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I. Introduction

At the request of the Board of Directors, this presentation will examine the “social enterprise” organisation from several perspectives. First, the social enterprise form of organisation will be defined, with a focus on the social enterprise sector in the UK, and other data specific to social enterprise organisations operating in the UK. A description of the social enterprises currently operating in the UK will be presented. The presentation will then discuss the concept of “social firms” and how they fit in to the business environment of social enterprises previously examined. This will be followed by a discussion of several aspects of our social enterprise, the Day Chocolate Company (Divine Chocolate), beginning with its origins and mission, and concluding with recommendations on how our social enterprise can formulate an effective long-term strategy for success.

II. What is Social Enterprise?

A social enterprise can be defined as an organisation that is driven by motives that are not exclusive to earning a profit from its operations (Pepin, 2010). As of 2010 there were at least 62,000 organisations that could be defined, to some extent as social enterprises operating within the UK (Pepin, 2010). The aggregate turnover generated by these social enterprises exceeded ?32 billion per year (Pepin, 2010). The additional, non-profit measures that social enterprises are measured by include various social, cultural, environmental, and other measures (Fichtl, 2007). For social enterprises, these additional non-profit measures can be viewed as being of greater significance to the organisation than the profit motive, given that social enterprises are more likely to direct surpluses generated via operations to meet certain social objectives, as compared to utilising such surpluses to increase shareholder wealth through activities such as dividend payments (Berardi, 2013).

Social enterprises operate in several sectors of the economy, but are most numerous in the training, housing, education, and retail/wholesale sectors (Berardi, 2013). The main source of income for social enterprises is the general public, which accounts for 37% of income generated by social enterprises in the UK (Berardi, 2013). The public and private sectors contribute 18% and 13% respectively, and grants and donations contribute 14% to the income generated by social enterprises in the UK (Berardi, 2013).

III. What do Social Enterprises do?

Social enterprises are established in order to address certain environmental and/or social needs through the operation of their business (Berardi, 2013). The most frequent objective of social enterprises in the UK is to improve a particular community, with a quarter of all social enterprises falling in this category (Berardi, 2013). Another frequently occurring objective of social enterprises, accounting of 24% of social enterprises in the UK, is the goal of addressing social exclusion in society in general, a community in particular, and/or a sector of the economy specifically (Berardi, 2013). Additional goals common in many social enterprises are the goals of improving the health and wellbeing of a community, and helping protect the environment (Berardi, 2013). Social enterprises need not devote all of their resources to address one particular objective (Berardi, 2013). Some social enterprises attempt to achieve several goals, which in addition to those already described above, including goals such as promoting literacy, supporting vulnerable individuals in society, assisting in providing affordable housing, and helping to increase employment (Berardi, 2013).

IV. Are any Social Enterprises Successful?

There are many successful social enterprises operating in the UK (RBS, 2013). One such successful enterprise is the Green Machine organisation (RBS, 2013). Green Machine reuses paint supplies in an effort to address the estimated 56 million litres of paint wasted each year in the UK (The Green Machine, 2014). The Green Machine’s labour force consists of 40% of individuals who can be categorised as disabled or disadvantaged, thus demonstrating a social enterprise attempting to address more than one social and/or environmental goal (The Green Machine, 2014).

A social firm is a type of social enterprise that attempts to create quality jobs for individuals who are disadvantaged in the labour market (Social Firms UK, n.d.). The criteria required in order for an organisation to be considered a social firm is as follows: 1) “Social Firms are businesses that combine a market orientation and a social mission” ; 2) “More than 25% of employees will be disadvantaged people” ; and 3) “Social Firms are committed to the social and economic integration of disadvantaged people through employment” (Social Firms UK, n.d.). Thus, the Green Machine organisation, in addition to being a social enterprise, can also be considered a social firm, given its commitment to finding employment for disabled and disadvantaged individuals (The Green Machine, 2014).

V. What kind of Social Enterprise is Day Chocolate Company (Divine Chocolate)?

As discussed above, social enterprises do not necessarily conform to any one particular type. (Berardi, 2013). The Day Chocolate Company is partly owned by the farmers who supply the cocoa used in the production of Day Chocolate Company’s chocolate products (Social Enterprise Academy, n.d.). The cocoa farmers are located in Ghana, West Africa, and own 45% of Day Chocolate Company’s shares (Social Enterprise Academy, n.d.). The cocoa farmers are organised as a co-operative called Kuapa Kokoo, made up of 45,000 members across 1,000 villages in Ghana, West Africa (Doherty and Tranchell, 2005). The chocolate is purchased from the farmers on a fair trade basis, in order to achieve better trade conditions for the farmers and promote the sustainable farming of cocoa in Ghana, West Africa (Social Enterprise Academy, n.d.). Thus, Day Chocolate Company can be viewed as a social enterprise of the type that attempts to improve a particular community and by creating employment opportunities (Berardi, 2013). Secondary effects of these goals, such as promoting education and literacy are also achieved (Divine Chocolate, n.d.).

When establishing a social enterprise in the UK, the organisation must be established as one of the following business structures: limited company; charity; charitable incorporated organisation; co-operative; industrial and provident society; community interest company; sole trader; or business partnership (Gov.UK, 2013). There are benefits and drawbacks to each of the aforementioned business structures, and an organisation will choose which of the business structures is most appropriate in its particular circumstance.

VI. Motivations and Expectations of the Day Chocolate Company (Divine Chocolate)

In the early part of the 1990s the cocoa production in Ghana was privatised, and the government of Ghana controlled the export of cocoa out of the country (Social Enterprise Academy, n.d.). However, when state support of the cocoa industry in Ghana collapsed the livelihoods of thousands of cocoa farmers in Ghana were put at risk (Social Enterprise Academy, n.d.). It was at this time that the idea for the Day Chocolate Company was created (Social Enterprise Academy, n.d.). The mission of the Day Chocolate Company is to improve the livelihoods of cocoa farmers in West Africa by putting them higher up the value chain (Divine Chocolate, 2012). Day Chocolate Company attempts to achieve this objective by sourcing the cocoa necessary in the production of its chocolate goods from the farmers of Ghana, West Africa according to fair trade standards (Divine Chocolate, 2012). Rather than being motivated by a goal of increasing shareholder wealth, the Day Chocolate Company emphasises a significant return of its profits from the sales of chocolate, in markets where such products are in high demand, in particular the UK and America, back to the cocoa farmers in Ghana, West Africa (Divine Chocolate, 2012).

The Day Chocolate Company was encouraged by the success of fair trade marked organisations such as the coffee company Cafedirect (Doherty and Tranchell, 2005). Cafedirect began in 1993, and by 2005 had succeeded in becoming the 6^th largest coffee company in the UK (Doherty and Tranchell, 2005). The success of Cafedirect had a direct impact on the livelihoods of coffee farmers in Latin America, Africa, and Asia (Doherty and Tranchell, 2005).

VII. The Day Chocolate Company (Divine Chocolate) Organisation

The Day Chocolate Company was established in the UK in 1998 as a private company limited by shares (Doherty and Tranchell, 2005; Usa, n.d.). When it was established in 1998, Day Chocolate Company’s shares were owned by the fair trade organisation Twin Trading (52%), the cosmetics company The Body Shop (12%), and the Ghana cocoa farmer co-operative Kuapa Kokoo (33%) (Social Enterprise Academy, n.d.). The cocoa farmers’ share was financed by a ?400,000 loan from the Department for International Trade & Development (Social Enterprise Academy, n.d.). In 2006 the Body Shop decided to donate its shares in the Day Chocolate Company to the Kuapa Kokoo co-operative (Divine Chocolate, 2011). In January 2007 Day Chocolate Company changed its name to Divine Chocolate Ltd in order to “more closely align the company with [its] flagship brand…” (Divine Chocolate, 2011, p. 1).

Day Chocolate Company has a significant presence in several countries, most notably in the UK, Canada, and the United States (Divine Chocolate, 2012). In the UK, supermarkets Waltrose and Sainsbury’s expanded their Day Chocolate Company offerings in 2012, and there is now a Day Chocolate Company 45 gram chocolate bar onboard Virgin Airlines flights (Divine Chocolate, 2012). As a result of the “demise” of the company’s Irish distributor, availability of the products in the Irish market decreased (Divine Chocolate, 2012). However, exports to Scandinavian countries, including Sweden and Norway increased, which served to partially offset the decline in the Irish market for the company’s products (Divine Chocolate, 2012).

VIII. Day Chocolate Company’s (Divine Chocolate’s) Business Activity

Between the years 1998 and 1999 the Day Chocolate Company recorded sales of ?103,500 (Doherty and Tranchell, 2005). By 2004 its annual sales had grown to ?5.5 million (Doherty and Tranchell, 2005). For the most recent year with available financial data, the year ended 30 September 2012, the company’s sales stood at ?7.5 million (Divine Chocolate, 2012). However, between the years 2011 and 2012 the Day Chocolate Company’s profit on ordinary activities after taxation declined significantly, from ?59,000 in 2011 down to ?27,000 in 2012 (Divine Chocolate, 2012). The decline in profit between 2011 and 2012 was attributed primarily to an increase in administrative expenses (Divine Chocolate, 2012).

The cocoa farmed by the Kuapa Kokoo co-operative is shipped to Germany, where an independent chocolate manufacturer combines the cocoa and other ingredients into an edible chocolate product (Social Enterprise Academy, n.d.). The German facility ships the chocolate to a warehouse in Hull, from where it is distributed to wholesalers and the retailers (Social Enterprise Academy, n.d.).

IX. Profits/Surpluses at Day Chocolate Company (Divine Chocolate)

The Day Chocolate Company has used profits from its operations to expand within the UK and beyond its core UK market, in particular the United States (Divine Chocolate, 2012). The Day Chocolate Company has also remained true to its core mission, in that it has continued to utilise profits from its operations to improve the lives of the cocoa farmers of the Kuapa Kokoo co-operative in Ghana (Divine Chocolate, 2012). However, the benefits derived from the profits generated by the Day Chocolate Company are not limited to the cocoa farmers (Doherty and Tranchell, 2005). According to Doherty and Tranchell (2005), over 100,000 Ghanaians living in communities with Kuapa Kokoo societies have benefited from necessities such as medical care and medications. Several schools have been constructed, and each school serves an area covering a 4 km radius (Doherty and Tranchell, 2005). The fair trade agreement premiums that accumulated through the year 2005 were sufficient to cover the schooling costs of an estimated 250,000 Ghanaians for an entire school year (Doherty and Tranchell, 2005). A leading cause of death in many parts of Africa, water borne disease, has been reduced significantly, in significant part due to the increased availability of clean water supplies (Doherty and Tranchell, 2005).

X. Strategy of Day Chocolate Company (Divine Chocolate)

An important aspect of the Day Chocolate Company’s strategy has been its concerted effort to convey to the chocolate consumer market the level of misfortune that has plagued the lives of many of the farmers responsible for the cocoa used in the manufacture of all varieties of chocolate products (Social Enterprise Academy, n.d.). Through its website, and through its direct encounters with supermarkets and other potential sellers of its products, the Day Chocolate Company has attempted to show that society can help change the lives of the Ghanaians for the better by purchasing their product (Golding, 2006; Social Enterprise Academy, n.d.). The Day Chocolate Company has also enlisted the help of organisations such as Christian Aid, in efforts to bring their products to the shelves of an increasing number of outlets (Turner, 2013). For instance, Christian Aid ran a campaign called, “Stock the Choc,” in an effort to have the Day Chocolate Company’s products carried at Tesco (Christian Aid, 2009). A similar campaign by Christian Aid succeeded in getting Sainsbury’ to carry the Day Chocolate Company’s products in its many stores across the UK (Lamb, 2008).

The Day Chocolate Company recognises that appealing to consumers based on its mission alone will not be sufficient so sustain its organisation (Social Enterprise Academy, n.d.). The emphasis on the quality of the product itself can also be seen at the level of the Ghanaian cocoa farmers (and co-owners) themselves, as demonstrated by one farmer’s statement in 2008, that “we [the Kuapa Kokoo co-operative] want people to feel good about our chocolate, not guilty about the poor farmer in the Third World” (Vidal, 1999).

XI. Challenges of the Day Chocolate Company (Divine Chocolate)

The most significant hurdle for a company such as Day Chocolate Company has been establishing itself in the market. When it first entered the market in the late 1990s, the UK chocolate market was dominated by the companies Cadbury, Nestle, Masterfoods, and Kraft Jacob Suchard (Johnson, Scholes, and Whittington, 2005). The “highly competitive” UK confectionary market did not experience any significant changes in the handful of years subsequent to the entry of the Day Chocolate Company either (Johnson, Scholes, and Whittington, 2005, p. 757). The difficulty in making an impact in the market can further be seen by comparing the sales teams at the UK confectionary leader, Cadbury, and the Day Chocolate Company (Social Enterprise Academy, n.d.). Whereas Cadbury has approximately 150 members on its sales team, the Day Chocolate Company has but three (Social Enterprise Academy, n.d.). The economies of scale of the larger firms are formidable (Doherty and Tranchell, 2005). For instance, in the late 1990s Nestle UK expended ?9 million on the promotion of a single product within its vast portfolio, the Kit Kat Chunky (Doherty and Tranchell, 2005).

Other challenges that the Day Chocolate Company must confront are not unique to the organisation. Most significantly, macroeconomic factors, such as a stagnant economy may impact demand, leading to another decline in sales, such as that experienced for the year ended 30 September 2012 (Divine Chocolate, 2012).

In addition, an increasing number of retailers are beginning to compete in the fair trade chocolate market, which may have an impact on the Day Chocolate Company’s market share of what is already a small segment of the total chocolate market (Reed, 2009; McGrath, 2012).

XII. Recommendations and Conclusion

The Day Chocolate Company has succeeded in carving out a niche for itself in the chocolate market. However, it must continue to expand into new markets, given that other organisations, including some of the large chocolate companies are beginning to compete in the fair trade chocolate market. The company should seek to leverage its experience in the fair trade chocolate market as best it can. The company may need to divert a greater amount of its profits to this growth strategy, and this may impact the amount that it uses in meeting its mission of improving the livelihood of the cocoa farmers in Ghana. Although the company may temporarily fall short of this mission, at least it will provide an opportunity to create a more stable and potentially long-lived social enterprise.

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Introduction

Since renowned economist Friedman (1970) expressed his strong convictions on the need for social responsibility in business, there has been much development in the theory and practical application of social responsible initiatives (McWilliams, Seigel & Wright, 2006). A whole movement has developed to cover a range of ethical practice which is now labelled under the umbrella of Corporate Social Responsibility (CSR). Many executives today face a dilemma between feeling compelled to invest in CSR initiatives whilst maintaining the cost controls so a necessary to maximise shareholder value. This essay first reviews the ideas of Freidman (1970), then the development of alternative theory is outlined, and the shareholder and stakeholder paradox is defined. The motives and actions of CSR policy at the international oil company British Petroleum (BP) are analysed and then related to the shareholder and stakeholder paradox.

The nature and context of Freidman’s views

Friedman (1970) wrote his infamous article in the New York Times Magazine as an explanation of what is known as the agency theory by scholars of CSR (McWilliams, Siegel & Wright, 2006). Agency Theory suggests that it’s not the role of executives in society to make decisions on social welfare of citizens. Since that time there has been a substantial growth in the definition and practical application of CSR policy and many have developed alternative views to Freidman (Crane and Matten, 2007). Freeman (1984) presented the concept of stakeholder theory that managers should consider the interests of all stakeholders other than the shareholders in a corporation. Importantly, Freeman’s ideas suggested that considering the needs of stakeholders is essential to a firm’s long-term success and not a benevolent additional ‘add-on. Stakeholder theory was developed further by Donaldson and Preston (1995) who stressed the ethical nature of CSR as well as the potential for increased financial performance that satisfies the interest of shareholders who invest in a business. Since then there has been a proliferation and transformation of CSR focus by scholars and businesspeople alike with an alignment between CSR practice and objectives in many corporations (Crane, 2013). In developed nations, large firms generally conduct CSR agendas or they feel they risk losing competitive advantage. Today in many markets, a strong CSR focus is a consumer expectation especially in cultures where the behaviour and role of corporations is closely monitored by media and pressure groups. Some businesses have even made the CSR theme central to their core mission, for example The Body Shop and Ben and Jerry’s. However many still have concerns about CSR initiatives in the corporate world and they would support Freidman’s view. Recently, Johnson (2015) suggested that CSR is an indulgence by executives in rich companies who complete to show who is most ethical and caring.

Friedman (1970) was dismissive of any attempts by executives to introduce initiatives that could be described as corporate social responsibility. He suggested that not only would CSR be harmful to shareholders who would suffer less returns on their investment, but there would be wider negative connotations for society has a whole as the executive would actually be administering a judgement that should be left to other agencies such as government. Friedman (1970) states “in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them” (Friedman, 1970, p.32). The only part of the article which we might interpret as a reflection of a stakeholder approach is when Friedman (1970) mentions it might be in the interest of a corporation that is a major employer in a local community to provide resources to that area or help improve local government. By doing so the business might attract more desirable workers, it may reduce the wage bill or have more loyal workers which ultimately would reduce costs and aid financial performance. However generally Friedman (1970) does not provide any notion that consumers may product differentiate on the grounds of the presence of CSR activity in a business which is an essential common tenant underpinning justification by managers today for promoting social responsibility. Friedman (1970) presented one end of the spectrum concerning the balance of focus between shareholder and stakeholder issues. The paradox managers face is the amount of focus they should give to the interests of various stakeholders through CSR initiatives whilst still securing shareholder interest and value.

The shareholder and stakeholder paradox

Those who promote stakeholder theory suggest that there are a range of benefits for a business adopting a strong CSR agenda that ultimately lead to an increased financial performance (Orlitzky, 2006). A business has the opportunity to increase organisational reputation by exercising CSR Policy which can develop consumer preference and loyalty. Businesses with CSR initiatives may be able to charge higher prices as consumers are prepared to pay extra where they believe they are helping others in need (Auger et al, 2003). For example, clearly labelled ethically sourced Fairtrade products found in British supermarkets such as coffee are available with a premium price. CSR policy can provide advantages when a business needs to raise capital as some investors and institutions are more willing to lend to firms with a strong ethical stance and at lower rates of interest (Spicer, 1978). Another prominent idea is that corporations with a high CSR agenda will benefit from better performing employees who increase their commitment and productivity as they respond to being part of an ethical mission (Greening & Turban, 2000). By consistent adherence to legislation such as contract, employment and environmental law, a business can avoid negative media coverage to catastrophic loss of reputation or even criminal misconduct charges (Wood & Jones, 1995). Corporations today see CSR expenditure as a way of generating revenues which improve financial performance (McWilliams, Siegel & Wright, 2006).

Direct costs can be attributed to CSR practice which have the potential to reduce profits and therefore the dividends to available to shareholders in the short-term (Frynas, 2009). Improving employee remuneration to provide a living wage has been adopted by many firms as late in the UK as socially responsible action but clearly incurs a direct expense (Living Wage Foundation, 2015). Ethically sourced suppliers tend to be more costly especially for example when eco-friendly production techniques are introduced. Introducing a more proactive recycling policy or pollution abatement policy above minimum legal requirements needs more resources and capital expenditure. Furthermore, there could be opportunity costs incurred where resources devoted to CSR practice are diverted away from other potentially beneficial projects in a business such as research and development activity, operational expansion or marketing campaigns. Business can only really take advantage of product differentiation if advertising reveals to potential consumers their CSR policy and practice so further expenditure is required for this purpose (McWilliams, Siegel & Wright, 2006).

Businesses that invest in CSR practices will have higher costs than those firms in the same industry that do not; executives have to make strategic decisions of the level of inputs they will commit to such activities. The vast majority of large corporations such as Multinational Corporations (MNCs) have considerable investments in CSR agendas and have whole departments dedicated to such activity (Crane, 2013). MNCs in the international oil industry are particularly renowned for having substantial CSR initiatives. Executives at multinationals(MNCs) such as British Petroleum(BP) constantly have to address the shareholder and stakeholder paradox in terms of balancing the needs of cost control so as to compensate shareholders fully whilst upholding the company’s organisational reputation through supporting a range of costly CSR initiatives.

Corporate Social Responsibility at BP as a reflection of the paradox in the oil industry.

BP is recognised as a corporate leader in its commitment and innovation to CSR initiatives (Frynas, 2009). In BP’s annual report, the opening statement stresses its CSR focus “We aim to create long-term value for shareholders by helping to meet growing demand for energy in a safe and responsible way. We strive to be a world-class operator, a responsible corporate citizen and a good employer” (BP, 2014).The highly visible effects of operations in the oil industry and a series of historical catastrophic events such as oil spills and local community devastation have made the ethical behaviour of companies like BP subject to close scrutiny. The very nature of the oil exploration, refinery and consumption raises ethical concerns due to the significant environmental and social impacts they create within the many countries they operate. Governments have introduced substantial legislation to protect their citizens and the environment; however international oil companies often choose to invest beyond legal minimum requirements which incur extra direct costs (Spence, 2010). Private organisations such as the media and pressure groups like Greenpeace constantly monitor oil companies and can considerably affect consumer purchase decisions.

BP has historically allocated substantial resources to CSR initiatives to limit negative impacts on the environment, to address the social impact on local communities they operate within and to manage the difficulties that can be created from a sudden inflow of oil revenues into economies in the developing world (Frynas, 2009). BP is a public listed company on the London and New York Stock Exchanges that attracts investors who expect regular dividends with satisfaction yields and capital gains in shares in the long-term. BP’s annual report outlines its current CSR focus into three areas: operational safety, environment and society, and employee welfare (BP 2014). It estimates that its annual environmental expenditure alone for 2014 was $2.216 billion for activity such as oil spill and clean-up costs, pollution abatement and environment restoration. BP’s annual dividend per share in 2014 was $0.39 and totalled $6.1 billion for all investors. Clearly CSR expenditure is significant in relation to investor returns. However, much CSR expenditure is necessary to meet minimum legal requirements and therefore cannot be considered totally as a strategic planning choice.

In April 2010 in the Gulf of Mexico a major oil spill incident took place around a BP ocean drilling operation subsequently called the “Deepwater Horizon accident” that significantly affected shareholder value and returns (BP, 2014). After an onsite explosion where 11 workers lost their lives, an estimated 200 million gallons of crude oil flowed into the ocean causing widespread onshore and offshore catastrophic environmental and social destruction. The U.S. Federal Government ruling in September 2014 finally held BP accountable for the incident imposing a fine of $18.5 billion which is still being appealed by BP. Also the incident caused many US consumers to boycott BP products and services which significantly decreased sales in the short-term. Other private litigations have been settled costing billions of dollars. As at 31 December 2015, BP has set aside $43.5 as a total pre-tax cost for the Deepwater Horizon accident (BP, 2014). The incident caused severe financial implications for BP shareholders; the share price dropped 55% immediately after the incident and still has not recovered to the pre-incidents levels. Dividends were suspended for the first 3 quarters of 2010. Incidents such as Deepwater Horizon damage organisation reputation and incur direct costs which deeply affect shareholder value. Part of the reasoning for substantial investment in CSR initiatives by multinationals is to mitigate such incidents and make sure they are minimalised by appropriate due care (Spence 2011). BP is dependent on the support of international financial markets and its international reputation for co-operation with its essential stakeholders and expansion of its operations (Frynas, 2009). Developing a strong corporate image is important for BP if it is to reach its long-term goals. BP executives have the paradoxical challenge of balancing the needs of shareholders with imperative CSR related expenditure.

Conclusion

Friedman (1970) expressed a view on Corporate Social Responsibility that still divides opinion and facilitates discussion today. However there have been considerable changes in the acceptance of CSR policy in recent years and many executives in corporations have embraced stakeholder theory with the need to understand and respond to the interests of various stakeholders such as consumers, employees and suppliers. The presence of CSR policy can provide benefits such as increasing an organisation’s reputation to encourage consumer loyalty, avoiding any unwarranted outside interference or improving employee commitment and productivity. Managers today explain their considerable CSR agendas leads to improving shareholder value through the variety of factors from which improve revenues which more than compensate for any costs incurred. Like many a major international oil companies, BP has embraced CSR culture at considerable expense as it understands it is vital to its long-term success. Like other public limited companies, BP is committed to shareholders through implementing a series of CSR practices to ensure the businesses reputation remains favourable with all its stakeholders and allows the company to generate sustainable returns.

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This work was produced by one of our professional writers as a learning aid to help you with your studies

As industrialization advanced rapidly across the world at the turn of the twentieth century, it transformed working practices and prompted theorists to consider how best to conduct business under such changed circumstances. The theory of scientific management has its roots in the studies conducted by F. W. Taylor during this formative period (see Taylor, 1911). There is much debate in the secondary literature about the synonymy of Taylorism and scientific management, which this paper does not discuss (for further details see, Caldari, 2007; Nelson, 1992). Rather, this paper positions Taylor as the defining early influence in a continuum of scientific approaches to organizational management – all of which fall under the broader definition of scientific management and management science – that endures today. Section 1 of this paper undertakes a critical evaluation of scientific management theory before going on in Section 2 to discuss how and to what extent it is applied at the organisation, Microsoft.

Critical Evaluation of Scientific Management Theory

Taylor was one of the first theorists to consider management and process improvement as a scientific problem and, as such, is widely considered the father of scientific management. He proposed that a business’s economic efficiency could be improved by simplifying and optimising work processes, which would, in turn, increase productivity. Taylorism, as a philosophy, was the product of a series of experiments and observations, such as time-motion studies, designed to determine the most effective and efficient way to complete a task. Its fundamental and inter-related principles can be summarised as follows:

Using scientific method to challenge habitual working practices and to determine the most efficient way to perform specific work tasks;
Matching workers’ capability and motivation to the task requirements and supervising them according to the established rules and procedures;
Establishing fair performance levels and develop a pay system that rewards, and therefore encourages, over-achievement; and
Appropriate division of responsibilities to allow managers to apply scientific management principles to plan work and ensure workers are effective.

Taylor’s work influenced a number of other contemporaneous theorists, such as Frank and Lillian Gilbreth, and, later, Henry Gantt, who also favoured empirical methods to determine the most efficient procedures. Indeed, his new scientific system of organisation was met initially with widespread support in the USA and Great Britain amongst theorists, politicians and economists alike (Nelson, 1992). However, Taylor’s scientific management was not without its critics, both at the time and subsequently. By the 1930s and 40s it had broadly fallen out of favour. The following section undertakes a critical evaluation of scientific management. It discusses the arguments of Taylorism’s detractors and also explores its legacy in popular modes of management practice today.

One of the most popular criticisms levelled at Taylorism is its perceived lack of human appreciation (Caldari, 2007). In the drive to increase physical efficiency, it considers the worker a part of the production process on a level equal to the tools s/he uses and, as such, strips him or her of all capacity to reason and act autonomously. All thinking and planning is taken over by management, and the worker’s role is reduced to the simple repetition of standardised and simplified work flows in accordance with productivity targets. By assuming that fair payment will motivate employees to perform optimally, Taylorism overlooks the individual’s subjective motivation and their need to derive personal satisfaction from their work. On the one hand, standardised work instructions have been shown to improve quality, facilitate training and reduce waste. However, on the other hand, today’s low skilled and highly rationalised roles, such as call centre or fast food jobs, workers are often characterised by high absenteeism and high turnover due to low job satisfaction. Since these are drivers of increased cost, it can be argued that the strict doctrines of scientific management actually run the counterproductive risk of increasing costs and reducing productivity.

A further point of controversy for Taylorism’s critics is the theory that scientific process will eventually identify the ‘one best way’ of carrying out a specific process of work to maximum efficiency (see Ralston, 2014). They argue that the implementation of ‘one best way’ disregards individual talents and preferred working methods, thereby alienating workers and preventing them from developing an appreciation of their place or function in the entire industrial process. This, in turn, suppresses their initiative and the potential for discovering new and innovative ways of working. Instead, opponents of Taylorism advocate a plurality of methods for increasing productivity, which should be tailored to workers’ needs. Feedback should be encouraged and decision-making shared between workers and management to engender a greater sense of participation and ownership, greater engagement, and a stronger sense of collaboration between workers and management.

In the light of the above criticisms, it is perhaps unsurprising that employees’ views of Taylorism have tended to be unfavourable. In its pursuit of efficiency and productivity, Taylor’s scientific management principles divide labour undemocratically, in such a way as to empower managers, benefit employers and lower workers’ morale. Although Taylor advocated fair assessments of working hours, productivity and pay, his theory obliges the worker to depend upon the employer’s conception of fairness, and gives the worker no voice in hiring and setting the task, in negotiating the wage rate or determining the general conditions of employment. In reality, many employers implemented Taylor’s theories only partially, using strict control, punitive measures to drive maximal output. This not only caused significant additional mental and physical strain, but also increased the potential for accidents and work stoppage (Nelson, 1992). Furthermore, workers believed down-skilling and eventual automation were responsible for growing unemployment – even if ultimately it might lead to lower prices and increased demand. They also objected to the fact that the gains of higher productivity were not shared with the workers. Rather, the major proportion was taken away by the employer in the form of higher profits. Such an imbalance of power and resultant dissatisfaction has the potential to polarise industrial relations leading to increased risks of strike action and disruption.

Although there is much to criticise about Taylorism and its early implementation, it should also be acknowledged that its advent paved the way for many of the management theories and methodologies that are followed today. The division of labour into ‘doers’ and ‘thinkers’ is a dichotomy that continues to shape the separation of strategy and implementation in most organisations (Kanigel, 1997, Stoney, 2001)). Likewise, in most organisations management and labour continue to co-exist in an uneven relationship which privileges intellectual work over manual skills. Likewise, the rationalization of processes into discrete, unambiguous units with defined work instructions has laid the foundations for knowledge transfer, automation and eventual offshoring (Drucker, 1981) – strategies that continue to be implemented in many multinational corporations today as management theory, and management itself, evolves with changing times (Witzel and Warner, 2013). Incentive schemes are still widely recognized as an effective means to encourage higher performance and are a standard component of most sales compensation packages. Meanwhile, Taylorism’s simplification of skilled work and the elimination of unskilled work represents a central tenet of business process engineering techniques such as Six Sigma and lean manufacturing (Head, 2003). By the same token, modern quality assurance, operations management and total quality management methodologies arguably have their roots in scientific management. In this way, scientific management transcends the narrower confines of Taylorism by means of its direct and indirect influence on those subsequent evidence-based methodologies that also attempt to treat management and process improvement systematically as a measurable, scientific problem (Witzel and Warner, 2015).

Discussion of how Scientific Management Applies to Microsoft

Taylor’s original thinking was informed by the shop floor processes of heavy industry. As such, it would be easy to assume its principles would be largely irrelevant in an industry as complex, innovative and knowledge intensive as Information Technology. Indeed, Bill Gates’s professed values of entrepreneurship, ownership, creativity, honesty, frankness and open communication appear to stand in opposition to the standardised work processes and strict division of labour that Taylorism champions. However, on closer examination it becomes evident that scientific management still exerts a significant influence within Microsoft and on how it conducts its business.

As with all large multi-national corporations, specialisation and division of labour is very much in evidence at Microsoft. There is a clear division between functional specialists such as software developers, project managers, marketing, sales, HR, finance and legal. As Taylorism advocates, their roles have written job descriptions with clearly defined skills and competencies to ensure employees capabilities and motivations are carefully matched to their position. Furthermore, their performance is supervised and measured regularly using SMART criteria (Specific, Measureable, Achievable, Results-based, and Time-specific) in a way that echoes Taylor’s emphasis on monitoring and measuring.

There are a number of colourful stories that depict the results-orientated culture that Microsoft has relied on historically in its drive for success (see, for example, Shaw, 2004). Until recently, Microsoft employed a controversial management system called ‘stack ranking’ which measured performance using a standard distribution curve. Whilst those at the top received bonuses and promotions, those at the bottom were shown the door (for further details see B. R., 2012). Although this was intended to motivate performance, employees found it oppressive. Developers sought to avoid working with top performers, who threatened their own ranking, and as a result free thinking, innovation and collaboration stagnated. Microsoft abandoned stack ranking in 2013, but it is evident that performance reviews and systems such as these owe a debt to Taylor’s principle of performance incentivisation through pay and reward. Indeed, Bill Gates’s comment on workers and their value points towards a scientific management heritage: “A great lathe operator commands several times the wage of an average lathe operator”, Bill Gates points out, “but a great writer of software code is worth 10000 time the price of an average software writer” (Schumpeter, 2015, p. 1).

Microsoft’s business model relies on scientific management’s requirement to challenge received wisdom and to find new and better ways of doing things. This applies to Microsoft’s products and production processes in equal measure. Yet rather than pursue Taylor’s ‘one best way’ and control it by means of strict hierarchy and managerial supervision, Microsoft has, historically, sought to empower employees at all levels. Instead of allowing workers strict ‘need to know’ knowledge that relates only to their discrete part of a process, Microsoft runs an intensive induction programme for new recruits, which introduces them to the overall business model, and acquaints them with colleagues and support networks. This broader knowledge equips individuals with the context to make autonomous decisions that are nevertheless aligned with the organisation’s interests. This, in turn, lays the foundations for continuous improvement based on comparison, feedback and the identification of more effective and efficient work methods. Microsoft seeks to encourage improved performance not only by financial incentives, but also by considering more progressive drivers of employee motivation, participation and satisfaction. Thus, software programmers at Microsoft work long hours, but extra discretionary effort is encouraged by free food, relaxed dress code, comfortable offices, and playing games (for further details see Birkinshaw and Cramer, 2008). So, whereas Taylorism is criticised for its de-humanising tendencies, Microsoft arguably seeks to balance and blend the drive for enhanced productivity with a complementary appeal to the broader hierarchy of needs in its workforce.

Conclusion

This paper has offered a critique of Taylorism as the first and most influential theory that shaped a spectrum of subsequent management practices that fall under the wider umbrella philosophy of scientific management. The example of Microsoft shows how the principles of scientific management inform many practices that are still in use today. As a large, established, multinational organisation, Microsoft’s management practices are, almost inevitably, complex and contradictory and the brevity of this paper does not permit a more detailed investigation of how and to what extent scientific management principles inform the varied practices of different functions and divisions within the organisation. For example, the process of iterative product development owes a debt to scientific management as does project management and evaluation. Nevertheless, this paper has offered a broad overview of how Microsoft has appropriated, adapted and implemented elements of Taylor’s early scientific management theory, such as division of labour, employee selection, training and supervision, pay and reward, scientific evaluation, and process improvement, to improve Microsoft’s productivity, quality, and economic performance today’s fast-paced competitive environment.

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Witzel, M. and Warner, M. (2015) Taylorism Revisited Culture, Management Theory & Paradigm Shift, Cambridge Judge Business School Working Papers. 1

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Introduction:

In conducting the research for this coursework a number of sources of data have been used. In the first instance, the bulk of the research conducted has been done making use of secondary sources of research, including books, journal articles, company annual reports and items from the business and trade press. Secondly, where relevant the researcher has also made use of a number of contacts within the retail sector which have facilitated primary research into a number of the companies which have been used as case study examples in the coursework. Primary research was conducted in the form of a number of informal style interviews with a relevant management level employee of the organisations in question.

P.1 The Structure of the Retail sector
Types of Retailers

At present the UK may be seen as having a wide variety of retailers all with a range of corporate and organisational objectives. In general terms, the UK retail sector may be divided and segmented on the basis of product type. Major retail groupings include the food retail segment, clothing segment and other non-food based segments which include electronics, DIY and other forms of specific fast moving consumer goods (FMCG). Those operating within such product segmented retail segments range in size from single one man operations with a sole trader legal status to large multi-national retail companies offering standardised products and services on an international basis.

In addition to these core segments, one should also consider the not for profits retail segment. This includes a wide range of retailers for whom the objective is the generation of a surplus rather than a profit. The surplus is then used to fund the underlying objectives of the not for profits organisation, usually associated with a charitable cause. Whilst the not for profits sector is often associated with low end cost leadership retail models this is not the only model used. Recent developments have seen not for profits organisations such as Oxfam embracing the premium end of the segment with the opening of the organisations flagship Bond Street store. In addition, other organisations such as the Co-operative bank offer a range of financial products and services within the retail banking sector which are of comparable quality to those of the for profits retail banking and financial services sector .

One bone of contention may be to consider the supermarket segment as a separate sub-segment of the retail sector altogether. Whilst the supermarket sector may be seen as having its origins in the food retail sector, the consideration is that such businesses have in recent years become diversified businesses which only retail food and food related products as a part of their total business. In actually fact the true success of many in the modern supermarket sector relies on the ability of such businesses to be able to market a wide range of diversified products from food to financial products and services.

Sales trends:

The UK retail sector is worth an estimated ?265bn annually which accounts for 8% of the entire countries GDP, this is estimated to grow to ?312bn by 2011. Of the total retail sector, a large part of the sales come from the food based sub segment, however the total retail segment is made up of a wide range of retailers marketing a variety of goods including food, clothing, electronics and other fast moving consumer goods.

A present, due to the recent economic downturn, sales within the UK retail sector are seeing their slowest rate of growth since April 2006 at just 2.3% higher than a year ago. Despite this down turn in the rate of growth a more positive view would be that despite difficult trading conditions growth in the sector has been maintained, with the sector not suffering the consequences of a contraction in sales. In considering how the economic downturn has affected the retail sector there are multiple views. Some, such as Anagboso and McLaren indicate that non-food retailers have done better in the recession as a function of falling prices in the underlying input goods, which has led to a boost in profits. Others argue that it is the food retail sector which has been more resilient due to the necessity nature of the goods sold by incumbent suppliers.

Location and Size:

Considering the location and size of retail outlets, this is an area which has seen a large transformation in recent decades. In past eras, the high street was the focal point of the consumer retailing experience, with an emphasis placed upon the presence of many small to medium sized stores located within the centre of towns and cities.

However, over time the retail model as shifted with stores becoming every larger in physical size and the range of goods offered to consumers. As such, this has led to a pattern of retailers moving into out of town locations in which large scale stores are opened using a hypermarket or warehouse format. Whilst there has been much criticism of retailers for abandoning the high street in favour of more convenient and easy to service out of town locations. One consideration is that such larger establishments and shift in location mirrors the changing nature of society, which has seen an increase in car ownership and a preference for standardisation of goods and services offered on a national basis.

Trends in the Number of Retailers:

Overall sources would seem to indicate that the number of retailers within the UK retail segment has decreased in recent years through a pattern of industry consolidation and merger and acquisition activities.

One of the key drivers of the consolidation within the industry may be seen as the emergence of the modern form of the supermarket. Initially the supermarket was a part of the retail sector associated with the sale of primarily food and food related products. However, over time the supermarket sector has in itself diversified and now sells a variety of products which were all previously only obtainable from alternative retail establishments such as clothing, electronics and financial products and services. As such, consumers now have less of a need to make use of the services of retailers who have stuck to a core set of products, consumers instead showing a preference for the convenience of being able to buy a multitude of goods and services in a single retail out let. The result for the sector has been a reduction in the total number of players in the retail market in favour of a smaller number of diversified retail businesses.

However, consumer convenience is not the only driver of consolidation within the industry. Price is also another factor of importance, sources indicating that along with convenience price is one of the single most important factors in determining the spending habits of consumers. As such, a smaller number of larger players in the market are able to deliver ever lower prices through what Porter would have referred to as a cost leadership strategy. As such, consumers opting for low cost providers will naturally create a preference for a smaller number of large players, as opposed to a larger number of small retailers, who are unable to benefit from the larger economies of scale of larger establishments.

Employment:

At present the UK retail sector employs a high proportion of the total number of people in employment, it is estimated that currently 3 million people in the UK work within the retail sector. This accounts for around 11% of the total work force of the UK.

Despite the growth of the sector, the general trend in employment within the retail sector is one of a downward trend. Sources indicate that over the past five years the number of employees within the sector has declined by 76,000. Whilst some of the reduction may be attributable to the recent economic downturn, only a limited number of the past five years may be seen as falling into the recessionary period, as such one may consider that the overall growth of the sector against a backdrop of falling employment points to structural changes within the industry, rather than a problem with the growth of the sector.

Technologies such as the self-service check out may be seen as one of the key structural changes which has aided retailers to reduce the total number of employees needed within the business. Sources indicate that that the implementation of such technologies may in effect allow a single employee in the future to do the same amount of work as five employees in stores where not such technology is deployed. This points to a significant reduction in the number of grass roots level employees required in the future from the deployment of just one technological development within the retail segment.

P.2 Local Convenience Stores

For the purpose of this example two products have been selected, one a perishable food product and another a non-perishable item of FMCG. Here the example of a food product considers the logistics operation behind a microwave meal product, whilst the example of a non-perishable product will relate to a cleaning product in the form of washing powder. Both will be considered in the context of the distribution channel within the Spar retail business, one of the key players within the convenience retail sector. Spar has been selected as an appropriate retailer as not only does the business operate within the convenience retail sector, but the researcher has also been able to make use of a key contact within the organisation facilitating the input of primary as well as secondary research into the project.

Small and Large Retailers:

The size of a retailer will determine many factors in relation to both its operations, marketing strategy and its general business and corporate level strategies. On the one hand, large retailers such as the “big four” in the UK which include Tesco, ASDA, Sainsbury and Morrison’s are able to focus on a strategy of building large out of town stores, which are designed to maximise efficiencies by operating on the basis of economies of scale which are used to generate a cost leadership strategy . As such, the strategies of large retailers are based upon buying large volumes of product which lowers the unit cost of products. In addition, large retailers buying on such a large scale are often able to benefit from other cost savings which are associated with the distribution and logistics channel. Many large retailers buying in such a large volume will be able to receive full loads of product delivered directly into the store directly from the vendor. As such, this eliminates the need for additional costs which are associated with multiple handlings of stock delivered into a network of regional and national distribution centres, as is the case with many smaller scale retailers.

On the other hand, small retailers not being able to compete on the basis of a cost leadership strategy must focus on a form of differentiation or market focus. Despite the advantage of large out of town locations, the small retailer is able to set up a network of smaller stores within metropolitan and high population density areas, which larger retailers may not be able to operate their business models. In addition smaller retailers may be able to offer additional differentiated levels of services such as around the clock opening hours. This however, is a competitive advantage which has been eroded in recent years, with many main stream retailers beginning to offer 24 hour opening schedules. Given that small retailers are unable to compete on the basis of price with larger retailers within the sector, such differentiated levels of service must always be seen as having the ability to generate additional levels of value in the eyes of the consumer, which will ultimately lead to the ability of the small convenience based retailer to charge a premium in comparison to the larger cost leader based competitor.

Considering the two products in question the perceived strategy would seem to be the same in the context of both kinds of retailer. For the large retailer the consideration is that the company can offer both products at a lower price than that of the small convenience retailer. However, access to the product may require the purchaser to travel a significant distance to obtain a product and thus the element of convenience is traded off for a lower price.

On the other hand, the small convenience based retailer adopts an opposite competitive strategy to that of the larger retailer. In the case of both products, the small convenience based retailer offers a product which may be viewed as a necessity in both cases with instant access to the product. However, in allowing the consumer a more convenient level of access to the product, whether this be on the basis of a closer location or the fact that store opening hours are longer that those of a larger retailer, a premium will be charged against that of the low cost retailer. As such, the consumer is asked to make a trade off in which convenience in the form of instant access is prioritised over the consideration of a lower price as offered by the larger retailer.

Distribution Channels:

The distribution channel considers the various parties for whom a product or service will travel through from the time when the product is manufactured to the point at which the end user will consume the product. In considering such parties there are a number of considerations which include both internal and external parties such as a consideration of the various staging posts a product will pass through including, warehouses, distribution and consolidation centres before finally arriving in the store and ultimately reaching the consumer.

In the case of the products being considered it is important firstly to identify the elements present in the distribution channel of the specific organisation in question, in this case the case study is considering the distribution channel for the Spar brand of convenience stores. For many smaller scale independent convenience stores the distribution channel may be one of much greater complexity including movement of goods between manufacture to wholesaler and then a second movement of goods from wholesaler to the retailer in smaller quantities, each transaction adding an additional layer of cost to the product .

However in the case of the Spar operation much of the distribution channel is handled in house thus resulting in greater efficiencies in the distribution channel and a reduction in costs as volume discounts are still achievable from buying in bulk. In addition one of the contemporary issues in the distribution channel is to consider the impact of the internet however, in the case of the convenience store the distribution of the product largely takes the form of a traditional physical distribution.

In the first instance taking the example of a washing powder, the product is purchased directly from the manufacturer on a full load basis. The product is subsequently delivered directly from the vendor into one of Spar’s national distribution centres, this allows the company to buy in bulk and receive the benefits of discounted purchasing. However, at this level the amount of product bought directly from the vendor is too large to be received by stores operating within the chain, this may be seen as a key difference when comparing the ability of larger supermarkets to be able to handle large deliveries of stock directly from the manufacturer.

As such, the product remaining on full pallets is redistributed to a number of smaller regional distribution and consolidation centres, the product is shipped alongside other non-perishable items which allows the regional distribution and consolidation centres to stock a greater number of products in the appropriate quantities for regional stores to draw upon.

Once the product has arrived at the regional distribution centre, the consideration is that full pallets of a product are still too large to handle for the kind of stores operating within the Spar chain. As such, full pallets of washing powder a broken down and mixed with other products onto a range of devices such as cages which can then be used to distribute a large variety of products to a store in small quantities, thus facilitating a wide range of product availability in store, without incurring large levels of wastage due to the over stocking of products.

Considering the distribution channel of the microwave meal in the same chain of stores the overall distributional channel is quite a different one, this is largely the function of the nature of the product in its self. Here the primary concern is that the amount of time which the product spends in the distribution channel must be much lower than that of a non-perishable item such as a washing powder.

In the case of a microwave meal the goods is purchased on the behalf of Spar however, this time loads are delivered on the behalf of the manufacturer by a third party logistics company specialising in chilled distribution. The product is brought directly into one of Spar’s regional distribution centres with a chilled warehousing facility. As such this eliminates one layer from the distribution channel in which the washing powder was first taken to a national distribution centre.

Again at this stage, despite the smaller deliveries made into the regional distribution centre, the quantities of product purchased are still far to great for distribution directly into the stores operated by the Spar chain. Again the relatively large quantities of product delivered into the regional distribution centres are subsequently broken down and the microwave meals are load built with other products of a perishable nature requiring chilled distribution. Once a suitable load has been built, the company’s fleet of small chilled trucks will redistribute the products to the stores in the appropriate quantities. As such, the whole processes sees that the perishable food product spends the minimum amount of time in the distribution channel in comparison to products of a non-perishable nature, where the time of distribution is a less critical issue.

Transport Methods:

In both cases the products in consideration are usually produced within the UK and will be transported via road transport by one method or another. However, the difference between the transport of the perishable food item and an item of non-perishable FMCG such as washing powder is likely to be significantly different within the road transport network.

Taking for instance the perishable food item in the first case, the microwave meal. Here one of the prime considerations is that if the product is not handled and transported in the correct way, then there is a high risk that the product will be spoiled and thus have to be written off at a cost to the business. In addition to this commercial consideration, the is the concern that where a perishable food product is poorly treated in the transportation process there are health and legal issues as well as commercial interests at stake. Mistreatment of a perishable food product in the transportation process could lead to quality issues which include but are not limited to serious food poisoning and ultimately death as a causation, both of which would have an adverse impact upon the profitability of an organisation engaged in such activities.

Having considered the above factors, it is not surprising that the documentation and procedural considerations associated with the transport of perishable food stuffs are much higher than those of a non-perishable items of FMCG such as washing power. Such additional documentation may include the recording of transportation times between locations and the documentation of the temperature at which goods were transported between locations.

In addition to the regulations observed, another factor which may be considered in the transportation of perishable food items such as a microwave meal is the element of cost. Whilst a non-perishable item of FMCG may be transported using basic methods of road haulage, the transportation of perishable food items such as a microwave meal is likely to require the use of a specialist chilled distribution fleet between chilled warehouses, all of which implies an additional cost in the direct costs of transportation.

On the other hand, the distribution of a non-perishable product such as washing powder via the road network may be seen as much more simple and cost effective operation. Here, the sole consideration is that transport allows the product to arrive in its desired location in good condition and in accordance with the desired delivery schedule to facilitate greater on shelf availability.

As such, as long as the product is not mal-treated during the transportation process, a non-perishable product will not automatically deteriorate during the transportation process simply as a function of time. In addition, where a product is damaged in the transportation process, the consequences for the retailer are much lower than in comparison to that of a perishable food product. Where a product is damaged in transport which is non-food based, the cost is limited to the write off of the product and even here, the retailer may be able to recoup a certain percentage of the value of the product by offering a discount on the item.

Storage – Manufacture to Consumer:

One of the critical elements in the whole distribution process is to consider the storage of the products in question from initial production at the manufactures operation through to the final presentation before the consumer purchases the product. Effective storage of a product is one of the key way in which those operating within the distribution and logistics function are able to minimise additional costs associated with wastage and product damage.

In the case of the washing powder, the product is produced in its retail format, in that of a standardised box. The boxes are then palletised which facilitates a palletised approach to the further storage and distribution of the product. After initial manufacture, the product is stored in a large automated warehousing facility at the point of manufacture. The product can be stored in such a location for several months until a customer order is placed, given that the product is non-perishable in nature the sole concern is that the product is not damaged through multiple handlings or exposure to light.

Once a customer order is placed by Spar, the product is similarly stored in a large automated warehousing operation which largely mirrors that of the storage faculties of the initial manufacturer of the product. Again the primary concern of storage is to minimise the potential damage to the product through multiple stock handlings and other elements such as light. As such, once product arrives it is quickly placed into location within the warehouse and pallets are maintained in their current format so as to ensure minimal opportunity for damage. On receiving goods, pallets are labelled by the warehouse, a process which allows for an effective program of stock rotation seeing that the first product in is also the first product to be redistributed an inventory management technique referred to as “first in first out” or FIFO.

On reaching the regional distribution depots pallets of the washing powder are initially stored in their current format. However after an initial storage period, individual pallets are relocated into a “breakdown area”. Here pickers are able to access the product directly so as to enable small loads to be built to send out to stores. As such, the emphasis of the storage operation changes between the large national distributions centre in which the ability to hold a large amount of product in good condition is the primary focus. At the regional distribution centre, the primary consideration is the ability to effectively access the product for the purposes of redistribution to the stores in the appropriate format.

Finally, on reaching the store the washing powder has two further elements of storage. Initially the stock is held in a non-chilled part of the in store warehouse where the goods is stored for a short period of time before being brought into the store to replenish sales out. Once in the store the washing powder is stored on an ambient shelf facilitating ease of access for the consumer and thus sales out.

In considering the storage associated with the microwave meal, a perishable item of food one may see that both the emphasis of storage and the complexity involved is much greater than that of the non-perishable FMCG item. From initial manufacture of the microwave meal the product is stored in a blast chillier to ensure that the product reaches a suitable temperature for storage within the manufacturers own faculties. After an initial storage period, the product is tested to ensure that the correct temperature has been achieved and the product subsequently put into a chilled warehouse within the manufacturer own establishment. The manufacturer’s warehouse is designed to facilitate speed of distribution within the storage function, products frequently spending less than 24hours on the manufacturer’s site before leaving the plant for redistribution to customers.

Once reaching the regional distribution centres, products are labelled and checked into the chilled section of the warehouse. At this stage there is a high degree of emphasis placed upon documentation, each batch of goods requiring documentation that the product has previously been stored in the correct way, including during the transportation process. Once checked in inventories are managed by a computer system which sees that pickers again use a FIFO system to break down larger quantities of goods for further onward distribution into the stores within the Spar chain.

Once the goods arrive at the local convenience stores there are two further considerations for storage. Larger stores have a chilled section of an in store warehouse available, in such circumstances the product is stored initially in the chilled section of the warehouse, before being brought into the store to replenish sales. However, many smaller stores within the Spar chain lack chilled warehousing faculties in store due to a lack of space. In these cases the product must be stored directly in the chillers which are to be the point of sale. As such, this indicate the importance of correct inventory management and the ability to distribute small quantities of product to a given store. Failure to conduct such an efficient operation could lead to increasing levels of wastage and stock write offs.

As such, one can see that there is a large difference in the storage part of the distribution function when comparing the distribution of washing powder against that of the microwave meal. The emphasis of the storage of washing powder was simply the ability to handle large amounts of product in a safe way which protected the stock. The emphasis of the storage of the microwave meal included facilitating the speed of distribution and making use of systems, which enable a comprehensive audit trail of documentation in relation to the maintenance of the quality of the product from a temperature control perspective.

P.3 Slide notes

This section provides a comprehensive set of notes to accompany the PowerPoint presentation discussing the challenges facing Sainsbury’s supermarkets. The challenges identified have largely been taken from the information provided in the company’s annual report, as well as considering items taken from the business and trade press.

Slide 1 – Overview

At present despite the challenges of the market Sainsbury’s has a market share of 16.1%, a market share which has grown by 0.2% in the last twelve months.

Currently Sainsbury’s is experiencing a rapid rate of growth in its non-food based segments, non-food sales have grown three times faster than the company’s food based sales in recent years.

One of the key areas for growth is that of the online distribution channel which has been a 20% rise in growth in the last year. Other key areas of growth may be seen as alternative format stores such as Sainsbury’s conveniences based stores.

In summary, Sainsbury’s is an organisation with growing sales and profitability driven by the development of non-food sales and alternative distribution channel. The challenge for Sainsbury’s will be to maintain growth in the increasingly competitive core market of the supermarket sector.

Slide 2 – Porters Five Forces Model

Introduce Porter’s five forces analysis as a standard industry analytical tool for the consideration of the competitive nature of a given industry or market.

Overall Level of Rivalry – The overall level of rivalry in the industry and segment may be seen as significant. Whilst the sector is dominated by just a few competitors which include Tesco, ASDA and Morrison’s each of these players are large companies with access to considerable levels of resources. As such, the industry represents an oligarchy style of industrial structure.

Power of Buyer – The power of buyers is relatively high, consumers are easily able to switch between providers with relatively little transactional costs incurred as a result. Whilst there are few major players in the market, there is a sufficient number for the consumer to still effectively change providers.

Power of Supplier – The power of suppliers within the supermarket sector is relatively low. Many suppliers are supplying generic goods for which there are a high number of producers available. In addition, the volume of products purchased by the supermarkets allow suppliers to be dominated with putative trading terms and conditions.

Threat of Entrants – The threat of entry into the market is relatively low. The oligarchy style industrial structure is often off putting to new incumbents and the requirement to invest a significant amount of capital in the required infrastructure and distribution network makes the supermarket sector less attractive than many markets with lower barriers to entry from a capital perspective.

Threat of Substitution – Given that many of the products a supermarket sells are related to food and the household, there is relatively little threat of substitution. The main threat of substitution may be seen as coming in the form of substitution to another provider of goods and services, rather than a switch in goods purchased.

There may be additional risks for Sainsbury’s operating a value added strategy in that consumers may as a result of the recent economic downturn choose to switch superior premium prices goods for less expensive standard quality offerings.

Slide 3 – Generic Strategy

Give a brief overview of Porter’s three generic strategies of cost leadership, differentiation and market focus. Then apply the model to the various competitors within the supermarket segment.

In addition to introducing the main strategies, make reference to the fact that Porter indicates that whilst the strategies are not mutually exclusive, very few companies managed to follow more than a single of the generic strategies with success. Those that opt not to follow one of the generic strategies or attempt to follow more than one strategy are referred to as “stuck in the middle”. The pursuit of more than a single generic strategy often results in a firm attempting to meet the needs of a wider group of consumers however, such firms usually deliver poor value to all segments.

Sainsbury’s – Sainsbury’s may be seen as following a differentiated generic strategy in trying to create a competitive advantage in the face of its competitors. As such, Sainsbury’s adapts its product range to incorporate a high number of value added products including, organic foods, freedom foods and speciality products. Sainsbury’s strategy may be seen one of attempting to beat the competition by offering an around

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Introduction

Perhaps it can be said that modern day organisation changes are the archenemy of complacency. Strategic transformation requires careful attention to detail and ongoing support. Long-term change however requires a commitment to make it happen. Many organisations have failed in the attempt to make change a successful event, however, there have been others that met the challenge of making it happen. Those organisations which have succeeded have done so with a step-by-step model intended to guide the intricacies of change processes. Leaders who understand the dynamics of humanism are better positioned to gain voluntary participation from their workforce. Engaging emotional support for the new vision of an organisation is but an art that is mastered over time. Behavior modeling and self-accountability are instrumental to transmitting desired results. Goals and objectives are intangible until the leadership team can guide the workforce through the difficulties that come from changing old habits. This paper discusses a merger between two organisations that conducted business as buyer and vendor. The buyer acquires the vendor and begins the process to change its culture using the eight steps at the heart of change.

This paper discusses the Hats-Galore Inc. acquisition of Gloves-n-More Inc., a company that historically was a major supplier to Hats-Galore. The change agent (CA) at Hats-Galore Inc. is responsible for changing the corporate policies of Gloves-n-More Inc. to match those of Hats-Galore Inc. The CA has determined that the policies of Gloves-n-More Inc. are very formal and rigid which matches the organisational culture often described as bureaucratic. The Hats-Galore Inc. corporate culture is more relaxed and more like a family.

The CA has decided to address the corporate culture change using a Bottom-Up strategy (Cohen & Kotter, 2002). The “See, Feel, Change” concept is used to summarize the eight stages of large scale organisational change (Cohen & Kotter, 2002). It is anticipated that the Gloves-n-More Inc. employees will resist the change. A brief discussion on addressing the resistance follows. The advantages and disadvantages of using the bottom-up strategy will be discussed. The paper closes with a recapitulation of its content.

See, Feel, Change Concept

Cohen and Kotter (2002) proposed the See, Feel, Change concept as a way to demonstrate for organisations the difficulty in changing employee behavior. Cohen and Kotter (2002) affirm that given the massive challenges on implementing corporate change, there are organisations succeeding at the practice. They assert further that management teams able to inspire change create a compelling vision that inspires action. Cohen and Kotter (2002) declare that those managers help employees visualize the problem (see), and “feel” (emotional engagement) the need to voluntarily participate in the mission (change).

Zaleski, Gold, Rotella and Andriani (2002) conducted a review of Cohen and Kotter’s (2002) See, Feel, Change methodology and found that Cohen and Kotter (2002) provided convincing evidence that demonstrates the simplicity of the approach, and complexities of behavioral change. Saunderson (2011) suggests that recognition is a tool to be used in establishing an emotional (feeling) connection with employees, influence their attitudes, and change their minds. Landry (2002) found that the emotional focal point suggests more art than it does a systematic process. Marshall (2002) suggests that of all emotions, feelings, are the most powerful and definitely a tool to be used in change initiatives.

Advantages of Bottom-Up Approach

Conway and Monks (2011) imply that the bottom-up approach engages employees in ways that encourage voluntary participation. Additionally, there is opportunity for midlevel managers to mediate and negotiate strategic connections in ways that create positive political interactions between the executives of both organisations. Employees assume ownership of responsibilities when they sense that the management team sincerely cares about them (Conway & Monks, 2011). Hill, Seo, Kang, and Taylor (2012) suggest that the interactive communication between high ranking managers and first level employees promote positive perceptions.

Disadvantages of Bottom-Up Approach

Conway and Monks (2011) identified the potential for fragmentation of networks and personal interactions that might interfere with work related processes. The bottom-up approach does not eliminate uncertainty, it merely reduces it. Additionally, the bottom-up process forces employees to unlearn traditional ways (Conway & Monks, 2011). The bottom-up strategy is not business process driven (IBM, nd).

Kezar (2012) conducted a study on bottom-up approaches and found that the focus remains on senior level leadership, such as, those found in the C-Suites (Chieftains). Kezar asserts further that the potential of efforts disintegrating remains high if the C-Suite support diminishes. Challenges remain in uniting the support of senior level executives with those of the front line supervisors. Kezar (2012) proposed that social theory applies to the collaboration processes of negotiation and leveraging activities, hence, creating differences in elitist and non-elitist perspectives.

Anticipated Resistance To Change

Conway and Monks (2011) suggest that resistance to change comes from inadequate communication with employees. They assert further that employees who perceive the imposition of change initiatives experience different levels of anxiety that lead to resistance. Conway and Monks (2011) observe that midlevel managers stall the change process by using procrastination as a resistance tool. Michela and Vena (2012) conducted a study on the psychological impact of mergers and acquisitions on employee emotional stability. They found that employees who feel threaten by the loss of their jobs to mergers and acquisitions tend to fall into a self-protective mode that interferes with the change initiatives.

Quinones-Gonzalez (2013) suggests that the employer-employee psychological contract is real and has the potential to affect the employer-employee relationship in positive or negative ways. Additionally says Quinones-Gonzalez (2013), employees are prone to perceive mergers and acquisitions as contract breaching. As a result, they may demonstrate adverse behaviors that interfere with the change process. Hinescu (2014) proposes that the duplication of departments result from mergers and acquisitions. As a result, there are two sets of employees who will potentially experience the symptoms of the stress and low morale that accompanies uncertainty.

Bottom-Up Approach Application

Kezar (2012) compares the bottom-up approach application as one based upon shared leadership and humanistic psychology. She discusses the interdependent variables which make the interactive process productive. Those variables were identified as empowerment, decision making responsibilities, and accountability. Kezar (2012) maintains that shared leadership facilitates the decision making process and contributes to the ongoing functions of the organisation.

The CA at Hats-Galore Inc. will use the bottom-up methodology to encourage autonomy. The CA will also empower employees with decision making responsibilities. Additionally, the CA will encourage open communication between the management team and first level employees. Managers will be encouraged to speak of the impending changes on a daily basis. Cohen and Kotter (2002) quote Jack Welch as saying, “you’ve got to talk about change every second of the day, that’s a bit of an extreme position, but maybe extreme is what wins” (p.14).

Eight Stages Of Large-Scale Change

Mento, Jones, and Dirndofer (2002) refer to the eight stages of change as one of three exemplary models. Kotter and Cohen (2002) promoted the stages as a model to be preferred over all others. The eight stage model has been designed for strategic level changes. Theoretically validated, the model has simple applicability for the merger between Hats-Galore Inc. and Gloves-n-More Inc (Kotter & Cohen, 2002). Though it is a simple and unambiguous model, its complexity unfolds during the various stages of engagement (Mento, Jones, & Dirndofer, 2002). The model complements the bottom-up approach undertaken by the CA of Hats-Galore Inc.

Stage 1: Establishing Urgency

Schippmann and Newton (2008) suggest that introducing change to an organisation requires the CA to instill value and meaning to the process. Establishing urgency provides ample opportunity for the CA to influence the masses with inspiration and motivation to move the process forward. Creating urgency can be done by eliminating the threat of overwhelming the audience with a vague message. Goals and objectives can be simplified into actionable directives (Akerley, 2012; Cohen & Kotter, 2002; Schippmann & Newton, 2008).

Stage 2: Building Guide Teams

Change initiatives require the support, intensity, and excitement of a team. Goals and objectives materialize when everyone is moving in the same direction. Jack and Welch (2011) assert that effective leaders get emotional with their star performers. They recommend tough love, meaning that this is not the time to promote incompetence. Building an effective team requires the CA to articulate where everyone stands (Jack & Welch, 2011; Cohen & Kotter, 2002).

Stage 3: Make the Vision a Reality

The vision articulates an attractive future of the organisation and the mutual benefits to be gained. It must be realistic and measures the effectiveness of a shared mission. It must be emotionally engaging. It must include values that resonate with the leaders, stakeholders, and employees (Cohen & Kotter, 2002; Create, 2011).

Cohen and Kotter (2002) posit that the vision drives the action aroused by urgency. The vision must be presented in living color. When employees can see a clear picture they develop an autonomous mode of working. As a result, they can work faster and with less input from their superiors (Cohen & Kotter, 2002; Mento, Jones, & Dirndofer, 2002).

Stage 4: Influence Via Effective Communication

Harvey (2015) recommends that the CA take time to walk around and talk to people one-on-one because it opens up the channel of understanding with empathy in place. He says that communication is an art as well as a science because it can be practiced on a step-by-step basis and mastered efficiently. Harvey (2015) asserts further that effective communicators are passionate and speak with clarity. A CA must drive up the emotional energy in ways that employees can feel their commitment (Harvey, 2015; Cohen & Kotter, 2002).

Stage 5: Empower For Action

Ghosh (2013) posits that employee empowerment is about transferring power from managers to front level subordinates. It is a strategic tool when used effectively. Ghosh (2013) proposes that people are socialized towards accepting responsibility for significant assignments. Therefore, managers can facilitate the process of empowerment by ensuring that opportunities of growth and personal development for their employees are abundantly available (Ghosh, 2013; Cohen & Kotter, 2002).

Stage 6: Celebrating Short-Term Wins

Cohen and Kotter (2002) encourage change agents to celebrate short-term victories. One organisation celebrated their employees and found the experience to be rewarding, both for, managers and their employees (Celebrating, 2010). Paterson (2014) recommends that all celebrations no matter how small are diverse and inclusive of all employees. A few ways to celebrate short-term wins could include posting thank you notes on employee desks, filling their desks with balloons, and extending lunch breaks (101, nd).

Stage 7: Implement and Sustain

Cater and Puto (2010) conducted a study concerning the strategy implementation competence of managers. They found that managers were better skilled at devising strategies than they were at implementing them. Thereby, rendering the strategy impractical. As a result, managers feel bewildered when the intended goals and objectives fail (Cohen & Kotter, 2002).

According to Cohen and Kotter (2002), the implementation stage of change is about leverage, alignment, and sustenance. Leverage concerns using the momentum gained in the latter stages to strengthen weaker areas and reinforce the strategic advantages. Alignment ensures that the ongoing activities are connected to relevant objectives. Sustenance requires that the sense of urgency is maintained throughout the duration of implementation (Cater & Puto, 2010; Cohen & Kotter, 2002).

Stage 8: Provide Ongoing Support

Cohen and Kotter (2002) assert that lack of ongoing support could derail the progress made. Hence, the eight stage promotes the increase of focus on the changes made. Managers must take time to show the before and after effects of the changes. Additionally, new leadership must be identified and developed to promote the cultural transformation (Cohen & Kotter, 2002).

Closing Comments

Self-efficacy and job satisfaction are instrumental to the success of any organisation. The ability for individuals to adapt to their social-cultural environments has an impact on their social-emotional well being. Organisation leadership must continuously look to new ways of engaging their employees in the vision of the organisation. Additionally, they must include opportunities for self-realization, self-efficacy, and personal development into daily work-related-tasks (Cooper, 2013).

The eight stages of change presents modern day management with a tool that incorporates humanistic theory, meaningful values, and self-realization for their workforce into work processes. As a result, CA have a versatile model that will facilitate the change process and provide opportunities at every stage to increase the job-satisfaction and self-efficacy needs of the workforce. Success for the organisation and employee is dependent upon the identity link created by employee perceptions. During the eight stage process, managers have the ability to influence employee perceptions in ways that help them feel safe and satisfied with the organisation (Perdue, Reardon, & Peterson, 2007).

Conclusion

This paper discussed the eight stages of change as a strategic approach for the merger of Hats-Galore Inc. and Gloves-n-More Inc. The CA of Hats-Galore Inc. was tasked with the responsibility of transforming the bureaucratic culture of Gloves-n-More Inc to the friendly and family oriented culture of Hats-Galore Inc. The See, Feel, Change concept discussed the challenges and viability of transformative change. The paper has met its intended goal.

References

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Introduction

The British football sector is characterised by considerable diversity in relation to the nature, type, size and success of football clubs (Wilson and Piekarz, 2015). However, what these clubs all share is a diminishing ability to attract large audiences. For example, by June 2015, just two months before the start of the 2015/2016 season, the English Premier League club, Newcastle United had only managed to sell 70 per cent of its season tickets; articles that just one decade earlier had been the subject of considerable demand (Edwards, 2015). Clubs at the lower echelons of the English footballing hierarchy, like Millwall and Brighton are faring even worse (Gupta, 2013), while many of those in the Scottish League are suffering a similar fate (Watt, 2014). This paper examines and discusses the drivers of the fall in football attendances and ticket sales in the United Kingdom in recent years. The paper finds that the decline cannot be attributed to any one factor; rather, a number of aspects have combined to produce a decline in interest, or ability of football fans to attend games. Against this background, a number of strategies to boost ticket revenues are proffered. The paper is organised as follows. The next section identifies and critiques four possible reasons for the decline in attendances and sales (the late 2000s recession, the limits of capacity, hooliganism and the increase in the number of televised football matches). Next three novel tactics to boost sales are identified. A short conclusion summarises the key findings of the paper.

Causes of decline
The late 2000s recession

In 2008, the British economy officially entered into a recession. Unemployment rose – particularly among the working classes (the social class in which football fans and audiences have traditionally been located), downward pressure was placed on wages, and, as a consequence of growing inflation, disposable incomes were squeezed (Wilson and Piekarz, 2015). It seems reasonable, therefore, to suggest that the decline in the uptake of football tickets by potential attendees is at least partially attributable to their inability to afford the expense. Indeed, research shows that during periods of economic downturn, households cutback expenditure on items that are perceived to be non-essentials or luxuries; for many households, attendance at a football game will fall into one of these categories (Dobson and Goddard, 2011). Thus, a negative correlation between (paid) football attendances and inflation rates should be expected. However, there is some research that indicates that football consumption is in fact, price inelastic, even in the higher price brackets (Forrest, Simmons and Feehan, 2002). What this means is that avid football fans will continue to purchase tickets and attend matches if the relative price increases (as occurs during a recession) even if their economic circumstances should, according to a rational analysis, inhibit this. The price inelasticity of football attendance has been explained according to the theory of fandom (Goldblatt, 2014). This refers to the fact that football should not merely be understood as a game, but as a subculture comprised of a community of consumers whose identities and interests are reinforced through the consumption of the activity of which they are a fan (Harris and Alexander, 1998). Many individuals are long-term fans of football teams (or, of the game in general); their history of interaction with the sport can often be traced through familial lines. In such instances, expression of fandom continues regardless of obstacles such as affordability and economic context.

The fact that football is characterised by fandom suggests that the recession alone cannot explain the sharp decline in attendances and revenues witnessed in recent years. However, some commentators have argued that the effects of the recession should be understood in conjunction with the massive, real rise in prices of football tickets that have been evident over the past two decades. Since the 1980s, the cost of attending a football game has increased substantially (Buraimo, 2014). In the English Premier League – the highest professional league in the country – the average price of a ticket has risen by some 1100% (in real terms) since 1995 (Buraimo, 2014). One of the reasons for the huge increase in prices is the need for clubs to invest substantial sums in new talent in order to remain financially viable (Dobson and Goddard, 2011). Devoted fans understand this and may be happy to contribute funds through higher ticket prices during normal economic times. However, faced with declining incomes, even the most dedicated followers may be forced to make cutbacks on attendance.

Capacity limits have been reached

Another explanation for the decline in attendances and sales is that the limits of growth have now been reached. During the 1990s and early 2000s, many large clubs built new stadia or extended or remodelled their existing infrastructure (Dobson and Goodard, 2011). Examples include Bolton’s Reebok Stadium, which was built in 1997, Sunderland’s Stadium of Light (completed in 1997) and the DW Stadium (Wigan) which was built in 1999. Indeed, Deloitte (2014) catalogues some 30 new stadium built between 1992 and 2012. The improvement in facilities and increase in capacity meant that aggregate attendance levels, and hence, revenues, sharply rose in the late 1990s and early to mid-2000s (Dobson and Goddard, 2011). Thus, the fall in numbers attending games and the revenues that this yields that has been witnessed in recent years merely represents a return to what economists term equilibrium, or the natural state of things (Dobson and Goddard, 2011).

Hooliganism

Since the 1980s, many football matches have been marred by instances of hooliganism (Hopkins and Treadwell, 2014). Hooliganism refers to a bundle of deviant and criminal behaviours (including violence, destruction, vandalism, intimidation, brawling and fighting) that is not typical of, but unique to the sport of football. Although hooliganism in football has a long history (according to Hopkins and Treadwell, 2014, the earliest recorded incident of football hooliganism occurred as far back as 1880), it proliferated during the 1970s and 1980s in English football. Many teams were supported by organised groups of hooligans such as Middlesbrough’s Frontline, the Naughty Forty (hooligans associated with Stoke City) and the County Road Cutters (Everton) (Hopkins and Treadwell, 2014). Growing incidents of hooliganism arguably made physical attendance at football matches far less desirable compared with the ability to watch the sport at home or televised in some space away from the stadium (Jewell, Simmons and Szymanski, 2014). The impact of hooliganism on attendances and revenues may also be more indirect. It may also have been partly responsible for the hike in prices that occurred during the 1990s, as clubs sought ways to attempt to dissuade hooligans from attending games. However, the impact of hooliganism on football attendances and revenues could perhaps be overstated. As Green and Simmons (2015) and Perryman (2013) have both noted, there has been a decline in incidents of hooliganism in recent years in both England and Scotland. This is attributable to a crackdown placed on hooligan activities by British law enforcers as well as increased powers of clubs to prevent sales of tickets to individuals known to be associated with football related crime.

Increased access to televised football

Finally, it is argued that physical attendances at football matches have dropped because there is simply no need for fans to attend any longer. As a consequence of new economic models characterised by the sale of the rights to televise football games to a number of production companies, it is possible for fans to watch most games either at home (if they have the relevant subscriptions) or in some other space (such as a public house) (Solberg and Mehus, 2014). Furthermore, channels through which football can be watched and accessed are growing in diversity as a result of advances in communications technologies. The proliferation of mobile devices such as smartphones and tablets means that individuals can tune in to their favourite clubs’ games even when they are on the go (Cleland, 2015; Solberg and Mehus, 2014). Although football fans express the joy and excitement of attending a ‘real-life’ game (Goldblatt, 2014), there are many advantages to watching a game outside of the football stadium. First, audiences have access to home comforts and facilities, such as toilets and drinks, and do not have to endure poor weather which may in fact improve their enjoyment of the game. Second, watching a game at home or in a public space is considerably less expensive than attending a physical game, even if a television (or other platform) subscription must be paid for (Dobson and Goddard, 2011). The cost of ancillary products such as food and drink is lessened, and souvenirs, if desired, can be easily sourced online (Solberg and Mehus, 2014). Thirdly, there may be better camaraderie for fans of the game because large groups of individuals are able to watch the game together; whereas only devoted fans are likely to travel to away games, and the cost of both home and away games, as well as restrictions on sales may prevent some individuals from attending. Fourthly, if hooliganism is perceived to be a problem, fans may believe it to be safer to watch the game away from the stadia (Perryman, 2013).

Despite the advantages of watching football games away from the stadia, as well as the increased ability to do so, some commentators argue that the impact of television and other media on the negative economic fortunes of the game have been overstated. Firstly, it is pointed out that clubs derive considerable revenues from their deals with television companies (Cleland, 2015). Secondly, many avid fans view televised games as inferior to watching games in real life. Thirdly, the games of many football clubs, especially those in the lower leagues, are not televised at all (Wilson and Piekarz, 2015). This means that the drop in attendance at these games cannot be attributed to the proliferation of broadcasted matches.

Strategies to boost revenues from ticket sales

Many of the factors that may be driving reduced sales are, to some extent, out of the control of the football clubs. Therefore, novel or innovative strategies may be necessary to increase sales. Drawing on the tactics used by American sports teams faced with declining sales (reported in Howard and Crompton, 2004), the following strategies are recommended to UK football clubs to boost revenues from ticket sales.

Use differential pricing. Differential pricing is a pricing strategy in which the price of tickets is adjusted according to the quality of the teams involved in the game, the weather or the time of the season (Dobson and Goddard, 2011). If low audience numbers are expected due to, for example, poor weather or the economic climate clubs are advised to drop prices in order to boost sales.
Flexible season tickets. This involves offering fans the ability to tailor season ticket packages to their needs and has been found to be highly successful in boosting sales (Howard and Crompton, 2004).
Facilitate resale markets. Clubs are advised to develop ticket facilities that enable secondary sale of already purchased tickets. This will allow individuals facing financial difficulties to recoup losses by selling tickets to other fans.
Concluding remarks

Football is big business. The survival and thriving of British football clubs depends largely on their ability to attract audiences, to grow those audiences (particularly season ticket holders, who are more loyal) and to convince those audiences to spend cash on ancillary goods (e.g. food drinks and souvenirs) when they are in attendance. However, the ability of clubs in the UK to grow audiences and to convert them into revenues is under threat. This paper has highlighted some of the drivers of the drop in football attendances and revenues from ticket sales in the United Kingdom in recent years. The paper finds that reduced revenues cannot be attributed to any one factor. Rather, the fall in sales is likely due to increased prices in tickets, reduced affordability caused by the economic downturn, the increase in hooliganism and the increased ability to watch football matches in spaces away from the physical stadia. Against this background, clubs are advised to adopt three tactics to support their economic and financial growth.

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Projectification of the organisational world has resulted in apparent agreement that projects and project management are an efficient means of implementing organisational strategy. By way of a literature critique, discuss this statement exploring the content, limitation and inherent problems of the strategic alignment of projects.

Introduction

Organisations in contemporary times face an increasingly volatile and fast changing business environment. Customer choices are becoming ever more fickle, and by extension, difficult to address. This scenario has led to a focus on ‘customisation’ that challenges the traditional focus on standardised offerings (Lampel, 2001; Beaume et al., 2009). The often referred to silo form of organisational functions and work processes has been replaced by a network or matrix form to gear organisations towards such customisation. This has had serious implications for how organisations leverage and develop their resources and capabilities (Gareis and Hueman, 2000; Beaume and Midler, 2010).

Such an orientation can permit organisations to deliver better value. However, there are diverse combinations of variables that shape product and service choices to orient what organisations offer to their customers (Cooke-Davies and Arzymanow2003). Projectification, or working through projects allows clustering relevant attributes that a particular client may require, as distinct from another client’s requirements. Such projectification has also come to be known as a ‘competence’ of organisations to deliver their strategy through the “vehicle of projects” (Lampel, 2001:273; Frederickson and Davies, 2008: 295). This paper examines projectification of organisations using assertions from extant literature (Gareis, 1992). In doing so it elucidates issues in, and nature of, strategic alignment of projects in organisations.

Projects and the organisation

Projects are micro-organisms embedded within the going concern that is understood as an organisation. They are unique by virtue of the resources and capabilities they deploy and by way of their requirements, processes and deliverables (Shenhar et al., 2002). From a ‘management of projects’ perspective there are several variables that relate to the approach of top management towards doing projects (Morris, 1987). Essentially these are about the nature of project portfolio, the way projects are resourced, the relative influence projects exercise on functional areas, and strategic choices that organisations make (Raz et al., 2002). Such choices could relate to technologies, operating practices, personnel, or even organisational growth strategies (Cooke-Davies and Arzymanow, 2003).

The idea of “best practices in project management” can be used as an illustration to show the influence of top management “sensemaking of the control and support” requirements that projects have (Lampel, 2001: 278; Gareis and Hueman, 2000: 716). When the organisation tends to prescribe best practices for its portfolio, or for certain types of projects in its portfolio, it seeks to provide some standardisation based on performance reflections from past, and also address the need augment future project performance. On the other hand, when an organisation is flexible and is looking at ‘good practices’ instead, it is being more liberal about how ‘projects emerge’ in terms of how they choose to adapt guidelines in the way they see fit to achieve project objectives (Leroy, 2002). Both sides have their pros and cons. In case of the former- overt control will affect the unique nature of projects that work towards customised solutions, and in the case of the latter, too much flexibility can cause chaos that may put organisational identity itself at risk (Spender and Grant, 1996; D’Adderio, 2001; Chatterjee and Wernerfelt, 1991). We develop this idea further in this paper as we discuss projectification, extent of project orientation, and the consequent issues and challenges organisations encounter.

The nature of strategic configuration ‘by’ projects

Strategic configuration of an organisation is but a set of strategic choices it makes to achieve its goals, or alternatively, increase congruence with business environment (Beaume et al., 2009). The mushrooming of extant research that sees organisations as less predictable, and unbounded ‘entities’ has led to development of thought on what is known as the ‘contingency’ approach (Cohen and Levinthal, 1990; Connor and Prahalad, 1996). Such an approach speaks of dynamism in the strategic configuration, but under an overall direction delivered by the higher order strategic choice organisations have been forced to make – in this case that of ‘projectification’. The challenges of such dynamism include the ability to understand and deliver the scope of change, the ability to synthesise experiential knowledge, constructively align power structures, and also, examine organisational identity issues that come with a project-based approach (Lampel, 2001; Lampel and Jha, 2004). In recent times, it is the idea of a project-based organisation that remains central to such emergence in strategic orientation. A project-based entity is understood as one where functions, architecture, role descriptions and resource allocation aspects are heavily geared towards the needs to delivering projects (Turner and Peyami, 1996).

The extent of project orientation

Not all organisations emphasise doing projects with the same scope and centrality. This is because of the process difficulties and resource commitments required for doing so from a ‘management of projects’ perspective (Morris, 1987). Top management orientation owing to still other factors, and also the nature of business an organisation is in matters greatly. This relative context has delivered the idea of extent of ‘project orientation’ (Lampel and Jha, 2004). The key variables defining such orientation are “project autonomy, scoping and programming” of projects (Lampel and Jha, 2004:361, Wheelright and Clark, 1992).

In essence project orientation is about the extent to which organisations are oriented towards supporting versus controlling the projects they do. For instance, an organisation can choose to support projects extensively and gear its functional areas towards projects, but on the same hand, also exercise a lot of control on project level strategy and operations. In contrast, the organisation can allow a high degree of flexibility in how projects strategies and work towards customised deliverables (Lewis et al., 2002). The latter clearly calls for greater autonomy, and is often a challenge for ‘management of leadership’ and ‘power structures’ in organisations (Lampel and Jha, 2004).

What objectives and tasks projects are trusted with matters as well, and this is not always visible by their ‘resource loadings’ alone (Chatterjee and Wernerfelt, 1991). For example, setting up a new manufacturing unit maybe very resource intensive, and it may be aligned to organisational aspirations of growth. However, another project leveraged to communicate and embed new technologies may be less resource intensive, but more important in terms of affecting the core of organisational capabilities (Grant, 1996).

Popular literature has shown that organisations can be classified based on the extent of their projectification or importance they give to projects in informing the ‘delivery of their strategy’ (Wheelright and Clark, 1992). Higher the projectification or project orientation, higher is the value generated, albeit only if the interface between projects and organisations is managed well (Turner and Peyami, 1996). The ‘projectivity’ model by Gareis (1992) below provides a pictorial representation of this interface. The figure clearly indicates a need for synergy between project and organisational goals. It also puts across several issues in management of this interface. These are about how and to what extent project systems, operations, and organisational support and control mechanisms, are configured towards deriving value from projectification.

Figure 1: (Gareis, 1992)

This brings us to discussing a perspective on typology of organisations with respect to the extent of projectification or project orientation (Lampel and Jha, 2004). A truly project based organisation is one where all organisational functions service projects, and by extension, project leadership profile and autonomy related variables score very high. There is a lesser degree of project orientation in cases where- though projects are supported extensively and comprise a majority of the organisational turnover, but they are also geared to deliver internal change and operational uplift initiatives (Shenhar et al., 2001; Shenhar et al., 2002). In this sense, they also support needs of functional areas. The design, resourcing and reporting configuration is thus of a lower order and partly under the control of functional areas that are in effect internal clients. Both these types are in contrast with ‘core operations led’ organisations where projects are unequivocally (and if delivered at all) only support mechanisms to inform functional and operational silos that deliver generic products and services. Arguably there is reducing number of organisations in this bracket (Lampel and Jha, 2004; Raz, et al., 2002)

As mentioned, this variation is often due to aspects such as nature of business and also organisational culture (Lapre and Van Wassenhove., 2001). Thus, these need to be contextualised when speaking of performance improvements from projectification. Several aspects to do with practices, routines, and technologies need to be considered. A crucial one for instance, is knowledge that is embedded in individuals that work on projects, but the context of the knowledge is lost with the end of the project. This is unless the individual moves to a very similar project and/or the knowledge is harnessed to inform project management systems in general. Strategising for ‘management of projects’ is thus crucial for informing effective ‘project management’. (Wenger, 1998; Connor and Prahalad, 1996)

Issues and concerns for strategy in projectification

As aforementioned, it is the shift towards networked and matrix forms has delivered research in the context of project orientation and project-based organisations (D’Adderio, 2001; Morris and Hough, 1987). In order to derive value from such an orientation it is crucial to be able to synthesise and operationalise the experience and knowledge from working on projects, and understand project performance for informing future projects. Since projects are unique entities such an objective is difficult to achieve and presents a crucial challenge for the ‘management of projects’ (Morris, 1987). This can be for instance, in the form of requiring novel ‘en-cultured’ knowledge management and learning systems like ‘communities of practice’, moving the right kind of people around, and spotting emerging project level competencies (Wenger, 1998; Grant, 1996). The role of project leadership becomes crucial, and also, by the same token, shapes a new power and control sharing strand in the organisation (Leroy, 2002). Motivational aspects to do with sharing knowledge with peers in highly competitive times, and also cultural issues that call for more collaboration despite such competition -are some of the challenges to reckon with (Drew and Coulson-T, 1996; Grant, 1996; Beaume and Midler, 2010).

Conclusions

There is a dominant argument to favour the assertion that there is a very visible difference between project management and management of projects (Morris,1987). While the first aspect is about tools and techniques, and to some extent the practices and processes that are used in execution of projects, the second one is about how organisations do projects and choose to relate to them, in terms of support and control mechanisms that they deploy. The latter is what dominates extant research on projectification. The issues it brings out as in this review paper, relate to a host of challenges organisations face. This is when they seek to become projectified, or aspire to derive value from projectification. The first and foremost is the extent of monitoring of projects by way of control through standardised procedures; the second is the harnessing of knowledge and expertise that emerges doing projects, and the third is about autonomy given to projects that determines their resourcing patterns and power quotients within organisations that host them (Shenhar et al., 2002; Cookie and Arzymanow, 2003).

The project environment and the corporate environment can be in synergetic tension or in a disruptive interface. This is likely to be determined by the extent to which organisations are able to manage disruptive challenges brought by projectification, and are able to be balanced in creating and modifying “cellular resource and capability pools” within projects (Connor and Prahalad, 1996: 481). These ‘pools’ also need to be integrated with the organisation, and provide feedback and experiential knowledge to the organisation. The choice about the extent of projectification is also a function of organisational confidence and past experiences with projectification. That it yields value is irrefutable, but the risks of not doing projectification properly, or overdoing it given organisational experience, readiness and nature of business are also very real (Cooke-Davies and Arzymanow 2003).

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Essay Question: Critically discuss Porter’s 5 forces model and argue whether the model still has relevance for today’s modern business environment.
Introduction

“Strategy is defined as the act of establishing a business direction that will successfully lead an organization into profit” (Kaplan and Norton, 1996). Kaplan and Norton (1996) argue that the focal point of strategy formulation is how to effectively draw on business intelligence acquired from an organisation’s internal and external environment. An organization’s unique capabilities, resources and processes are considered its core competences. These core competences determine the organization’s unique position against its competitors within its external business environment (Prahalad and Hamel, 1990).

The first step towards analysing an organization’s position within a business environment is to consider an overview of the surrounding environment. Such an analysis, identifies the general factors that impact on all market segments that operate under the same economic, technological, political and social environment (Daft, Sormunen and Parks, 1988). While knowledge of these factors provides an indication of the extent that these forces can impact on an organization, a more narrow approach is vital to assess the immediate competitive environment.

Porter’s five forces model (1979) was introduced as a strategy tool aiming to analyze the immediate competitive environment of individual industries. Having been developed as an industry analysis framework, the five forces model, considers the specific forces that determine competition. The impact of these five factors facilitates the competitiveness and economic potential of an industry.

This paper aims to critically discuss the model starting with a detailed overview of the framework. Further research and critical evaluation of the theory on whether it still applies into modern business environment will also be considered.

Analysis of the 5 forces framework

An industry is described as a cluster of organizations sharing the same characteristics and competing in the same business environment (Lummus, Krumwiede and Vokurka, 2001). As industries share the same characteristics, the need to create a strategy tool that would enable the assessment of their profit potential, the impact of underlying drivers and their investment attractiveness was identified.

In 1979, Porter recognised this need and proposed a framework which analyses the basic structure which can be extended to every industry. This foundation, constitutes of five essential factors that summarise the most important criteria to consider in order to analyse a particular sector’s key drivers of success. Based on such an analysis, a strategy can be formulated proposed on growth factors and certainty rather than scenarios and forecasts.

The first force of Porter’s framework refers to the threat of entry and is concerned with the ease or perplexity to enter a particular industry. It should be clear that when an industry is difficult to enter, competition is high and existing competitors are very strong. Once potential newcomers decide to enter such an industry, they will not pose a significant threat to existing competitors as they will rather need to overcome existing barriers. Typically, these barriers fall under a set of factors including economies of scale, product differentiation, capital requirements, cost disadvantages independent of size, access to distribution channels and legal constraints.Understanding how these barriers influence access to an industry is important to distinguish the competition level and profitability. For most industries, if the above factors do not constitute significant entry barriers a high threat of new entrants will beimposed (Porter, 1998).

The second force considers the threat of substitutes as competitive goods that may replace or complement an organization’s offerings. Substitutes, are differentiated from the core product or services that the main competitors within the industry offer. However, they are still categorised as a competitive force as existing customers may switch to them and create an impact on the industry’s market share and profitability. Where substitutes offer considerable performance advantages for their price value (price/performance ratio) and are developed by powerful and viable industries, they should be considered a serious competitive factor.

The third force discusses the power of buyers referring to the bargaining ability of customers to control a producer’s or supplier’s profitability. This is the case in industries where buyers can exert strong influence to suppliers or producers which ultimately shapes the competitive environment. There are several criteria that determine buyers power. It may be the concentration of power within a small number of dominant customers and when it is easy to switch to another supplier within the industry as their product offerings are not highly differentiated. Additionally, it may consider the buyer competition threat when customers use the purchased good as a production resource for their business. When buyers have the ability to produce the same product or resources themselves instead of buying it from the suppliers, their power is also significant. Also, if buyers buy large volumes of products and are sensitive to lower prices their power is high (Porter, 1998). .

The fourth force moves on to the power of suppliers and illustrates how dominant suppliers can reduce organizations power in negotiation for purchasing essential resources and their profitability. Increased supplier power is determined by a number of factors. These factors include concentration of power to a small number of suppliers. This poses challenges for organizations as they will be highly dependent to buying from these suppliers. Furthermore, they will face a significant switching cost if they decide to change supplier. Where a limited number of suppliers exist within a particular industry, it is considered a very profitable segment. Additionally, suppliers power is determined by their potential to integrate forward meaning the danger to cut out buyers and reach end consumers directly.

The fifth force concludes with the competitive rivalry which describes how the other four powers interrelate and shape the structure of competition within an industry. Putting together the impact of these forces, the level of competition as well as the profit potential and overall attractiveness and performance of an industry is determined. There are certain factors by which competitive rivalry is directly affected. If competing organizations are of approximately the same size, competitor balance will be such that rivalry will be intense. When industry growth rate is low, rivalry is likely to be intense. The existence of high fixed costs to operate in the industry and high exit barriers if a firm wishes to leave the industry will also trigger high rivalry. Additionally, when there is not significant differentiation between the product offerings of individual competitors, the level of rivalry will also be intense.

Critical evaluation of the framework

Porter’s five forces model is a classic strategic business tool deployed at industry competition analysis, to assess the prosperity capabilities and environmental influences. However, as industries are dynamic and business characteristics constantly evolve it may be questioned if it is still applicable and reliable (McGahan, 2000).

Criticism on whether the framework is incomplete suggests that the multi-level nature of certain industries may affect the accuracy of analysis. Specifically, as discussed in Johnson, Scholes and Whittington (2009) understanding that most industries may need to be analysed at different segments is vital in order to implement a coherent analysis. Referring to the multiple clusters within airline industries as a relevant example, the authors discuss that a successful industry analysis should be applied into each customer segment and market cluster in order to provide a concise picture not just an overview.

The dynamic nature of industries is identified as another underlying factor that may cause uncertainty about the suitability of the framework. The fast pace that industries change, may affect fundamentally the circumstances, individual capabilities and overall business environment. This process is defined as convergence and describes how dynamic changes may recreate the industries causing two previously separate industries to merge (Van den Berghe and Verweire, 2000). More specifically, changing circumstances in converging industries may embed such resources innovations (for example technologies) that will enable new product capacities and ultimately widen competition (Malhotra and Gupta, 2001).

Bringing together products or services so that they complement each other, may create a powerful way to impose a new competitive force within an industry. Reflecting on complementary products and the potential to combine and reposition them so that they will cooperate rather than compete to each other, Burton (1995) emphasises how this can reshape industry competition. Similarly, ul-Haq (2005) discusses a different approach which suggests that complementary products develop significant business opportunities and initiative for organizations for cooperating rather than competing with each other as the five forces theory suggests. This approach determines an additional competitive force that may provide significant profit potential and competition insight (Brandenburger and Nalebuff, 1995). Hence, it is suggested to be placed as the sixth force to complement the five forces framework (Yoffie and Kwak, 2006).

The discussion so far has tended to assume that the five forces framework manages to address critical competition forces within an industry, although several other factors may also be considered in order achieve greater accuracy. In a relevant research, Christensen (2001) supports the value of the framework into the modern business environment. Christensen’s (2001) conclusion is that the five forces framework is an essential strategy tool which can provide a useful insight into all organizations. Even though it is acknowledged that profit circumstances may vary across industries and thus the model can be developed further, it is still considered a sound basis for competitive analysis.

Similarly, Grundy (2006) outlines that there is still room to improve the framework and enhance its practical value. It is suggested that the five forces framework has been historically used as a theoretical strategy model with significant influence in mostly academic business management contexts. The author’s approach relates with how it can be practically applied into the modern business environment with success. This includes several features including rating the impact of forces and assigning them an importance weight in order to explore how they interrelate and how they create an industry pattern.

An attempt to revise the application of the framework in today’s business contexts should ensure that it manages to incorporate the prevailing circumstances of the era into the analysis. Considering that Internet has become an increasingly powerful factor, Karagiannopoulos, Georgopoulos and Nikolopoulos (2005), attempt to study if this traditional theory is still appropriate for current industry examination. Their findings support the studies discussed above acknowledging the value of the framework as the starting point of competition examination. However, they also stress the influence of several other facts relative to technology innovation and the profit capabilities these create in order to accurately diagnose the changing nature and new patterns of economy and industries. The potential to utilise the five forces framework as the foundation of technology and Internet competition analysis is also confirmed by Siaw and Yu (2004).

Conclusion

Porter’s five forces model has been a very influential strategy framework providing guidelines to investigate competition, profitability and investment attractiveness within an industry. The purpose of this paper was to discuss the value of this traditional strategy framework into modern business environments. Providing a detailed examination of the individual five forces, the process of competitive industry analysis was explored.

The very process of determining the optimal strategy following the principles of the model was identified. This relates to an assessment of the level of intensity of the individual five forces being the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the competitive rivalry between them.

Extending this principle into subsequent analysis and evaluation of the framework, more recent research was considered. Major conclusions signify that the defining characteristics of the framework can still be applied with success into strategy and modern business practices. However, good decision making practices should include a set of parameters to obtain a complete and up-to date picture. These parameters are based on the notion that industries are dynamic environments and changing factors directly affect competition as they impact on each competitor’s capabilities and profit potential. The most crucial to be included in a relevant analysis are then defined as technological innovation and advances, mapping of individual market clusters within industries, convergence and the potential to complement and reposition products.

Overall, current strategy research follows Porter’s five force’s framework in competition and industry analysis. The framework is found to be of critical importance in building strategic decisions. A more practical and realistic approach is nevertheless required in order to achieve a less vague and contemporary picture.

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Task 1 – P1, M2.

One view of the distinction between personnel management and HRM is offered by Bloisi (2007: 12) who sees personnel management as workforce centred and operationally focused. Tasked with recruitment, selection and administrative procedures in accordance with management’s’ requirements, they are functional specialists rather than strategic managers, often with little power or status, acting as a bridge between employer and employee, required to understand and articulate the needs of both. Redman and Wilkinson (2006: 3) see the rise HRM as taking place over the last 20 years, firstly in the US and later in the mid-1980’s in the UK. The 1990’s saw the appearance of HRM journals and university courses, with the then Institute of Personnel Management, the main professional body for personnel practitioners, re-launching its journal People Management with the subtitle the magazine for Human Resource Professionals. After 2000, the professional body became Chartered Institute of Personnel and Development (CIPD), emphasising the transition. Redman and Wilkinson (2006: 4) argue that the rise of HRM reflects changing concerns of management and changing power balance in the workplace with declining trade union membership and management concerns turning towards efficiency and productivity. There is also the influence of organisational change attempting to adjust to global competition with downsizing, de-layering and decentralisation. Organisations are more flexible, less hierarchical and have been subject to continuous change programmes such as business process re-engineering, performance management, culture change and the concept of the learning organisation, all areas where HRM has become involved.

Armstrong (2006: 19) summarised major differences by noting HRM places more emphasis on strategic fit and integration with business strategy, based on a management and business oriented philosophy. HRM attaches more importance to organisational culture and the achievement of commitment, and places greater emphasis on the role of line managers as the implementers of HR policies. HRM is a holistic approach concerned with total organisational interest, while recognising those of individuals, but as subordinate to the total. HR professionals are expected to be business partners as opposed to administrators and treat employees as assets and not as cost overheads.

P2, M1

Armstrong (2008: 9) states that the overall role of HRM is to ensure organisational success through its employees, noting that Caldwell (2004) identified the role in the form of goals to be achieved. These included the management of people as assets fundamental to the competitive advantage of the organisation, aligning HRM policies with business policies and corporate strategy, creation of flatter and more flexible organisational structures capable of rapidly adapting to change, encouraging teamwork and cooperation, empowering employees to manage their own self-development and learning, and improving employee involvement. Also development of reward strategies designed to support performance, building employee commitment, and increasing line management responsibility for HR policies. Foot and Hook (2008: 30) offer a comprehensive list of tasks and activities of the HR practitioner. These include recruitment and selection, learning and development, human resource planning, provision of employment contracts, policies on fair treatment, equal opportunities, managing diversity, managing performance improvement, employee counselling, payment and reward policies, health and safety, employee discipline, grievance, dismissal, redundancy, negotiation, ethic and corporate responsibility and change management among others.

P3

While HRM can initiate policies and practices Armstrong (2006: 97) acknowledges the line manager has implementation responsibility. If line managers feel indifferent or disagree with HR policies, and are compelled to implement them, they do so reluctantly and ineffectively. Purcell et al (2003) pointed out that high levels of organisational performance are not achieved simply by the existence a range of HR policies and practices and any difference made lies in how these are implemented. A factor affecting the line manager role lies in their ability to carry out HR tasks. Special skills are needed to perform people-oriented activities such as defining roles, interviewing, conducting performance reviews, providing feedback and coaching and identifying learning and development needs. Some managers have them and some do not possess these skills, or the organisation fails to provide training. Redman and Wilkinson (2006: 211) argue that line management responsibility for HR issues is not new, as they were always held responsible and accountable for managing people at work. There has been devolution of some HR work to the line partly due to pressure of organisational costs, and to provide a more comprehensive type of HRM arguably best achieved by devolving HR tasks to those managers responsible for implementation.

A frequent criticism of line management is their lack of soft, or people skills, and Torrington et al (2008: 205) state that many voluntary resignations are explained by dissatisfaction on the part of employees with supervisors. People are frequently promoted into supervisory positions without adequate experience of training.

Task 2 P4

McKenna and Beech (2002:117) describe the need for HR planning as being defined by the number of staff required to meet the organisation’s future needs as well as the composition of the workforce in terms of the necessary skills. Mullins (2005:797) describes HR planning as a strategy for the acquisition, utilisation, improvement and retention of an organisation’s human resources, preferably an integral part of broader corporate planning. Information needs include the extent and scope of the plan, forecasting period, target dates, and types of occupations and skills required, among other factors. The first stage is an analysis of existing resources. Second, estimation of likely changes in resources by the agreed target date, including losses, current staff development, and external factors such as labour availability, market or legislative change, all of which determine the supply forecast. There follows a forecast of staffing requirements necessary to achieve corporate objectives by target date. Finally a series of measures are taken to ensure the required staffing resources are available as and when needed. The overall process should consider changes such as population trends, for example the ageing workforce, fewer young people entering directly from school, more flexible work and organisational structures, level of competition from other organisations, employment legislation, development in information technology and automation.

P5, M3

Price (2007: 369) explains that the Credit Suisse process involves pre-selection, online testing, and both telephone and face-to-face interviews. Jackson et al (2008: 552) explain that Southwest Airlines uses structured interviews with multiple interviewers who have had extensive training.

Marchington and Wilkinson (2005: 176) list the availability of a wide variety of selection methods including references, application forms, work sampling, assessment centres and graphology believing that no single technique, regardless design quality, is capable of producing perfect decisions capable of certainty as to which individuals will be good performers in a given role. Multiple methods are preferable, and while references may be sought before or after interviews, they remain critical. Online tests, telephone interviews, assessment centres and personality questionnaires, literacy and numeracy tests and those for specific skills are also used according to a CIPD annual survey (CIPD 2004). Most have very low accuracy levels in terms of producing effective decisions, with work sampling offering the best likelihood of success, followed by intelligence tests and structured interviewing. References score poorly as does graphology and a combination of techniques increases accuracy. Jackson et al (2008: 552) suggest that an alternative or complimentary method is the personality test, used to judge likely fit with organisational culture.

P6, D2

The interview remains the most common selection technique with Bloisi (2007: 147) noting that 68 percent of organisations still use interviews with an increase in the more structured types, and towards training of selection teams, with the (CIPD 2005) survey reporting 56 percent using structured, panel interviewing, and 41 percent employing behavioural questioning in structured interviews. McKenna and Beech (2002: 152) see several problems associated with the interview. These include subjective, unsound judgements made by untrained interviewers, early judgement based of first impressions, or the interviewer may have prior unfavourable biases about interviewees, or be positively disposed to them because they like or are attracted to them, the halo effect. Where a panel is used there may be a lack of consensus. Problems include lack of preparation, shortage of allocated time, unsuitable venues and lack of appropriate documentation, such as the applicant’s CV being circulated to all involved, and lack of structure and note-keeping. However, Armstrong (2006: 404) feels the interview provides the opportunity to ask probing questions about the candidate’s experience and evaluate the extent to which their competencies match the job specification, enabling interviewers to offer a realistic preview of the job and gives the candidate opportunities to ask questions about the role, training, career prospects terms and conditions of employment. The face-to-face interview allows an assessment of how the candidate would fit into the organisation and offers the candidate a similar opportunity. Overall, unless no personal contact is required, as in some remote networking roles, the interview remains a critical but flawed part of selection.

P7

Best recruitment and selection practice is promoted by the (CIPD 2011) website. Selection practices involve two main processes of short listing and assessing. CV’s or application forms are used from short listing onwards and awareness of the avoidance of unfair discrimination highlighted. Online techniques may be used to manage application forms and screen candidates. Candidates should be given prior notice of what to expect, regardless of method employed, including the type of assessment and timescale, in addition to a check for disability requirements. Questions should be carefully planned and identical for all, with answers scored and a focus on required attributes and behaviour, with efforts made to put the candidate at ease. Psychological tests should only be considered where appropriate. Assessment centres may be used with various exercises and tasks but should be perceived as fair to the candidate. Reference checks should be undertaken, sometimes by telephone. The general advice is to use a structured approach ensuring perception of fairness to both successful and unsuccessful candidates, with flexibility and job tailoring. All involved should have appropriate training, be adequately briefed about the job, its requirements, and aware of the danger of unfair discrimination.
Price (2007: 369) notes that selection at Credit Suisse focuses on pre-selection, online personality testing and telephone interviews, followed by face-to-face meetings. Structured questions are compared to pre-determined answers and interviewers are trained.

Jackson et al (2008: 552) note that Southwest Airlines uses combinations of techniques including face-to-face interviews, aptitude and attitude testing by panel, and peer and line manager one-to-one meetings. The process is well-designed, structured, tailored to the job and involves all obviously suitable applicants. Neither organisation meets all best practice guidelines but Southwest does demonstrate high levels of staff retention.

Task 3 P8

Price (2007: 471) states that job evaluation is concerned with the tasks involved in fulfilling the job, duties that have to be completed and responsibilities attached. The process involves a comparison of jobs in a formal, systematic way to identify their relative value to an organisation and has its roots in the scientific management movement of Taylor (1947).
It is seen as increasingly inappropriate for the way work is organised today since the content of many jobs varies daily. Traditional job evaluation is focused on unchanging job descriptions and requirements, and if performance and pay are linked to the completion of specific tasks the need for change, endemic in today’s organisation, is ignored as is a flexible approach to customers. Modern organisations favour competency profiles instead.

Factors determining pay include the employer’s compensation strategy, worth of the job, affordability, external factors such as labour market conditions, living costs regional wage rates, cost of living, presence of collective bargaining, and legal requirements (Bohlander and Snell 2009: 419).

P9, D2

Beardwell and Claydon (2010: 520) identify several types of reward systems including individual performance-related pay where employee performance is assessed against pre-set targets or objectives and payments may be consolidated into base and bonus or variable pay. Benefits are doubtful and limitations include the fact that motivation by money alone is not necessarily effective or universally applicable, and problems are associated with measuring performance fairly and objectively. Contribution-related pay is based on both outcomes of work carried out and levels of skill and competence employed. Its advantage is seen as a move towards rewarding employees for their conduct of the work, attitudes and behaviours displayed, which are seen as leading to competitive advantage. Competence-related pay is a method of paying employees for their ability to perform as opposed to paying for performance (Armstrong 2002). Its advantages include the encouragement of competence development which fits the modern less-layered organisations and facilitates lateral career moves. Disadvantages are that assessment of competences may be difficult and links to pay arbitrary. Skill-based or knowledge-based pay is aimed at encouraging employees to gain additional skills or qualifications appropriate to business needs. The advantage is that employees strive to gain relevant skills, but a disadvantage can be cost and the need for a skills requirement analysis to ensure only those skills required are encouraged. Team-based pay is measured on an assessment of team performance rather that at an individual level and designed to reinforce collaborative working and team results. Teamwork is seen as contributing to organisational success, however, among the difficulties are distinguishing individual contribution, and highly performing individuals in low-achieving teams may feel penalised and dissatisfied.

P10, D3

Torrington et al (2008: 263) state that for most people pay is important, if not a sufficient motivator in itself. Maslow (1943) recognises the need to have sufficient money for basic existence as one of the most fundamental in a hierarchy of needs which motivate people. Herzberg (1968) argues that while pay in itself may not motivate, it holds the capacity to de-motivate if insufficient. Marchington et al (2002: 480) explain McGregor’s (1960) distinction between theory X and theory Y managers, with theory X managers believing that workers are inherently lazy and uninterested in their work, and must therefore be highly controlled and offered incentives to get them to work harder. In contrast theory Y managers believe workers can be motivated by goals of self-esteem and desire to do a good job, and that money is less important to them than these types of rewards. Vroom’s (1964) expectancy theory is linked in terms of the effort put in by employees in the expectancy of reward, and is dependent on whether they view the likelihood that their action or effort will lead to the necessary outcome of reward.

P11

For those employees not subject to an automatic annual increment when conditions allow, a common practice in monitoring and rewarding is annual review with their immediate supervisor, a limited and often superficial process. Bloisi (2007: 259) describes performance appraisal as a means of measuring and evaluating performance, which requires aiming at enabling decision-making on employee performance and determining any training or development needs. Frequently seen as an annual event, to be effective it should be continuous and involving two-way dialogue, and is frequently used as a guide to reward.

Armstrong (2000: 11) argues that performance appraisal as a means of monitoring has been discredited because it was frequently operated as a top-down bureaucratic system owned by HR rather than line managers. It was often backward-looking; concentrating on past performance, rather than future development needs, and with inadequate links to business needs. Employees have resented the superficial nature of the procedure and managers have lacked the necessary skills to conduct appraisals.

Jackson and Mathis (2007: 335) suggest appraisals can be formal or informal, with the informal being conducted whenever necessary and the day-to-day relationship between manager and employer offers such opportunities. However, in today’s sometimes networked organisation, this may be impossible. Team appraisal can be useful as having peers involved can overcome the problem of the manager’s inability to be present to observe. Comparative methods may be used to compare performance levels of their employees against one another. Management by objectives allows the manager to set, agree and monitor employee progress against targets, either job or behavioural in nature. In all cases, an important criterion is that managers receive adequate training in employee monitoring and feedback skills. 360-degree feedback may be used as basis for monitoring and reward and according to Swart et al (2005: 213) is a process where different groups within the work situation, such as peers, subordinates and supervisors and possible internal and external customers appraise an individual and offer feedback.

Task 4 P12

The Trades Union Congress (TUC 2008) provides a guide to employment rights in the UK. The employment contract signed at time of offer will normally give the notice amount required on departure which must be at least one week after a month’s employment, rising progressively up to 12 weeks after 12 years or more, with most employees being entitled to receive pay. This can be waived by receipt of payment in lieu of notice. If the reason is for misconduct, it has to be substantial and can be without notice, and immediate departure may be required. After a year’s employment written reasons for dismissal must be provided, or if dismissed while pregnant or on maternity leave. Failure to comply with the employment regulations opens up the possibility of the employee taking their case to an Industrial Tribunal.

Apart from complying with employment legislation in voluntary resignation situations best practice is also to conduct an exit interview to establish where possible the main reasons for resignation and to discover if the organisation could have done anything to prevent the resignation, facilitating learning for the future (Taylor CIPD 2002: 71). Exit interviews provide a more useful picture of departure grounds when the employee has secured another position. Most employers retain records for several years following departure, and many ensure all access is removed, especially in the case of IT staff. Foot and Hook (2008: 112) add the provision of a preparation for retirement program to assist the transition of departing for employees, and provision of programmes to keep ex-employees in touch.

B&Q comply with all the legal requirements of exit in terms of providing paid notice, or payment in lieu, in addition to paid holiday entitlement. If the departure is involuntary reasons for dismissal are provided in writing and all access to property and systems are shut down on the date of departure, regardless of reason. Property is normally returned on departure date or earlier. No exit interviews are conducted, and no follow-up is practiced for departed employees, which compares badly with best practice.
Rolls-Royce complies with all legal requirements and notice in addition to holiday entitlement. All departure reasons are documented and an exit interview conducted notes of which are retained for analysis as to reasons. All access to property and systems are removed on date of departure and any company property is required to be returned. Overall the company complies reasonably with best practice.

P13

Redman and Wilkinson (2006: 367) argue that regardless of methods used, fairness and justice remain key issues in redundancies. Recent trends have seen a move away from seniority and a reduction of last-in-first-out towards selection based on skills and performance. Certified absence counts against an employee in the selection process as much as unauthorised absence according to the IRS survey (2004). Torrington et al (2008: 223) adds attendance record to the list and reports that a more recent approach involves drawing up a new post-redundancy organisational structure and inviting all employees to apply for the jobs that will remain. Early retirement and voluntary redundancy are also favoured.

References

Armstrong, M. (2000) Performance Management: Key Strategies and Practical Guidelines, 2nd Edition, London, Kogan Page Ltd., p 11.

Armstrong, M. (2002) Employee Reward, 3rd Edition, London, CIPD.

Armstrong, M. (2006), A Handbook of Human Resource Management Practice, 10th Edition, London, Kogan Page Limited, p19, 97, 404.

Beardwell, I. Claydon, T. (2010), Human Resource Management: A Contemporary Approach, 6th Edition, Harlow, FT Prentice Hall, p 520.

Bloisi, W. (2007) An Introduction to Human Resource Management, Maidenhead, McGraw-Hill Education, p 12, 147, 259.

Bohlander, G. Snell, S. (2009) Managing Human Resources, 15th Edition, USA South-Western Cengage Learning, p 419.

Caldwell, R. (2004) Rhetoric, Facts and Self-Fulfilling Prophecies: Exploring Practitioners’ Perceptions of Progress in Implementing HRM, Industrial Relations Journal, 35(3), pp 196-215.

CIPD (2011) Selection Methods
Available from: http://www.cipd.co.uk/hr-resources/factsheets/selection-methods.aspx

CIPD (2004) Recruitment, Retention and Turnover: A Survey of the UK and Ireland, London, CIPD.

CIPD (2005) Recruitment, Retention and Turnover: A Survey of the UK and Ireland, London, CIPD.

Foot, M. Hook, C. (2008) Introducing Human Resource Management, 5th Edition, Harlow, FT Prentice Hall, p 30, 112.

Herzberg, F.W. Mausner, B. Snyderman, B. (1957) The Motivation to Work, New York, Wiley.

IRS (2004) The Changing Shape of Work: How Organisations Restructure, Employment Review, No. 794.

Jackson, S.E. Schuler, R.S. Werner, S. (2008) Managing Human Resources, 10th Edition, USA, Thomson South-Western p 552.

Jackson, J.H. Mathis, R.L. (2007) Human Resource Management, 12th Edition, USA, Thomson South-Western, p 335.

Marchington, M. Wilkinson, A. Sargeant, M. CIPD, (2002) People Management and Development: Human Resource Management at Work, 2nd Edition, London, CIPD, p 480.

Marchington, M. Wilkinson, A. (2005) Human Resource Management at Work: People Management and Development, 3rd Edition, London, CIPD, p 176.

Maslow, A. (1954) Motivation and Personality, New York, Harper & Row.

McGregor, D. (1960) The Human Side of Enterprise, New York, McGraw-Hill.

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This work was produced by one of our professional writers as a learning aid to help you with your studies

Introduction

Advertisements are designed to attract interest in their products or services. With an increase in the number of adverts, advertisers use a variety of means to attract attention. Some advertisers intentionally create adverts that are designed to create controversy – even to go as far as they are intended to be banned after use so that they can additional free publicity and that people start talking about the adverts (Price, 2003). Some companies do not just do this as a one off, but build a strategy around this, for example Benneton or Tango (Price, 2003). Another example is Great Frog Jewellery, whose advert states “If you don’t like our jewellery, fuck off!” (Nixon, 2003, p. 74). Paddy Power is a nationwide bookmaker (PaddyPower, 2015). This essay will show that it produces many adverts, several of which have been controversial. The question is whether such adverts are good or bad for the company whose products or services the adverts promote.

Background

The market for advertising is continually growing and is expected to amount to almost $600 billion in 2015 (eMarketer, 2014). The market is oversupplied and advertisers have to had to create new adverts to get attract the potential customer (Orr, et al., 2005). One approach is to make their adverts more “risque” using a variety of means to attract the consumer’s notice (Orr, et al., 2005). One such advertiser is Paddy Power. Paddy Power is a large international bookmaker, who operates via shops across the United Kingdom and beyond (PaddyPower, 2015). Paddy Power has marketed itself using adverts over the years, many of which have been controversial (The Telegraph, 2012). One example is the Paddy Power advert adapting the Last Supper by Leonardo de Vinci to show gaming in an advert in 2005 which Corcoran & Share (2008) claim critics felt showed disrespect for Christians.

Paddy Power Gambles with Last Supper (McLeod, 2006)

Adverts such as these have been reported to the Advertising Standards Authority (ASA), which is an independent organisation who regulates advertising (ASA, 2015a). The ASA has ruled against Paddy Power on several adverts, saying that their adverts were offensive (ASA, 2012a), prejudicial (ASA, 2014a) and insensitive (ASA, 2014b). The ASA rulings are that the rulings mean the adverts cannot be reused. This is not to say that all Paddy Power adverts broke the rules. A “Jack Cooper” radio advert Paddy Power produced in 2012 was investigated by the ASA and they found that it did not breach the code of practice (ASA, 2012b, n.p.). In addition it should be noted that there were complaints made to the ASA regarding many other adverts from betting companies nationwide (Steen, 2014) and thus the ASA does not single out Paddy Power for its rulings. However the ASA identified that the most complaints received about an advert was an advert that made reference to the trial of Oscar Pistorius which engendered 5,525 separate complaints (ASA, 2015).

Paddy Power’s Oscar Pistorius advert, source: ASA, 2015

As a result, although Paddy Power has not been singled out by the ASA, Paddy Power has produced adverts which had generated thousands of complaints to the Advertising Standards Authority, several of which have been found to break the ASA rules and Paddy Power has been ordered to cease using these adverts.

Braveheart Advert

In June 2015, Paddy Power produced a new advert (the Guardian, 2015) which showed an image adapted from the 1995 film Braveheart, in which Mel Gibson directed and played the character William Wallace, according to the Internet Movie Database (imdb, 2015). The advert is shown below.

Braveheart advert (the Guardian, 2015)

The image in the centre shows Roy Keane, which the Mail Online identifies as the assistant manager of the Republic of Ireland’s National team, made to look like the character William Wallace from the film (Burrows, 2015).

The text in the advert, reading “You may take our points, but at least we have our freedom” and followed by “Ya wee pussies” (the Guardian, 2015, n.p.) is a reference to the vote in Scotland in 2014 for independence, in which the side rejecting independence won the vote, which left Scotland remaining part of the United Kingdom (BBC, 2014). The advert was mounted onto a 13 metre vehicle and it was driven across Dublin on the day of the Ireland vs Scotland match in the Aviva Stadium (Brenman, 2015).

Is such controversy good for firms?

As has been shown, the adverts created much publicity. There is the basic publicity that Paddy Power paid for in terms of displaying the adverts in positions where people could see them. However considerable additional publicity has been generated by the controversial nature of the adverts. Reports in the Guardian, the Telegraph, the BBC web site and other places, some of which are detailed above show that Paddy Power has gained considerable publicity for no cost. Thus their adverts have been seen by many more people. This leads to the question as to whether this additional free publicity has helped or hindered the company. Mundy (2012, p. 171) points to the advert “Paddy Power can’t get Tiddles back, there’s nothing we can do about that, but we can get you your money back with our money-back specials” (ASA, 2012c, p. 17). The ASA (2012c) received 1,089 complaints, most of which were people who claimed that the advert could encourage animal cruelty. However Mundy (2012) reports that the result was that Paddy Power did not suffer as a result and the web site part of its business increased significantly. In this example, the controversial advert was good for Paddy Power in terms of increased turnover after the advert was released and the complaints promoted it to appear in newspapers, web sites and books. Another advert, by Sega showed gamers heading up the Mekong Delta in Vietnam, finding a lost temple and finally finding a Sega Mega Drive was claimed to cost the company half a million dollars, but from the advert and resulting publicity from the controversy, Sega received considerable value for the money spent (Pettus, et al., 2013).

Clearly this is not a one-off. Gainsbury (2012) claims that there is a deliberate strategy by Paddy Power to create controversial adverts. Gainsbury (2012) goes on to say that these adverts are often seen by the younger generation and this has the potential to raise the chance of these people to gamble, especially online. Thus there is the potential for controversial advertising to create a new generation of gamblers, who could then bet using Paddy Power’s web site, again resulting in benefits for Paddy Power.

Pulizzi (2014) says that one approach to marketing is for a company to entertain their customers, which helps build their brand. Bradley & Blythe (2014) claim that their brand of controversial adverts generates a following which, when written included (at the time of writing) over 100,000 twitter followers and over 700,000 Facebook followers. Add this to the 14,000,000 views of Paddy Power videos on YouTube and there is clearly a long term approach to their brand which is defined by their controversial advertising giving them considerable low cost or no cost publicity (Bradley & Blythe, 2014). Even the removal of a controversial advert helped Paddy Power to promote its brand (Bradley & Blythe, 2014).

As it was already established that Paddy Power has been publishing controversial adverts over a period of years, it is clearly a part of Paddy Power’s strategy and not a one-off lapse. Paddy Power clearly believes that this advertising is beneficial to itself. Although the ASA rulings are often against them, if they only use each advert once, the ASA announcement that they must never use the same advert again (ASA, 2012a; ASA, 2014b) has no effect on them. It is noted that, in addition to the advertising they paid for (such as the Roy Keane banner on the truck), they also gain a huge amount of additional publicity from the newspapers and other media, who also reshow their advert with a story associated with it stating that the advert is unacceptable to some. The Google news server lists the article in the Guardian amongst 89 articles (google, 2015).

Roy Keane news articles (Google News, 2015)

Thus the threat of legal action from Roy Keane gained Paddy Power a large amount of additional publicity that they did not pay for. Advertising can have both a long term and short term impact and the value of advertising is hard to measure).

The gross profit of Paddy Power during the time period in which they have been using the controversial adverts has gone from ˆ455m in 2011 to ˆ554mm in 2012, ˆ617 in 2013 to ˆ714m in 2014 (Redmayne Bentley, 2015). Thus their total marketing strategy is proving successful.

Even when Paddy Power produced an advert that was banned from being shown on television, Paddy Power uploaded it onto YouTube and it has been viewed over 1.6 million times. Thus even when their advert is banned from TV, it can still be used. It was even posted onto the Daily Mail web site, gaining additional publicity (Mail Online, 2015).

One feature of the Advertising Standards Authority is that, as a non-statutory body, it does not have the powers to fine advertisers or to take advertisers to court (ASA, 2015c), even if they are the worst advert in 2014 and have an approach that brings advertising in general into disrepute. When complaints are launched at Paddy Power, their response is to say that the readers who complain are just taking the adverts too seriously – their adverts are intended to be light hearted (Corcoran & Share, 2008). Thus companies such as Paddy Power can act with impunity and are not generally punished for their adverts.

At the time of writing, the ASA has just made a ruling on their latest advert which includes the phrase “Just f**k off already” (ASA, 2015d), which, it was complained, could cause offense. The response from Paddy Power was that it was in keeping with their other adverts. Thus it is clear that Paddy Power do not have any problems with their style of controversial adverts and it follows that Paddy Power feel the adverts must be beneficial to their company.

Is such controversy bad for firms?

The Gambling commission publish a Gambling Industry Code for Socially Responsible Advertising (Gambling Commission, 2007). It is clear that the advert produced and being driven round Dublin and taken to the Aviva Stadium and the other adverts could be seen by children as much as by adults. Thus there could be a claim that the adverts may encourage children to gamble. However there is no evidence to substantiate this. If Paddy Power were to be considered to be marketing to children, or other vulnerable people, there could be legal action under section 16 of the Gambling Act 2005 (Gambling Act 2005). Thus the adverts could backfire if Paddy Power were found guilty. Benetton, for example, produced controversial adverts concerning the death penalty (Ma, 2014). The result was that they were sued in Missouri, which lead to Sears cancelling their contract with Benetton which was estimated to cost Benetton $100 million.

In South Africa, controversial adverts can depict nudity or the drinking of alcohol (Dubihela & Dubihela, 2011). Although the object of these adverts is to attract the attention of young adults, and this is achieved, the issue is that these adverts do not actually help the reader to remember the actual brand that is being advertised (Dubihela & Dubihela, 2011). As a result much, if not all of the money that a company spends on such advertising is wasted.

Van Belleghem (2012) claims that the reason for the production of a controversial advert is to produce an increase of people who talk about it. However, he identifies, this requires a clear storyline. If there is no storyline, the advert may actually generate fewer conversations.

Conclusion

To conclude, the controversial adverts created by Paddy Power and others was in full knowledge of what they were doing. Their controversial style of advertising works well for them when measured in terms of an ever increasing profits and bringing in new and younger gamblers may give them longer term benefits. Paddy Power regularly creates one-off controversial adverts which are immune to the ASA rulings as they have no plans to reuse the adverts, so they can get away with them. Also, with the ASA being unable to take action against them, their only disadvantage is that they may lose a low number of gamblers who object to the adverts.

However there are risks. Legal action can lead to both penalties and can cost on the bottom line if the company’s customers no longer purchase from them.

However, with the penalties being rare and, in the UK, with the Advertising Standards Authority having limited powers, the continuance of controversial adverts shows that they are continuing to be produced and thus Paddy Power and other companies conclude that the good points outweigh the bad points.

References

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