Question

Name an ineffective organization. What can management do to improve it? Explain.

Pick a company in a given industry. Use strategic model(s) to describe its environment and strategies.

Describe the lifecycle model. Explain how it can be used. Give an example.

Answer 1

An organization is said to be effective if it successfully achieves the desired targets with the resources available at hand. Ineffective organizations are those which show a conflict in the behavior, motivation, performance, and interdepartmental relationships of the stakeholders both within and outside the organization. Any organization lacking clarity, competency, efficiency, and consistency is termed to be effective.

An example of ineffective organization is Energy Efficiency Services Limited company in India. It is stated as inefficient because it has got a huge-debtors on it which constitutes to a amount of more than 80 crores. It has failed to extract the amount. There are a plenty of reasons possible. For example, the company management is not doing its job properly or the product supplied by the company has failed badly as a result of which the debtors are now not paying. However, this is not the case. The company is a LED bulb supplier and the product offered is working fine. Thus, the fault is from managements end. The employees are not motivated enough to recover the debt of the company.

The management can do the following things to improve its condition:

1. It can go for factoring i.e. it can sell its recoverable assets to a third party at a discounted price. Hence, not total but a huge amount can be recovered.
2. The board member can behave stricter on the management to start the recovery process on their own in a aggressive mode.
3. The company should give more authority to its recovery team to take decisions on the spot because it delays the process of recovery. Every time the recovery team is given an excuse by the debtor it has to report to the higher management about the issue and wait for their response.

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Strategic analysis of airline industry:

The organizational strategy of a company is the business planning statement which is made after analyzing the goals, objectives and the environmental analysis of the company including its strengths, weaknesses, opportunities and threats in the market.

Porter five forces model helps an organization to identify competition of a business based on the following five factors:

1. Bargaining power of suppliers
2. Bargaining power of customers
3. Threat of new entrants
4. Competitive rivalry
5. Threat of substitutes

The airline industry holds a huge share of $1.5 trillion in the U.S. economy. It provides jobs to 10 million people. This is a very great number. Also, the competition in the airline industry has also become very stiff. Thus, the players in the airline market must very carefully analyze the market to last long in the market and make ample profits.

The following is an explanation to the conditions that influence the industry regarding the Porters five forces:

Bargaining power of suppliers: The airline industry consists of manufacturers, air navigation service providers etc. Companies in this segment have long term contracts and they tend to achieve profits by attaining economies of scale by providing standardized products to the companies for very long time periods. Also, the cost involved in being a supplier is very huge. Due to this high cost the number of suppliers is very limited. Therefore, the bargaining power of supplier is very high.

The following factors will affect the bargaining power of supplier:

1. The entry of new suppliers i.e. increase in number of suppliers will affect the bargaining power of supplier. The more the suppliers the less will be the bargaining power.
2. Cost of labor: Cheap labor will help to reduce the overall cost of the processes because of which the companies may ask for discounts.

Both the factors are in favor of the suppliers as neither the labor not the number of supplier is high. Thus, one can say that the affecting factors intensity is low.

Bargaining power of buyers:

The service offered by airline companies is perishable in nature. Thus, customers must be attracted by giving the maximum in the minimum cost. Also, there are several categories in flights. The number of service providers is not very high. They can be counted on fingers. But when the permutation and combination is done in the categories and providers the number of options available to a customer becomes very high. Therefore, giving a high bargaining power to the customers.

Thus, the intensity of the affecting factors is high as the companies will never reduce the offers. The companies in this case earn by attracting maximum people i.e. economies of scale.

Threat of new entrants:

The cost of entering an airline industry is very high. Due to this high cost the window of entry of new companies is very narrow. But the companies from other countries also venture in different countries. This is a very serious threat for the existing players. This also gives ample options to customers. Thus, not only increasing the bargaining power of customers but also increasing the threat for the home players.

The intensity of this factor is moderate as the company’s take big risk by entering a foreign market.

Competitive rivalry:

Customers often choose a service by selecting from various options. A customer conducts a deep study to select one option. Thus, companies must provide various offers and schemes to the customers to earn more. For example, an empty seat in a flight will cost $200 while an occupied seat, then whether it is sold for $180 will reduce the losses of companies. The competitive rivalry is very high in this segment.

Threat of substitutes:

The other transport medium in U.S. are also very efficient. However, they may take time to reach the destination in comparison to flights. Since the rates of other modes is very nominal than air flights the customer is likely to switch to other options if he has no time constraint. Thus, making the intensity of this factor very high.

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Concept of Product Life Cycle (PLC):

Product life cycle is the overall life of the product from its introduction till its exit from the market.

Product life cycle has four stages:

1. Introduction: The stage in which a product is introduced in the market.
   
2. Growth: It is the stage where the demand for a product increases in the market.
   
3. Maturity: The stage in which a product achieves its maximum value i.e. the sales become constant. This is because, either some rival product has entered the market, or the product has lost its importance.
   
4. Decline: It occurs when the sales of a product starts to decline. Reasons can be introduction of new products which are cheap and provides more satisfaction to customers.
   
   There are certain strategies which can be implemented at each stage to maximize the life cycle of a product. It is important for markers to study PLC so that they can make necessary changes at each stage to stay for long time in the market.
   
   During the decline stage, the marketers often have the following choices to elongate the decline stage and to make maximum profits before the product faces shutdown:
   

1. To introduce the products in decline stage in other markets. For example, a toothpaste which served a market for 6 years and is now on the verge of decline because of other variants (in terms of taste, effectiveness to fight mouth problems, and cost etc.), the marketers can launch the same in less developed geographies (both domestic and international)
2. The product in declining stage can be sold at cheaper prices to increase the sales.
3. The product can be introduced again in the market with some features added to impress the customers.