively but it is primarily due to globalisation and increased trade that America has a strong economy today.


Bivens, J., 2007, Globalisation and American Wages: Today and Tomorrow,

The author examines the effect of globalisation on wages and predicts what the future is going to be, based on mathematical models.

Blinder, Alan. 2006. Off-shoring: The next Industrial Revolution. Foreign Affairs magazine.

Boyer, P., Foreign Trade, U.S., The Oxford Companion to United States

Boyer, P., Global Economy, America and the., The Oxford Companion to United States History. 2001. Accessed on 22 Apr. 2010 at

Daniels & Sullivan, International Business and Operation, 11th Ed, Pearson Education

Eatwell, John. 1996, International Financial Liberalization: The Impact on World

Development, Office of Development Studies, Discussion Paper Series (September). New   York: United Nations Development Programme.

Fishman, T., 2005, How China Will Change Your Business, Inc. magazine,

O’Reilly, E., & Alfred, Diane., 1998, Innovations in Technology and Globalization,

Slaughter, M., & Swagel, Philip., 1997, Does Globalization lower wages and export jobs?, IMF Report,

UNWTO World Tourism Barometer (World Tourism Organization) 7 (2)

Click Here To View MBA Dissertations

Risk Management Alstom

Risk Management – A Case Study of Alstom

Risk Management at ALSTOM. The advantages of rail projects involve cheap shipment transport costs, increased in the mobility of passengers, greater economic addition and the environmental advantages from condensed road traffic or develop and improved urban transportation. But for the railways projects financiers needs to consider and keep in mind the risks factors that they can face throughout their projects and on the basis of that knowledge they should take some steps and start an awareness programs for those who relate to this project. Risks awareness programs should include the awareness about the hazards and controlled risks along with the steps that can reduce and almost decrease the risks which can be beneficial for the workers and for the rail projects as well.

Why the risk management department / function is an important function for a company

In the newly established private sector of railway, requests for contracts to offer railway services and rolling stick entirely relies on rewards and risk. Though ALSTOM has a massive share of market and substantial experience in the in business, each contract it creates divergence according to the specification of train, provisions of financing and spares, maintenance of various agreements (Quinn, & Strategy, 2013).

This consequently puts more stress on managers to obtain carefully whether every tender is value the risk and what the linked incentives are probably to be. From the suppliers of about two years British Rail will go to identify a short period of warranty after taking the train delivery. It will then renovate and maintain the trains, in addition to offer transport and rail services, like ticketing for passengers, facilities for station and maintenance of railway infrastructure. Financers are avoiding the risks of UK extreme environment and not having the feeling of urgency of Risk Management (Adger, 2010). And there is a lack of importance among firms that are being affected by the extreme weather.

And there is a lack of importance among firms that are being affected by the extreme weather. First of all we need to find out those steps that can reduce above discussed risks so that the railways project can be completed (Quinn, & Strategy, 2013). Investor should realize the risks of extreme environment that can affect the project.

ALSTOM refused the opportunity of business development in the secondary market. As an outcome, manufacturers of train like ALSTOM depend entirely on big contracts for manufacturing trains and experience from either scarcity or gorge that is they were either snowed under with commands and instructions or had to deny as commands rejects. Train manufacturing was a start or stop business and therefore each command was dissimilar, there were no retained technology and high capital cost.

To manage risk, ALSOTM was really concerned about it risk management department. And in order to manage the risk ALSTOM found a serious and vital change in focus for manufacturing  through moving from being merely a train manufacturer to a service provider. Late 1980s passenger transport were becoming more complicated system, integrating an increasing amount of equipment which are high value from suppliers which are specialist.

It was observed at ALSTOM that though these more complicated and sophisticated trains were a chance to increase and improve the product quality , the risk of late delivery and non-performance had raised. The main point was to incorporate the tasks of specialist suppliers so that those kind of risks can be easily managed (Reuter, Foerstl, Hartmann, & Blome, 2010).

Long Term cost risk for ALSTOM can be the major risk for the company. Now for a period of 20 years ALSTOM has a contract to supply their trains for the Northern Lines, it can no longer considers only of the manufacturing trains’ cost. As the company is not considering the long term cost of the company’s assets. So in ALSTOM ’s main interest is to maintain trains in immaculate circumstance and enhance and develop them throughout the lifetime of the company, if they continue this kind of attitude and apply risk management function this will lessen the cost of maintenance and generate more profits.

The project of Northern Line offered ALSTOM with major experience , not just in developing projects but also in capitalizing them. By taking the risk of asset for the scheme, ALSTOM unmitigated its rile as a train producer to act as a systematic stock firm. ALSTOM then went to the pecuniary markets to offer the capital for manufacturing the trains with capitalists who took the monetary risk for the project.

Assess how different departments/functions of a company such as ALSTOM can help the company manage its risks

The business strategy and the human resource management should be entirely incorporated so that they can effectively and efficiently play an active role within the risk management and its assessment. Whenever there is amalgamation activity, the Human Resource Department frequently has a huge responsibility to ensure that business operation transition go easily and smoothly. When firms amalgamate, some of the most important modification happens in treatment and in number of its workers. If in ALSTOM human resource department can successfully tackle with these significant matters, they can have massive effects on the success of the firm (Reuter, Foerstl, Hartmann, & Blome, 2010).

Major goal and role of ALSTOM is to establish and sustain trains until the end of era of franchise of Virgin. But the company is experiencing problem in maintain trains. The company is facing legal issues like accidents or suicides relating impostor, defect, and fire, electrical or mechanical failure caused by ALSTOM’s train or the company and especially workers’ strike which is due to the mismanagement of human resource, and it can cost a lot to ALSTOM.

The company hoped that they can carry on sustaining trains and can be able to manage their human resource after the franchise. Northern Line scheme’s financiers did not abridge risk whether it’s related to technicality or human resource mismanagement. Though the investors and the sponsors for the West Coast Main Line WCML project were signifying banks and other institutions of finance, are taking releasing risk, further than the date of primary franchise (Dimant, Lindner, Liu, Ruiz, & Tejpal, 2011). Till 2012, investors and sponsors have assured income flow from this project. But the risk comes after the year 2012, and the question raised that will the revenue generated for rest of the life of the advantages is enough to fund the financial make-up and produce a profit on the speculation of latest trains?

It is the sponsors and investors who having created the train manufacturing possible, who take the acclaim risk of supplying trains for the Virgin franchise (Narasimhan, & Talluri, 2009). Due to systematic finance management of ALSTOM the company was able to generate profit on the speculation of latest trains. But the major types of risks that must be consider by ALSTOM are strategic risk, for instance a competitor will going to pose serious threat on the business, compliance risk for instance the introduction of new safety and health rules and regulations, financial risk for instance increased interest rates or non-payment by customers charges on business credit, last is operational risks for instance theft or breakdown of main instrument.

How risks for a business such as Alstom are assessed

Assessment of risk is not about developing a massive amount of paperwork, but rather about recognizing appropriate measures to manage and control risks in the organization. Organizations like ALSTOM is already taking serious steps to guard its business operations and employees, but the company cannot deny the importance of risk management because it will aid ALSTOM to determine whether the company have covered all it requires to (Burstein, Sohal, Zyngier, & Sohal, 2010).

Think about how ill health and accidents could occur and focus on the actual risks, those that are most probably and will cause the most damage. For several risks, other rules need specific control actions. The risk assessment can facilitate ALSTOM to recognize where they require at assured and definite risk and these specific control measures in more specification. These control actions do not have to be examining separately but can be measured as an expansion of overall risk assessment.

Analysis of railway safety is very complex topic in ALSTOM where safety is indomitable by various elements including error of human. Many assessment of railway safety method currently employed are relatively mature instruments. In many situations the executions of those tools might not give suitable and adequate results because of the lack of safety risk information or the high level of vagueness and ambiguity present in the available safety risk data.

For many businesses, particularly ALSTOM, simple five step approach including all elements of risk would work efficiently (Narasimhan, & Talluri, 2009).

Identifying Risk

At ALSTOM looking for those factors at workplace that have the possibility to cause any kind of harm, and identifying employees who may be exposed to the dangers.

Evaluating and Prioritizing Risks

Evaluating the probability and the severity of the potential harm and the existing risks and prioritize them according to their classification of significance (Van Detta, 2013).

Deciding on Preventive Action

Identifying the suitable actions to control or eliminate the risks.

Taking Action

With the help of prioritization plan implementation of protective and preventive measures to eliminate the risk factors

Monitoring and Evaluation

The evaluation should be monitored at regular gaps to make sure that it stays up to date.

Risk Management
Risk Management

Evaluate approaches to managing risk

In business Enterprise risk management contains the procedures and the methods employed by the organization to manage and control risk and confiscate opportunities regarding to the attainment of their goals and objectives. It provides a framework for risk management, which naturally engross recognizing specific conditions or events related to the opportunities and risks of the organization, evaluating them in terms of magnitude and likelihood of impact, considering a strategy of response and progress observation (Wallin, Larsson, Isaksson, & Larsson, 2011).

COSO considers this ERM, incorporated framework fill up this requirement, and suppose it will become broadly adapted by the firms and other companies and meant all interested parties and stake holders. ERM’s incorporated framework extends on inner control, giving a more serious and widespread focus on the broader focus o ERM.

As it is not meant to and does not restore the inner control framework, but rather integrate the inner control framework within it, organizations might determine to look to this ERM framework both to satisfy their inner control requires and to move toward a risk management procedure.


It is meant to aid promote new dialogue between senior executives and boards as they associate to more fully extend their resiliency of organization to risk and abilities of management to recognize opportunities to take appropriate risks for strategic and competitive benefits (Wallin, Larsson, Isaksson, & Larsson, 2011).


As organization struggle to establish ERM procedure into models of more mature business operation, management and will require being tolerant. ERM should be observed as a long-term cultural modification as immediate achievement is exceptional. Unfortunately, no off the shelf explanations for firms looking to commence an effective and efficient enterprise, broad approach to risk management and lapse.

Analyze what causes various risks for Alstom transport

The P&O Nedlloyd Southampton encountered very rough climate in the Western advances to the English Channel. There was no proof that the transformer moved in stow on both ship but on entrance at the construction site of the power station at purpose, the transformer was found harmed to the degree of over 2 pound per meter (Reuter, Foerstl, Hartmann, & Blome, 2010). It had to be revisit to works of ASTLOM for repairs. ASTLOM was agreed that the harm to the transformer had been due to some strange and extraordinary event in the transit’s course and made a declaration under their insurance doctrine, which was entirely on the terms of all risks.

The insurers then believed that the harm to transformer resulted from the intrinsic incapability of the transformer to endure and survive and the common incidents of carriage by sea from United Kingdom to Malaysia throughout the cold seasons. They hence rejected the claim on the basis that the harm was caused by the intrinsic vice and then carried these proceedings looking for a statement that they were not accountable to cover ALSTOM under the doctrine.

The judge identifies that it was the general basis among the parties that directs the reasons for the harm to the transformer was the aggressive movement of the craft, specifically the Eliane Trader, due to the wind and sea actions. The action of wind and wavers obviously were a predictable incident of any journey and is therefore a danger to which all goods passed through sea are significantly exposed (Reuter, Foerstl, Hartmann, & Blome, 2010). Goods caring for shipment should therefore be able of enduring the forces that they can normally be normal to meet in the course of the journey and these might differ highly relying on the time and route.

According to the ASTLOM the employment of non-ASTLOM parts and sections without thorough design of industry and standards of safety, had caused in the sequence of failures in paths exchange machines, an unusual kind of structure and had resulted in the operational issues, together with a derailment of freight cars. ALSTOM warned against the integrated elements across all control system of trains.

Changes in government policies are also effecting the operations of the company. Increase in tax rates, duties on custom, import exports pricing policies are posing threats on the speed of business operations.

Risk Assessment Template

Risk Area

Risk Identified

3- S

4- P

Risk Impact 

Risk Severity

Non-ALSTOM Tools The particular risks linked with employing non-ALSTOM instrument are that it would need increasing the power level of device



This is the high risk that can increase the probability for a single breakdown that could not save the system from noticing the trains on the track, which can cause accidents. The risk is high because it is harmful for the system, and it can cause severe accidents in present and future as well.
Safety of Railways In ALSTOM safety is indomitable by various elements including error of human.



In many situations the executions of these tools might not give suitable and adequate results because of the lack of safety risk information or the high level of vagueness and ambiguity present in the available safety risk data. Again the severity is high because of human error and this can cost to the company a lot in future.

Identification and Assessment of the impact of risks: At ALSTOM looking for those factors at workplace that have the possibility to cause any kind of harm, and identifying employees who may be exposed to the dangers. It is very necessary to assess the impact of risk through evaluating the probability and the severity of the potential harm and the existing risks and prioritize them according to their classification of significance.

The Seriousness or Severity of the Risks: In October 2006 ALSTOM employee gave a verbal warning to another engineer of metro regarding the risks of combining instruments from various producers during a discussion. Illenberg said the particular risks linked with employing non-ALSTOM instrument are that it would need increasing the power level of device(Zavadskas, Turskis, & Tamošaitiene, 2010). This is the high risk that can increase the probability for a single breakdown that could not save the system from noticing the trains on the track, which can cause accidents.

Analyse the actions or strategies that Alstom can implement to manage the risks you have identified

All of the above risks can be controlled and managed. Well if talk about technical risks ALSTOM requires to consider few points that can develop the standards of technicality that can be very beneficial for the projects of railways, first of all the company should consider the importance of training its employees technically and conduct some sessions related to training sessions so that they can be able to technically equipped and skilled, and can be able to operate and construct the functions of the railway with the advanced and latest technologies (Zavadskas, Turskis, & Tamošaitiene, 2010). And for managing the economical and financial issues they require to have appropriate departments that can control, manage and reduce the economic and financial risks elements.

Analyse to what extent Alstom Transport, and other business, are vulnerable to major crisis

Due to extreme weather of UK, the temperatures become intolerable particularly in winters. But financiers are avoiding the risks of UK’s extreme environment and not having the feeling of urgency of Risk Management. And there is a lack of importance among firms that are being affected by the extreme weather. In the storm the winds most usually are strongest; even though they can arise at any time of year it can effects the projects which are underdeveloped and undersized. Other modes of transport are poorly effected by the UK’s extreme weather, it’s possibly the weather will be estimated extremely severe (Arena, Arnaboldi, & Azzone, 2010). The severe situations also stated that firms are going to consider extra claims in extraordinary situations.

Last but not the least heavy rain risks may affect the project. In winter there is a heavy rain in UK it all rely on the extent of rain that may be fail. Heavy rain can be the bigger hindrance in the completion of these rail projects. It becomes important for the financiers to take serious measures to handle these kinds of situations as all these factors are uncontrollable but we need to take those steps that can reduce the risks.

Control Risks involves technical, economic and financial, accidents, political and legal risks. All these factors can affect the railways project. While running the railway system technical standard are continuously coming across some problems. This might affect the railways projects. The distance need for the bridges cause more conflicts (Arena, Arnaboldi, & Azzone, 2010). Train accidents are increasing day by day due to miscommunication. The economic case for the ALSTOM railway comes out to be found on a supposition that there will be free movement of goods and people throughout the council area. The economic underpinnings for the line depend on continued economic growth and more trade between ALSTOM member states.

Critically evaluate in detail the approaches that Alstom Transport can use for crisis management and business continuity planning

First of all we need to find out those steps that can reduce above discussed risks so that the railways project can be completed. Investor should realize the risks of extreme environment that can affect the project. They should keep the gap between the railway tracks because in summers the tracks expand if there will be no proper gap between the tracks the train will be damage. Storms can increase the risks accidents (Renn, Klinke, & van Asselt, 2011). Because of storm and heavy snow fall the snow will cover the railway tracks and it will become difficult to drive over those tracks to avoid this kind of situation it is necessary to have air pumps in front of the train to blow the snow. Due to heavy rain in UK especially in winter season the aim to complete the project can be delayed. To handle this kind of situation there should have proper drainage system and canal system so that heavy rain cannot affect the ALSTOM railway project.

Control risks can be handling easily with having any kind of problem. Well if we will talk about technical risk we need to consider few steps that can increase the technical standards that can be beneficial for the railways project, first we should consider the urgency of training the workers technically and arrange some training sessions so that they can be technically skilled and equipped, and can be able to construct and operate the railway function with advance technologies. There are many rail projects which are on the ongoing stage and needs more financial investments to run the project smoothly. And for managing the financial and economical problems they need to have proper departments that can manage, reduces and control the financial and economic risks factors (Renn, Klinke, & van Asselt, 2011). Due to miscommunication lot of rail accidents have been occur to avoid this kind of problem they need to proper guide and train their workers how to communicate so that in future the risks of accidents can be reduce and almost vanished. Last is political and legal risk, for moving goods and passengers from railway is considering being free in future all over the council area but this needs a joint practices system for all states members to allow agree on a solitary point of entrance into the UK and have a similar tariff for the imported products.

Importance of Risk Management

Poor or lack of appropriate risk management strategies greatly affects the viability of any investment undertaken by anyone be it the government, a company or an individual business entity. In every investment that anyone undertakes, he or she must consider the issue of risk. Starting a business investment is taking a risk in itself. Time is what will tell if an investment will be successful or not. The future is uncertain and difficult to predict, due to this unavoidable fact, anyone starting a business venture has to come up with ways to mitigate risks involved in the business venture at hand.

Risk management can be defined as the process of identifying, analyzing and mitigating the uncertain state of any investment during the process of making decisions. Risk management comes to play whenever an investor tries to quantify the possibility or the potential for losses in an investment and then takes the necessary actions depending on his/her objectives in the investment and the nature of their investment’s risk tolerance potential (Satyajit, 36).

Poor risk management practices can cause severe consequences to any business entity be it a company or an individual business. A good example is the recession that began in 2008 which was caused by financial firms adopting loose credit risk management strategies. An investment without the consideration of risk management is like a vehicle travelling to no destination.

Research Findings

In my research of business risks and how to manage them, I came up with the different sources of business risks. A company cannot eliminate risk completely, but it can manage risk successfully. When it comes to financial issues, the management of a company has to make difficult decisions and choices pertaining the acceptable risk levels. If the risks are not acceptable and may yield losses then the management rules out the venture, but if the risk is acceptable and may yield high returns afterwards, they choose to undertake the venture at hand.

Successful risk management practice is based on the maintenance of a good balance between risks and rewards and ascertaining potential profits against potential threats in the operational stability of a business. Every company that operates any business venture must inevitably assume a certain level of risk so as to generate profits that will satisfy its stakeholders. Any business undertaking comes with some risks, the risks are diverse ranging from financial risks, risks from the market place and employee related risks (Satyajit, 56).

Risk management involves being aware of the potential risk and having an alternative plan to help deal with any problem that may arise in the course of an investment. A fitting illustration of this is when the management of a company realizes that the funds allocated to the company for a certain project will not be enough to complete the project. An appropriate risk management for the company will be having a backup financial plan that would fund the project and see its completion if the primary source of funding for the company is not willing to offer it additional credit.

The primary source of risk for a company is the market place that it operates in. It is very difficult to control the risks involved in the market and the best way to manage them is to directly deal with them in the best way possible. Among the major risks in the market is that the demand or preference of consumers may change over time, which would mean that the demand for a company’s product may decrease. Another risk can emerge when a competitor introduces a new product in the market that may be more desirable to the consumers than that of the company, or it may offer a competing product at a relatively low price and lure all the customers to consume its product. This poses to be a real danger to a company’s sales and it may adversely affect the operating profit of a company in a negative way.

Most risks in businesses emanate from financing and cash flow sectors. A company may fall short of finances when operating an expansion project or its customers may delay in paying their invoices in time creating delays which may disrupt the cash flow of a company. Also, the suppliers of a company may fail to supply or they may raise their prices all of a sudden with no prior notice creating cash flow problems to a company (Satyajit, 69).

Another major source of business risk is employee relations. Problems associated with labor pose a great impact to the production capabilities of a company. There are some personnel in the company that it cannot afford to lose and so it may incur increased wage costs so as to retain them. A company’s performance and profitability can dwindle due to the loss of important and essential personnel. This may happen when, for example, a key product designer moves to another competitive firm for a better pay.

A company may also have expanded its operations geographically to other countries; this means that it does business at international levels. Due to this, the company faces a variety of risks which include the risks of political problems. If a foreign country is politically unstable, it may bring a company’s operations to a standstill. Also, there may be changes in tariffs and the import/export laws may change thus affecting the company’s sales. The fluctuation of currency exchange rates may also pose a great risk to a company’s operations internationally.

The above mentioned risk sources affect every business entity and any investment that does not take into account the possibility of risk is suicidal. Poor risk management strategies have seen to the closure and collapse of many investments in the world. Just but to mention a few, about everyone knows about Hurricane Katrina and the destruction it brought to America. The government invests in protecting its citizens but in the case of the hurricane, poor risk management had been undertaken beforehand. Due to that, the hurricane caused unfathomable damage of property and loss of lives than anyone could comprehend. This were the results of poor risk management (Crouhy, 41). This is a catastrophic example of what poor risk management can cause.

Another good example of poor risk management strategy can be explained by Yahoo. It was the first company to offer mailing services to people using the internet in the world, due to this; it was charging people for the services it offered but not until the emergence of Google its greatest competitor. Google offered similar services but for free and so it attracted more customers than Yahoo. Yahoo did not see the risk of a competitor emerging and taking over its market share. Google is now the most used search engine in the world.

Knight Capital is another good example of a company that failed in its execution of a systematic risk management strategy in its undertaking. The company switched to a new software that it had not fully tested and entrusted all its undertaking to it without ascertaining the risks that may be involved. Upon putting its new software to the job, the company had recorded numerous erroneous trades in the New York Stock Exchange (NYSE). Even though the company immediately ceased its business transactions after realizing the problem, it had already committed itself to transactions worth billions of dollars. This resulted to an immediate pre-tax loss of more than 440 million US dollars. This financial company rushed for profits at the expense of risk management. If a financial company is pushing up technology and keeping its workforce on toes to extract the smallest value that is on offer in the ever competitive market, it should also make sure that its risk management systems keeps up with the same pace.

All companies in one way or another have faced risks and it all depends on how good their risk management skills are so as to pull trough. The following are the most common examples of risk management techniques that businesses employ so as to maneuver their way through risks.

Avoidance of risk- the easiest way that a business can manage risk is by avoiding it. This simply takes place when a business refuses to engage in any activity that it may perceive to carry any kind of risk. A good example of this is when a hospital avoids carrying out a procedure that involves a high degree of risk to the patient’s life. This method is simple in managing threats to a business entity but it also lowers the revenue potential of the business (Crouhy, 50).

Risk mitigation- some risks that businesses face is unavoidable and the only way to manage them is by trying to reduce their impact to the business. Risk mitigation is meant to lessen the negative consequence of a known risk to a business.

Transfer of risk- sometimes a business may choose to transfer risk away from itself. It does so by paying premiums to an insurance company in exchange for protection against any substantial loss. For example, a business may insure itself against fire so that in the event of any accidental fire that may cause financial loss, the insurance company will compensate it.

Risk acceptance- this is another way of managing risk in a business entity. A company may choose to accept a certain level of risk that may be brought about by a specific project if the expected profit is far much greater than the risk involved (Hopkin, 73).


I believe that risk management will become part of the management process of organizations in future. If the process of risk management had been put in place over the past two decades, a number of risks could not have taken place and more others could have been mitigated.

In the modern world, companies are beginning to see the advantages of protecting themselves against all types of potential risk exposures. By understanding risks, how severe and frequent they are; a company can now turn to viable solutions (Hopkin, 63).

From the research findings, it can be proven that poor or lack of appropriate risk management strategies greatly affects the viability of any kind of investment undertaken by anyone, be it the government, a company or an individual business entity. It is clearly evident that starting an investment without a clear plan on how to manage the risks involved will guarantee a very high chance of failure for the investment in question.


Adger, W. N. (2010). Social capital, collective action, and adaptation to climate change. In Der klimawandel (pp. 327-345). VS Verlag für Sozialwissenschaften.

Arena, M., Arnaboldi, M., & Azzone, G. (2010). The organizational dynamics of enterprise risk management. Accounting, Organizations and Society, 35(7), 659-675.

Burstein, F., Sohal, S., Zyngier, S., & Sohal, A. S. (2010). Understanding of knowledge risk management and responsibilities: a study in the Australian context. Knowledge Management Research & Practice, 8(1), 76-88.

Crouhy, Michel, Dan Galai, and Robert Mark. Risk Management. New York: McGraw-Hill, 2001. Print.

Das, Satyajit, and Satyajit Das. Risk Management. Singapore: John Wiley & Sons, 2006. Print.

Dimant, E., Lindner, S., Liu, J., Ruiz, T., & Tejpal, V. (2011). Bombardier Inc.-Case Study of a brand in an Emerging Country.

Hopkin, Paul. Risk Management. , 2013. Print.

Narasimhan, R., & Talluri, S. (2009). Perspectives on risk management in supply chains. Journal of Operations Management, 27(2), 114-118.

Quinn, J. B., & Strategy, E. S. (2013). Strategic outsourcing and risk management: leveraging knowledge capabilities. Image.

Renn, O., Klinke, A., & van Asselt, M. (2011). Coping with complexity, uncertainty and ambiguity in risk management: a synthesis. Ambio, 40(2), 231-246.

Reuter, C., Foerstl, K. A. I., Hartmann, E. V. I., & Blome, C. (2010). Sustainable global supplier management: the role of dynamic capabilities in achieving competitive advantage. Journal of Supply Chain Management, 46(2), 45-63.

Reuter, C., Foerstl, K. A. I., Hartmann, E. V. I., & Blome, C. (2010). Sustainable global supplier management: the role of dynamic capabilities in achieving competitive advantage. Journal of Supply Chain Management, 46(2), 45-63.

Van Detta, J. A. (2013). Politics And Legal Regulation In The International Business Environment: An FDI Case Study Of Alstom, SA, In Israel. U. Miami Bus. L. Rev., 21, 1.

Wallin, J., Larsson, A., Isaksson, O., & Larsson, T. (2011). Measuring Innovation Capability–Assessing Collaborative Performance in Product-Service System Innovation. In Functional Thinking for Value Creation (pp. 207-212). Springer Berlin Heidelberg.

Zavadskas, E. K., Turskis, Z., & Tamošaitiene, J. (2010). Risk assessment of construction projects. Journal of civil engineering and risk management, 16(1), 33-46.

Other Relevant Links

Servitization Operations Management

MBA Operations Management Degree

Currency Risk Dissertation

View MBA Dissertations Here