Human Resources Management In Personnel Management Commerce Essay

The term human resource management has been used for the last ten to fifteen years however before that, the field was known as personnel management. According to Hall.R (1992) he made no differentiation between personnel management and HRM and saw that the latter as a modern expanded version of traditional personnel management due to technological change in the work environment and a shift in societal values. However Hackman, J R and Oldham, G R (1986) explained the differences between personnel management and HRM as to personnel management is considered as workforce-centred while HRM as resource-centred. Guest (1987) conception of HRM is not as an alternative to personnel management but as a particular form of personnel management which stressed the strategic issues of employee commitment, flexibility, quality and integration. Ian Beardwell & Len Holden (2001) defined HRM as a strategic and coherent approach to the management of organization’s most valued assets – the employees who individually and collectively contribute to the achievement of the objectives of the business. In additional to that (Hall, D T (1984) viewed HRM as involving all management decisions that affect the relationship between the organization and its employees, moreover Jackson, S.E & Schuler (2003) considered HRM as a distinctive approach to employment management which seek to obtain competitive advantage through the deployment of a highly committed and skilled workforce.
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This essay will critically evaluate the role human resource plays taking into consideration the changes in external environment factors in additional to that the essay analyse the HR practices which will help organizations gain sustainable competitive advantages through critical discussion and relevant examples will be given and finally conclusion and recommendations will be made.
Roles of HRM
For the past ten years organizations have more importance on human resource practitioners in additional to that HR is been considered as a value added source within organizations. Furthermore, according to (Ulrich, 1997) human resource department has been seen and viewed as major source for gaining competitive advantage against competitors in the market.
Understanding the Role of HR with the impact of external environment factors
According to John Bratton & Jeff Gold (2007), in the current business environment, organizations need to be constantly evaluating their internal and external environment for challenges and opportunities to remain competitive and to sustain growth. Changes within the society in Political, economic, social, and even psychological changes create significant impact on organizations. However there are many factors which are driving changes in organizations today like globalization, restructuring of organizations, the ever changing workforce mobility balancing the family work issues
(Diagram 1) external factors affecting HR roles
Source (Cyr, D.J. (1995)
Organization /human resource management
Acquisition of Employees role
According Laurie J. Mullins (2007),In an economy of increasing globalization and the struggle to create sustainable competitive advantages, organizations are continuously evaluating their strategies to ensure that they have the expertise needed to help achieve the mission of the organization However the economic challenges due to the consequences of the 9/11 terrorist attacks on the United States and credit crunch which started 2007 all over the world which continuously affects organizations on recruitment and selection strategies. Nevertheless, Julie Beardwell and Tim Claydon (2007) define selection as a “process of collecting and evaluating information about an individual in order to extend an offer of employment.” On the other hand according to Guest, D E, Conway, N, Briner, R and Dickman, M (1996) they mentioned ways of measuring (cost per hire) meaning the importance of considering cost of acquiring employees he also added that in current business environment there rules and regulation which protects employees from unfair treatment by organization during recruitment and selection process, therefore HR plays big role in order to make sure the organization get the right people for available posts fairly without discrimination of any kind. (Guilford, J P (1967)
Mc Donald’s corporation employ people from different backgrounds and from different parts of the world as to comply with rules and regulations of the government and avoiding discrimination of any kind in its recruitment strategy as can be seen below.
McDonald’s recruitment structure. Source (
Acquisition of new employees
Different ethnicity
Disabled workforce
Equal opportunity
Migrant workforce
Determining demand vs. supply of labor role
According to Laurie J Mullins (2002), HR plays a role the whole process developing practices that can improve employees performance and the process includes determining the number of employees needed for the organization to perform at is optimum, however since the 9/11 terrorists attacks and the credit crunch many organizations have been forced to reduce massive number of employees so as to cope with the struggling economy. The main challenge for HR is to make decisions on number of employees needed to be recruited or reduced to cope with the demand of products in the market without making loss for the organization.
Diagram 3
ddl ssl
—————–equilibrium point.
Quantity. Source (Charman.A, 1999)
(In diagram3)According to (Charman. A, 1999) HR make plans on demand versus supply of labor needed by organization in order to meet the required output or quantity of products needed in the market however it is important for companies to make sure they maximize profit and cut down costs of labor.
Example 2
Virgin Media is a good example as it plans to cut down about 2200 jobs by 2012 which is 15%of its total employees however according to chief executive (Neil Berkett) the company plans are due to HR forecast on the number of employees needed at this difficult time of recession and the changing customer needs in the market. (www.bbcnews/business)

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HR role in supporting organization strategy or corporate strategy
According Michael, (2001) there have been change in the human resource role over the last ten years as HR functions were viewed as not that important for the organizations in additional they were subjected to merely as to administrative function however in nowadays economy the HR practices are considered very important by business partners and HR is given vital role through inclusion of HR leader in strategic business planning which involves on decisions and planning on how the organization will compete its rivals.
The questions regarding, what to produce? Where to produce? For whom to produce and how many to make (quantity of the products) are part of the organization planning process. However according to Michael Armstrong Forthcoming( 2010) he defined business strategy as the process by which organization mission and objectives are set as well as the process of which organization exploits its resources to achieve objectives , therefore HR is playing a big role in developing strategies in current business environment which is complex and dynamic the main aim here is to assess the talent pool in order to if there is appropriate expertise needed to accomplish the business strategies of the organization
According to Peter Boxall & John Purcell (2003), integrating HRM with the business strategy enables human resource to support and implement strategic plan to achieve competitive advantage for the organization by maximizing human capital and increasing labour efficiency which in turn can reduce cost and increase productivity and finally maximizing profit for the organization.
Example 3
Goldman Sachs 2010 has won the second position for best employer to work for; however the vice chairman of Gold Sachs MR. Michael Sherwood said that the secret to success was due to good work done by HR in supporting the corporate strategy in every possible way and that the company could not have won without the role performed by HR in supporting the corporate strategy. (
Training and Development role
According to Becker, Huselid.M, &Ulrich.D (2001), they defined training and development as systematic approach of developing employees skills in order to increase efficiency of employees in performing their tasks however according to resent figures provided by (The United Kingdom Society for Training & Development) estimates that UK organizations are spending more than 10billion annually on employee training and development the main reason for this is that companies must integrate technology to companies strategies however for it has been proved that companies which provide training and development for its employees are winning the battle against competitors for having better skilled workforce and efficient labour which meet the demand of the customers and most importantly creates good reputation for the firm in the eyes of the public.
Example 4
According to the manager of Morrison branch in Stoke Newington (MR. Terry Joseph) said that due to the training HR provided at his branch make the branch best seller among Morrison stores in 2008 since the employees have more skills and knowledge in performing their tasks however he mention few advantages of training as seen below.
Advantages of training
Increase in the employee’s attitude towards their work.
The employees acquire knowledge and expertise in an area that would enable him/her to perform more effectively on the job.
Increase in the employee’s performance.
Self-confidence. Training helps to improve the self-confidence of an employee. It enables him to approach and perform his job with enthusiasm.
Higher Earnings. Trained employees can perform better and thereby by earning more employees become more efficient.
Safety. Training helps an employee to use various safety devices. He can handle the machines safely and becomes less prone to accidents which can save organizations from legal actions.
Example 5
Nando’s is another good example of companies which provide better training to its employees as it won the national training awards in the UK 2009 in five of its schemes which are
New restaurant opening training
Working in management teams( team building)
Nando’s induction training
Coaching programmes
Buddies system(buddies are staff who help to train new staff)
Example 6
The company offers training programs to their employees and their suppliers of car parts so as to increase efficiency and meet the quality standards expected by customers.
Source (
HR Role in Organization Change and Development
According to Griffiths, D. and Williams, L. (1999), the impact of Global economic changes, customer changing needs migrants workforce, HR has the role in enabling the organization to adapt to the external and internal issues in which firm is currently facing and also issues that firm may face in the future. The pace of recent changes in technological development and economic trends like credit crunch makes change an inevitable feature of organizational life, however the competency expected form the human resource professionals therefore the ability to plan and implement the necessary changes in the organization for the purpose of improving performance depends upon the HR professionals .
Process of change
According to Gupta, A. and Govindarajan, V. (2002), there are many processes that can be used to undertake change some of the models include Kotler’s eight-step strategy for change management which comprise of eight steps
Establish a sense of urgency: creating sense of agency in organization for change
Create the guiding coalition: building strong leadership for change
Develop a vision and strategy: developing clear vision for change
Communicate the change vision: communicate the change to organization
Empower employees for broad-based action: empowerment of employees
Generate short-term wins: creating reward for employees
Consolidate gains and produce more change: this is the time to change all activities that don’t fit with change
Anchor new approaches in the culture
Example 7
Harley and Davison Company
New technology in production: Using the Japanese production methods as a blueprint, Harley and Davidson HRM team instituted what they termed as the productivity triad to reduce costly inventory and increase consistency and quality. The new approach had three components (i) Employee involvement, (ii) use of just-in-time (JIT) inventory practices and (iii) statistical operator control (SOC) techniques however according to (Nolan and Kotha, 2007) These changes in the company encouraged workers to contribute in the decision-making process where it was essential participate in quality formed circles and were made directly accountable for improving motorcycle quality.
HR played big role in Ducati Company which had to change as the organization evolved, in 1990 after the company’s IPO was released, the company started to transform itself from an informal organization to a formal one. They emphasized individual and organizational learning at all levels through its leadership Institute Program, it also worked on simplifying its structure through the creation of teams and well defined roles. For example, Ducati depends on teams to produce and support the product. The company also made changes to worker job descriptions and production process and eliminated jobs that did not add value to their products.
HR role in Organizational Behaviour & Theory
According to Michael Armstrong (2009) defined organization behaviour as actual study of how people feel, what people think and do within organizations in additional to that (Daft, 2001) added that the current economic conditions have led to increase in organizations turbulence and that has made it difficult for predicting the behaviour of organizations in different situations and good example is many people have lost their jobs and restricting of many organization due to credit crunch and terrorism. Today’s economic conditions has led organizational behaviour and theory to be one of HR core roles and part of responsibility in which HR has to understand the needs of employees in additional in relation to the policies it makes and how any given policy or practice may affect the behaviours of the employees.
Example 9
HR department in Argos stores have realised the importance of knowing organizational behaviour and have put strategy in place which is mainly to do providing seminars within the organization and enable people to learn for and be ready for any restructuring or any future changes. Michael Armstrong (2009)
Human resource practices
Job Analysis:
According to Guest, D E and Peccei, R (1994), in job analysis the main practice is to describe the nature of the job in relation to human requirements like experience needed to perform the task and skills required. In the end of job analysis there is job description which is entirely to do with the duties and activities involved in performing the specific task by the employees however, employees, managers depend on job description to get information sine the job description has great influence on job design
Example 10
For companies like Apple job analysis is important to their efficiency in production and maintaining their quality standards and HR department always make sure the employees know exactly their duties and responsibility.
This is another practice of HR which is to do with recruitment and selection of workforce for the organization staffing includes Recruiting which is to do with attracting skilled and qualified candidates for filling vacancies and then selecting the most qualified applicants for hiring from among those attracted to the organization. HR have to develop methods that can be used by managers to select required for the given jobs. (Guest, D E and Horwood, R (1981)
Example 11
Companies like Amazon and Starbucks, they develop budget to hire fulltime employees on annual basis and include certain amount of fund in that budget to hire part time staff throughout the year to handle the flow of the business (Guest, D E and Horwood, R (1981)
Example 12
At Microsoft staffing is taken very seriously and according to the head of great managers at Microsoft (Gill Crowther) everything that HR is doing is geared to creating a good environment to attract the best candidates however in Microsoft they believes people are more important than other assets of the organization.(
According to Hall, R (1996), this is another practice of HR where its first step is to help newly recruited employees to adjust to their new jobs and also adjust to organization; it is a way to show new employees their new jobs aspects including their working hours and company rules and expectations. (Beatty, R.W. & Schneider, C E. (1997)
Example 13
4Print limited: the printing company based in greater London in UK has good reputation for providing better orientation time to newly recruited employees by giving employees full information on what is expected of them regarding their duties, company culture, pay rate and working hours. Mr. Steve (the manager) said that through orientation practice his company is able to perform better than competitors since the employees are better equipped with information about their work so can perform their work efficiently.
Performance Appraisal
According to D E, Michie, J, Sheehan, M and Conway, N (2000), This function monitors employee performance to ensure that it is at acceptable levels in additional to that the performance appraisal process involves evaluating individual’s job performance and accountability nevertheless performance appraisal gives feedback to employees as a guide to future behaviours. Performance appraisal provides basis for pay and also disciplinary actions which might be taken against employees and it is necessary for performance improvements. D E, Michie, J, Sheehan, M and Conway, N (2000) D E, Michie, J, Sheehan, M and Conway, N (2000)
Example 14
This company had a problem as an appraisal system was introduced and they called it employee evaluation system to weed out old workers. It affected 18,000 Ford salaried workers around the world in different grades and it was discriminated. This suit attracts diversity which caused race, gender and age discrimination. (
Career development
According to (D.Fombrun, N Tichy and M.A Devenna, (1998) Career development has developed as a result of the desire of many employees to grow in their jobs and to advance in their career. Career planning activities include assessing an individual employee’s potential for growth and advancement in the organisation
Example 15
Boston Consulting Group (BCG) they provide structure to ensure success and flexibility to accommodate the needs of employees by providing training to support employees and enable them to follow whatever path they choose in their careers; however the company operates in more than 65 countries around the world which gives more exposure for its employees who want to face different challenges in performing tasks in different countries around the world.
Example 16
ARM ltd(Architecture for digital world limited), the company believes that the best people are the solution for innovation therefore career development has been given priority in order to stretch employees skills and help the company to compete strongly against competitors. The company provides variety of on the job and formal training opportunities which aim at developing employees; however these are some examples of learning resources available for to employees. (
Classroom training
Higher education assistance
Leadership programmes
Technical training
Rotation programmes
Team development sessions.
(Guest, D E, Michie, J, Sheehan, M and Metochi, M (2000b)
Labour Relations:
According to Dennis Nickson (2007), labour relations is interactions between organization and trade unions who represent employees in negotiating and discussing issues regarding employees wages, working conditions and other employees rights in their employment contracts.HR practice here is more to do with negotiating with this trade unions and resolving disputes and grievances for the betterment of both employees and organization, (Guzzo, R Aand Noonan, K A (1994)
Example 17
British Airways and union
In the case of British Airways the argument way not that strong and was not acceptable, that has led to series of strikes action by the employees and this development had cost British Airway to lose millions of pound.
According to (Guion, R M (1993),this practice is concerned with recording employees information like forms of applications, personal history and references, health history and most important employment history, Other things to be recorded includes earnings and hours of work, absences, turnover. In today’s working environment employees and organizations demands more in terms of their personnel records therefore that makes very important practice of HR. (Cyr, D.J. 1995)
Example 18
Marks & Spencer have good reputation for being the able to have good records of its employees which enable the company to have good understanding of its employees and this enables them to allocate jobs better. (
HR as source of competitive advantage
Michael Porter says ”that competitive strategy aims to establish a profitable and sustainable position against the forces that determine industrial competition” he added company can gain competitive advantage through three strategies .Haley, J (1999)
Cost Leadership: is a competitive strategy where the enterprises aim to become the low-cost leader in an industry. For any organisation to achieve low cost strategy it must able to achieve the follows: have access to cheap resource like labour, capital, employees; economic of scale; effective and efficient production plant; more sophisticated operations management techniques e.g. Just-in time (JIT)
HR practices to achieve cost leadership
Most common ways to cut HRM costs is to employ technology to replace some of the more expensive HR professional-delivered services (i.e., e-learning vs. in class training)
Low turnover of employees in order to have better customer retention (recruiting, selection, and training costs of a new employee)
Competence-knowledge, skills, and abilities an employee has that the job requires
Motivation-is the employee willing to exert the necessary effort to perform the job well
Work-related attitudes-is the employee satisfied with their job, committed to the organization, and act as a good corporate citizen
Example 19
Toyota use HRM practices to increase the efficiency of production and thereby lower the cost. People express airline is a similar example of, a cost/efficient thrust.
Differentiation. This is another competitive strategy. In a differentiation strategy, a firm seeks to be unique in its industry along dimensions that are widely valued by buyers. Dennis Nickson (2007)
Hr practices for differentiation
Management of HR is less susceptible to imitation therefore competitive advantage achieved through HRM practices is likely to be more sustainable:
Competitors rarely have access to a firm’s HRM practices
Even when practices are visible, their impact may not be as favorable by competitors due to interrelated system (i.e., incentive pay system may only work when used in conjunction with selection practices that favor hiring risk takers.
Example 20
Mercedes Benz emphasises reliability and quality however Mercedes Benz firm can charge premium price
In the current economic conditions it is important to consider external factors when HR roles and practices are done, however organizations with good practices of HR can gain more advantages compared to its competitors as we have seen organizations like nandos who have won the investor in people prize just because of their good behaviours towards developing employees skills and the way they actually provide their employees with adequate skills which intern organizations can get more profits through increase of employees efficient and productivity.HR roles like acquisition of employees, determining demand and supply of workforce, the role they play in change of organization are all proven to be critical for the organization survival in today’s economic conditions. In additional to that, most of the companies today have realised that in order to make more profit and be able to compete in the market there is a need to put more investment in people rather than machines because people are the main asset of organization, a good example is companies like Toyota who have actually put in place strategies for knowledge management within the organization so as to enable employees to share their knowledge and also share other people knowledge in order for them to gain competence in performing their tasks efficiently and this strategy is in the hands of HR department of Toyota company. Nevertheless other companies like Nissan have gone even further in recognising the importance of HR role in the organization as the company strategies must align with HR strategies.
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Terry(manager)Morrison Supermarkets Plc Supermarkets49 Stamford Hill
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Steve( manager) 4Print finishers ltd Unit 6, Northgate Industrial Park, Collier Row Rd, Romford, Essex RM5 2BG

Connection Of Biodiversity To International Relations Commerce Essay

The connection between international relations and biodiversity can be linked to the evolution of both as globalization does too, which have brought among others, the increasing in international trade throughout last years. It’s a fact that countries experience economic interdependence and that it is not equally shared; usually North developed countries demand raw materials or natural resources at low prices to produce goods, which later are going to be sell to southern or developing countries at higher prices; due to that southern countries are forced themselves to exploit their resources at the point that there is space for extinction rates and for biodiversity to decrease.

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The economic interdependence that countries are experiencing nowadays have caused high loss of biodiversity not only in flora, because of the high rates of deforestation, but also in fauna, as people even more are destroying habitats and exploiting at high levels the benefits that they could take from animals. All of that is part of an evidence to say that international relations and biodiversity are connected and also we can say that the first one can define the course of the last one; as international relations evolve, biodiversity may decrease.
This is seem as a problem as international relations increase, globalization and international trade does too, and because of that, southern or commonly named developing countries which have around 20% of the world’s total biodiversity, have to exploit their natural resources, causing massive losses of species.
Biodiversity is an important political issue because it depends on the relations among the most powerful economies in the world, which determines the levels of use or abuse on the natural resources available in the planet. Nowadays we are talking of interdependent capitalistic economies competing in the international arena, usually the most powerful developed countries influencing the decisions of not so developed ones. All of those changes in the world’s reality have generated changes in biodiversity too; the fact that specialization has increased as international trade does, developing countries have chosen to exploit their natural resources in order to supply developed countries the raw material they need for their manufactured goods. That in order to developing countries to expand their economies at any price, most of the times without having conscience of the consequences it might bring to the environment, even if they have that conscience, they doesn’t have the economic resources to implement sustainable processes that let them exploit natural resources in a reasonable way, causing that way less extinctions or more losses on biodiversity.
Reducing the rate of global biodiversity loss depends on the well management of the protected areas in the world, which represents only around the 10% of the worlds surface, which includes zones that were supposedly to be protected but in the daily use it result not be that way. The efforts of developing countries to conserve this zones usually seem to be compromise because of the bad manage they give to the financial aid, that they receive from some developed countries. It’s common to find that those financial aids even if they represent some regulations and commitments, are often used in other issues or even fall in hands of corruption which in common in those developing countries. The problem for developed countries to create that kind of zones is that usually they don’t have the space or they don’t have the flora and fauna to protect. The issue from all of the above if that the protection from excessive use is not feasible as those natural resources represent an important part of the country’s economy. So the solution is to use biodiversity but in a moderate way, creating protected areas and providing other options for local users.
Some effective policies of protection for those areas don’t need many economic resources, it’s enough to increase the surveillance and enforcing rules on those protected areas. But often that enforcement is not enough because the local users usually don’t know where the limits are and the penalties they would receive for breaking the rules. One important element that can be useful is to create local conscience and also adapting local constituency and effective enforcement.
Susanne Kleeman says in her article “voices for biodiversity management in the 21st century” that biodiversity management pays inadequate attention to the importance of governing institution, even if they are rules. Laws and policies are more likely to promote sustainable use and conservation of resources with the incorporation of institutions. Three factors are important for a successful conservation program: incorporating local values, ensuring consistency or rules and maintaining adequate enforcement.
Due to the process of globalization, extinction rates are increasing worldwide because global warming and other human caused events; which is a reflection of the massive damage of the political and economic system has been causing. Many countries in the world promote free trade and globalization without taking care of the consequences or environmental effects, but without sustainable development policies; if it still going that way extensive trade and all that it brings into a country is going to end with all of the natural resources.
In order to contribute to solve some of the environmental problems caused by international relations there’s a need to create a new multilateral diplomacy because, as said by Hill, J in his article “A new diplomacy for sustainable development; the challenge of global change”, the environmental problems and the plans for their mitigations transcend political boundaries. So that way, countries can get into negotiations to integrate long-term perspectives in international policy more in a diplomatic environment that concerns about sustainability, cooperation and threats to the environment. This new way of diplomacy has already begun, first with the UN conference on the human environment in Stockholm in 1972, the with the Rio-Johannesburg process in 2002 and annual meetings and summits that have been realized to creating conscience and finding for solutions for more environmental friendly processes that can contribute with the global warming, which is a long term threat.
Another important international actor additional to the multilateral diplomacy, are NGO’s that have proven to be a very important actor when dealing with issues that have no frontiers such as environmental and biodiversity issues. That’s one of the most important reasons why NGOs must work together on redesigning the world order and put biodiversity and natural resources as hot topics on the international agenda and also in the political agenda of each country. Many international forums are opened for discussing biodiversity, in which the actors are competing to define priorities and choose the best tools for management of genetic resources, which nowadays have been one of the most important inputs of world economies because those are the raw materials of biotechnology companies.
Two international agreements have emerged because of the lack of environmental regulations that is causing the extinction of those resources: the TRIPS and CBD convention on biological diversity. As coban said in his “caught between state sovereign rights and properly rights: regulating biodiversity” Both consider the problem of regulating to biological resources as an issue related to the capitalist relations but the difference is that the second one is a convention that seeks to protect the environment affirming that biological diversity is subject of national sovereignty, while the former one regulates biotechnology patents worldwide. The TRIPS states that intellectual property rights of corporations over genetic or biological resources are complementary in the process of capital accumulation, while CBD has been an effective awareness-raising tool. The CBD was adopted in 1992 during the Rio Summit and it recognizes the need to take action in the environmental issues, integrating the principles of equity and ethics in the use of biodiversity and also establishes that biological diversity is subject to national sovereignty; this convention has been ratified in 177 states and start its activities in 1993, focusing on the genetic resources and the access to them, technology transfers, financing of conservation policies and trade in genetically modifies organisms. One of the most important contributions of this convention is the fact that poor countries can’t commit to preserve biodiversity unless developed ones provide them with technologies and financial aid, due to the use of processes that reduce abuses into the environment. This financial aid has been declining, and the international institutions and organizations that promote the protection of biodiversity has not proven to be an effective regulative framework.
Nowadays international agreements are not the only involved, the private sector somehow seem to be more in favor of that sustainable development. International business coalitions also play a role in interactions between environmental regulations and private sector interests. Mainly there are 2 coalitions directly related to environmental issues, the international chamber of commerce and the global industry coalition. The former deals with biodiversity governance and environmental policies, and the latter have to do with biosafety negotiations; both of them have space in the international arena and the power to help biodiversity abuses to diminish at the international level.
For international treaties and policies to work correctly, there has to be a support at the national level. Local governments have to share and implement the ideas that international treaties, policies, conventions, NGOs and other actors promote. As stated by Susanne Kleeman, biodiversity governance needs to be adapted to local conditions but aligned with global, regional and national frameworks and it calls for vertical linkages adapted to local conditions. The national government has to agree with the international politics in order to create some consistency and to share the same objectives.
In conclusion, biodiversity and international relations have important connections because as more capitalistic becomes the world, natural resources are going to be exploited at much in order to satisfy the needs of trade of the developed countries. And in the other hand in order to survive economically and improve their status and living standards, developing countries would still abuse of the biodiversity with the objective of selling raw materials for the production of manufactured goods. If good conservation policies and treaties are not implemented, much of the diversity and natural resources we have probably will disappear, and after that there’s not much to do. Finally unless environmental issues become central part in the international agenda, the world will suffer dramatic changes.

Glaxo Smith Kline Pakistan Limited Commerce Essay

GSK Pakistan Limited was created on January 1st 2000 through the merger of SmithKline Beecham Pakistan and Glaxo Wellcome Pakistan and it stands as the largest pharmaceutical company in Pakistan today.
GSK leads the industry in value, volume and prescription market shares. Some of their key brands include Augmentin, Panadol, Seretide, Betnovate, Zantac and Calpol in medicine and renowned consumer healthcare brands include Horlicks, Aquafresh, Macleans and ENO.
GlaxoSmithKline (GSK) is one of the Pakistan’s largest research-based pharmaceutical corporations that discovers, develops, manufactures and markets branded human health products. GSK has two main business divisions, pharmaceuticals and consumer healthcare. This profile deals with the pharmaceuticals division, which generates 85% of GSK’s sales.
GlaxoSmithKline (GSK) is also Pakistan’s leading research-based pharmaceutical company with a powerful combination of skills and resources that provides a platform for delivering strong growth in today’s rapidly changing healthcare environment.
GSK also has leadership in four major therapeutic areas – anti-invectives, central nervous system (CNS), respiratory and gastro-intestinal/metabolic. Company produce medicines that treat six major disease areas – asthma, virus control, infections, mental health, diabetes and digestive conditions. In addition, GSK is a leader in the important area of vaccines and are developing new treatments for cancer and has a growing portfolio of oncology products.
The company also has a Consumer Healthcare portfolio comprising over-the-counter (OTC) medicines, oral care products and nutritional healthcare drinks, all of which are among the market leaders.
GSK is primarily focused on the development, production and distribution of its own products. GSK is an important contributor to the national skills pool in areas of chemical and pharmaceutical research, manufacturing, management practice and sales & marketing.
Registered Office:
1. GlaxoSmithKline Pakistan Limited
35-Dockyard, West Wharf,
Karachi -74000.
Telephones: 92-21-2315478-82
Fax: 92-21-2313632
Other Offices:
1. GlaxoSmithKline Pakistan Limited
F-268, S.I.T.E.,
Near Labour Square,
Telephones: 92-21-2570665-69
Fax: 92-21-2572613
2. GlaxoSmithKline Pakistan Limited
18.5 km, Ferozepur Road,
P.O. Box No. 244,
Telephones: 5811931-35
Fax: 5820821
Five Years Sales
SALES (rupees in billions)
9.4 (Growth by 6.2%)
10.1 (Growth by 7.1%)
Company’s Five Years Profit
PROFIT (rupees in billions)
1.81 (Growth by 23.3%)
1.66 (Decrease by 8.2%)
Revenue breakup
Ratio Name
Inventory Turnover
1.69 times
10.11 times
4.69 times
3.0 times
Total Asset Turnover
1.17 times
1.1 times
Profit Margin on Sales
Earnings Per Share
Return on Assets
GSK’s value is based on its research strength linked to production & marketing. The core of value creation is from the inventories of new chemical entities and it captures value through a high intensive sales and marketing process. Essential to the overall value proposition is the synergy of R&D, production and commercial activities. GSK has been committed to its social and health related activities. Good Corporate Citizen is core value of GSK.
Core values of GSK’s can be summed up as a belief in performance with integrity, coupled with entrepreneurial spirit, focus on innovation, a sense of urgency and a passion for achievement.
GSK are working to ensure the culture guides and informs everything they do by adhering to these core principles, they seek to create a climate in which the best people can always achieve to their full potential, and in turn help millions of people live longer, healthier and happier lives.
Production and commercial activities
Synergy of R&D
High intensive sales
Core Competencies of GSK :
GSK has the core competencies in genetics, to enable them to integrate genetics effectively and responsibly into their current practice. Competency in these areas represents the minimum knowledge, skills, and attitudes necessary for health professionals from all disciplines (medicine, nursing, allied health, public health, dentistry, psychology, social work, etc.) to provide patient care that involves awareness of genetic issues and concerns.

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GlaxoSmithKline (GSK) is one of the Pakistan’s largest research-based pharmaceutical companies that that discovers, develops, manufactures and markets human health products. It is an innovative company that produces branded products only, which it has developed itself. The company has two main divisions, pharmaceuticals and consumer healthcare. The consumer healthcare businesses of GSK consist of over-the-counter (OTC) medicines, oral care products, such as the toothpaste brands Aqua fresh, MacLean’s and Sensodyne, and nutritional healthcare drinks. The pharmaceuticals division is the largest part of GSK’s businesses and can be divided into prescription drugs and vaccines. The headquarters of GSK are located in the UK. The company operates in some 160 national markets. GSK conducts R&D at more than 20 sites and employs 15,000 employees in R&D. GSK is involved in many different R&D partnerships with academic institutions, biotechnology companies and other pharmaceutical companies. The company has a leading position in genetics and in new drug discovery technologies.
Consumer healthcare
Prescription drugs
Over-the-counter (OTC) medicines
Oral care products
Nutritional healthcare drinks
Viral Vaccination
Aqua fresh
Heart disease
Skin condition
GSK’s business goal is to be a world leader in pharmaceutical industry. In order to achieve this, the company seeks to improve its R&D pipeline, using a focused drug portfolio strategy and selective in-licensing agreements for the external contracting of R&D. The company links R&D closely to commercial operations to maximize the value of its R&D portfolio. Furthermore, GSK seeks to increase brand name recognition among customers and to develop improved versions of older products, on which new patents can be obtained. It is a common strategy of branded drug producers to develop improved versions or more convenient formulations of drugs on which the patents have expired, and to persuade doctors and patients to use the enhanced version.
Business strategy
Being best place for best people to do their best work
Optimising the performance of key products
Delivering the product pipeline for patients
Improving access to medicines
Supply Chain of GSK
Supply Chain Management according to GSK, is a process for ensuring continuity of supply through the rapid identification of actual and potential supply chain issues enabling pro-active management and the prevention of low and out of stock situations.
GSK’s Supply Chain mission is to construct, harmonize and improve quality of all the product and go with the intend of satisfying the chain of suppliers’ suppliers and customers’ customers by providing right product, at the right time, in the right quantity, to the right place and becoming highly recognized by our employees, customers and shareholders and abiding by Government laws and regulations
GSK’s Objective of Supply Chain Issue Management
• To prevent low and out of stock situations occurring.
• Pro-actively identify any potential supply chain issues with the purpose of
preventing low stocks and stock outs occurring.
• Resolve supply chain issues, at a local level where possible, excepting
issue types categorized for immediate escalation.
• Provide a fast and effective mechanism for escalation where issues
cannot be resolved at local level.
• Enable delivery of root cause analysis – complete with follow up action – to
ensure the causes of actual and potential low stocks and stock outs are
• To have one information source for all supply chain issues.
• To have global visibility of all supply chain issues.
• To enable rapid tactical response to commercial opportunities
Supply Chain Integration
sales force activity (SFA)
factory Warehouse
Sales stations/Warehouse
GSK’s Supply Chain Structure
Mr. Ahmad Jamal Qudsi (Commercial)
Distribution Manager
Mr. Sajjad Zahid Shaikh (GMS)
Manager Procurement, Shipping, Contracts, Regulatory affairs.
Exports mANAGER
Warehouse mANAGER
Mr. Obaid (GMS)
Purchase Manager
Sales Force Activity
( Demand Generated)Supply Chain Process
Manufacturing Planning
(Demand Generated)
Procurement Planning
(Quotations asked)
Follow up —import & dispatches
Clearance Transit Time
Material in Warehouse
Material Available For Production
Released by LTR
FO Batches
Packing line
FO Quarantine
Central Depot’s
Lab Test Results (LTR)
Satellite Depot’s
& Distribution
GSK’s Global Manufacturing & Supply Procedure
GMS site disposals will be co-ordinated within a consistent process alongside communication plans. A consistent process will enable GMS in meeting the business case objectives. The process proposed will generally recommend decisions to the CET based on a balance between:
• Realising the synergy benefits from transferring production
• Maximising sale proceeds
• Minimising local labour redundancy
• Ongoing supply security
• Managing political and other local sensitivities
Key features of the site disposal process are:
• It is GMS-managed with involvement of key stakeholders at the sites and in Legal
• External contracted assistance will enable global ‘marketing’ of the sites
A phased and co-ordinated approach:
Phase 1 – preparation
Phase 2 – search
Phase 3 – negotiation
The Escalation Process
Step 1:Daily (regular)
The regular dialogue between Demand and Supply managers is the foundation of SCIM. SCIM is only invoked when the agreed supply plan cannot be achieved and a resolution cannot be found by the demand and supply managers. Low stock and out of stock events are entered into the SOLS system or generated automatically. Demand and Supply Managers discuss entered events as appropriate. Supply Managers – make proposals to resolve the event. Demand managers read proposals and agree by accepting the suppliers response to events with the customer satisfaction “flag” as a default value of “yes” or disagree and move the “flag” to “no”. If ”no” is selected then commentary may be entered into the escalation field. This enables a report to be run selecting any items marked for escalation. Demand and Supply Mangers proactively view trends, and any issues which might potentially impact the supply of product.
Step 2: Wednesday
The Supply Manager prepares for the PCM. Reports are available from SOLS and other supporting computer systems identifying all issues. In particular, the SCIM report from the Data Warehouse. This is to be run for All Issues (in SOLS issues are referred to as events). The Supply Manager cuts his report in preparation for the PCM at the latest this is done on the Thursday morning.
Step 3: Thursday
The PCM is held. At sites of supply the PCM review all Low Stocks, Out of Stocks and any issues and their potential impact on the sites’ ability to supply. Where no resolution to actual and potential issues is found then the Supply Manager invokes the escalation procedure with the ALM or equivalent. N.B. Issues can be escalated by either the Demand Manager or the Supply Manager
Step 4 Thursday/Friday
The ALM (or equivalent) is brought in by either the Demand or Supply Manager to help resolve the issue identified. The ALM (or equivalent) runs the SCIM report from the Data Warehouse filtering on Unresolved Issues. If resolution can still not be made then the ALM progresses the issue with the Regional Logistics Director (RLD). RLD chair conference call with ALMs (or equivalent) and any guest Demand or Supply Managers required. RLD compiles consolidated market view for region of issues. RLD tries to find network solutions to supply issues. RLD flags unresolved issues as critical issues in SOLS.
Step 5 Monday
The Area Logistics Managers / Directors are brought into the discussions to assist resolution – if necessary – especially where a potential stock rationing situation might occur. VP of Global Logistics (VPGL) runs the SCIM report from the Data Warehouse filtering on Critical Issues. VPGL chairs conference call with RLDs and any guest ALMs, Demand or Supply Managers required. VP compiles consolidated market impact for issues. VPGL flags any unresolved critical issues as exceptional in SOLS. VPGL makes decision escalate critical issues and engage commercial and manufacturing executives.
Step 6 Tuesday
Formal review by RSDs, Vice-President Global Logistics, Senior Vice President Global Logistics and Strategy and any other appropriate senior manager. The SCIM report is run from the Data Warehouse filtering on Exceptional Issues. An output from this meeting (or teleconference) can be the establishment of a ‘virtual’ team to resolve the issue. It will exist until the issue is resolved and is lead by the ALM (or equivalent) supported by the RLD. Where stock rationing is required the RLD will trigger the Rationing process VPGL reports on the commercial impact of exceptional issues. The RLD assumes overall responsibility for resolution of the exceptional issue.
Supply Chain Process:
Supply Chain Issue Management (SCIM) is a process for ensuring continuity of supply through the rapid identification of actual and potential supply chain issues enabling pro-active management and the prevention of low and out of stock situations and regular communication occurs between demand and supply managers. The process is driven from bottom up rather than top down. Issues are to be resolved at the lowest level. Trending analysis is to be done by the Supply Managers. The process is two way between demand and supply. Both supply performance and forecast accuracy are to be reviewed.
GSK, Pakistan
Planning in GSK, Pakistan, is done by the demand function unit of the finance department. Below is a general diagram which shows how the planning takes place:
The Process:
The process starts with the doctors which prescribes medicines to the patients. The patients then ask for the drugs from the chemist which is basically a retailer. From retailer an order is then passed on to the distributor which then simultaneously ask for the drugs from the company. Now the daily data on sales is sent to the SMART Department of GSK which uploads the information in the database. Finally the queries and reports which are generated by the SMART Software help the Demand Managers, in the finance department, to predict the future demand for the specific drug.
SMART Software basically creates the trend which help managers see the rise and fall in a drug’s demands over the years. This helps them to accurately tell the procurement managers the demand required for the raw materials to be purchased for a specific drug.
The corporate executive team of GSK does strategic planning on every last day of week which is co-ordinate within a consistent process alongside communication plans. The process proposed will generally recommend decisions to the CET based on a balance between realizing the synergy benefits from transferring production, Maximizing sale proceeds, Ongoing supply security.
Corporate executive team (CET)
CET & VP, Planning & Sourcing
CET approval
Corporate executive team
As mentioned above the demand in GSK is forecasted by the Demand Function Unit of Finance Department. Finance department provides 24 months rolling aggregate demand forecast, which is known as ADS (Approved Demand Statement). This statement shows individual demands for all product lines demanded by end users. The softwares used by the finance department to predicts demands are BIPEX (also known as BPCS) and JD-Edwards.
On the demand side markets review their sales plans on a regular basis (at least monthly depending on size of market) and feed into the supply sites Production control Meetings through the Supply Managers
Unplanned demand is a demand, which comes unexpectedly Like at the time of War, NATURAL DISASTERS OR ANY EPIDEMICS According to GSK, they have a policy to maintain four weeks safety stock to handle the uncertainties.
Stock, in the three categories, intended to maintain supply continuity resulting from a significant event that is unplanned.
Top 20 Products (as defined by GSK annual sales, Pharma/Consumer Healthcare)
Medically Critical and Access to Medicines products
New Chemical Entities (NCEs), including Product Line Extensions (PLEs)
Supply Issues (potential and actual) are reviewed formally each week. At the supply sites this is done at the weekly Production Control Meeting. Supply Issues are managed on a daily basis but the formal weekly meeting brings all aspects of supply and demand together for review; it adds a framework. Then after the supply plan has been made it is forwarded it to the Procurement Department.
Master Production Schedule
The entire production is based on this plan weather it is Tablet, syrup, or injectables manufacturing. This is set up on the bases of forecasted and some times unplanned demand as well. Date for all the batches is set up according to this plan but when there is a sense of urgency then there are some changes made. The figure below shows this process is generated:
Master Production Arrival
This is the inventory, which is going to arrive in bulk, and it is the job of Master Production Scheduler to arrange the bulk. This bulk can either be for export or for the market demand done through forecast. He also sets up when to make the required batch on which date.
GSK used inventory management system First in First out (FIFO). Inventory management (FIFO) of strategic stock to ensure proper rotation and reduce the potential of data used. Items at stock keeping unit level where, based on the forward sales forecast/ sales orders, the level of inventory is predicted to fall below 50% of the agreed safety stock within the next 90 days.
GSK stores stock in ware houses for maximum flexibility of supply purpose. The stock is taken into account within 1 month of time.
Material Management Planning:
GSK, Pakistan is using BIPEX (also known as BPCS) to effectively and efficiently handle the Material issues. All transactions are made electronically into BPCS known as Business Planning & Control System. If there is an additional requirement due to abnormal demand then there are some changes made in MRP.
Capacity Planning
Capacity means a measured ability to accomplish work. Capacity planning is a process in which capacity is planned based upon expected demand and it needs to be balanced with required capacity utilization and it also outlines the capacity requirements for the production, availability of machines and what are the standard hours, which they are required to meet the forecasted demand. And to manage the capacity control process GSK Pakistan is using 2 systems known as JD-Edwards and BIPEX which is also called as Business Process Control System (BPCS).
Supply chain manager act upon the process enabling pro-active management of potential and actual supply issues in order that the impact on lost sales is minimized. Supply chain manager resolve supply chain issues, at a local level. The Supply Manager prepares for the PCM. Reports are available from SOLS and other supporting computer systems identifying all issues. In particular, the SCIM report from the Data Warehouse. .
GSK Pakistan is currently importing 72 drugs, which includes all its vaccines and expensive oncology medicines such as Hycamtin. The reason why GSK imports these products are because there manufacturing is very expensive and Pakistan is not self sufficient in the raw materials which are required to make these products. Infact the climate of Pakistan makes it very hard for GSK to manufacture vaccines here. Thus all its vaccines are imported from Belgium. Also, these products cater to a very small market segment and manufacturing them here would not be profitable.
Gsk Medicines contain active ingredients. They also contain other, additional ingredients called Excipients that help ensure the stability, safety and effectiveness of the medicine. They are also added to improve the medicine’s taste and appearance and to make it easier to take. Some may be used to prolong the life of the medicine
Pharmaceutical ingredients include both synthetic chemical substances as well as material with biological orgin. Various control methods with chemical, microscopic and microbiological testing is covered during the course. In addition, the different national and international quality control regulations for pharmaceutical ingredients are taught.
The Weekly Process
At the day-to-day level the Demand and Supply Managers are engaged in managing the fulfillment of the order book, ensuring forecasts are kept up to date, handling any un-forecasted (abnormal) demand, and resolving any issues. This is normal daily activity. Any issues arising must be discussed with the objective of resolving at local level. Issues can come from either the Demand or the Supply side. The Stock Out and Low Stock (SOLS) Data Warehouse system is the main vehicle for recording and reporting issues and actions taken between Demand and Supply Managers. It is used as a formal means of identifying and tracking issues and the actions taken to resolve them. It is a dialogue application for use by the Demand and Supply Managers. Demand nodes will accept the proposals or escalate through the hierarchy. Data can be manually entered into SOLS. Supply sites must respond to recorded stock-out and low stock events according to SCIM time table
GSK has an extremely large procurement organization largely left over from the 2001 merger between Glaxo Welcome and SmithKline Beecham. The purchasing group set a goal of developing what it called “best value purchasing” strategies, ensuring that GSK is getting the best possible price and cost for everything it buys. That means negotiating the best prices and making sure those contracts are adhered to.
GSK has two types of purchases i.e. local purchases and foreign purchases
Raw & Packing Material
Group purchases
Non Group purchases (party purchases)
NIP (non inventory purchases)
PR incorporated in:Incorporated By:Against Requisition of:BIPEXPPICPurchasesJD EdwardsConcern dept.NIPPurchase of inventory is approved through Firm Plan Order (FPO) by Purchase Planning and Inventory Control Dept (PPIC) and incorporates in system N.I.P. Concern department generate approved Purchase Receipt. Procurement Department (P.D.) received signed copy of FPO by PPIC and PR for N.I.P.
Raw Material
Packing Material
Fixed Assets
Consumable items
Quotation calling
Selection of Supplier through Quotation Evaluation Form
Placement of Purchase Order (PO) by P.D.
Information in PO:
Supplier name
Delivery schedule
Quantity Required
Rate (as decided with supplier)
Nature of MaterialMaterial Supplied at:PurchasesStores.NIPConcern Dept.
3way check:
Invoice WITH P.R. & P.O. by Commercial Finance
Issuance of INVOICE by Supplier.
Information in invoice:
Delivery Challan #.
Recording of Liability depends on LTR.
Supply of:Documents IssuedBYTOPurchasesReceiver’s Ticket.(RT)
Delivery Challan.Stores Dept.Quality Control (QC) Dept.NIPMaterial Receipt Note (MRN)Concern Dept.Incorporated in System.
Lab Test Report (LTR)
Incorporation of approved lots in BIPEX by QC
Up to the Quality
Accounts Dept. runs an auto report & identify NEW LTRs
Entries made by Accounts Dept. for new LTR’s: –
DebitCreditENTRY for NEW LTRStock (@Standard rate)xxxPurchases Price Variance (PPV)-GSTxxx PPV- Other than GSTxxx Provision for purchases(actual payable amount)xxx PPV variance (with the Diff.) Fav/ (Un-Fav)xxxxxxPurchases (actual payable amount)xxx Purchases ContraxxxENTRY for NEW INVOICE (after approval of QC)Provision for Purchasesxxx Vendor Control A/Cxxx
Entries made by Accounts Dept. for new MRN: –
DebitCreditENTRY for NEW MRNExpense A/C (NIP)xxx NIP Commitment A/C xxx ENTRY for NEW INVOICE NIP Commitment A/C xxx Vendor Control A/Cxxx
Payment to VENDOR
Entries made by Accounts Dept. at Payment Stage
DebitCreditVendor Control A/Cxxx Bankxxx Tax Liabilityxxx
Raw Material
Packing Material
Purchase FROM
Quotation Calling
Selection of Supplier
Raw Material
Finished Goods
Prices are already decided between GlaxoSmithKline Pakistan Limited & Group Companies.
Placement of Purchase Order (PO) by PD & they incorporates PO, in BIPEX.
Receives PERFORMA INVOICE (an agreement to sell) by Supplier.
Type of L/C
Opening of Letter of Credit (L/C) with Bank.
Information in L/C: –
L/C #.
Mode of transportation.
Type of L/C. (Usance / Sight)
Receipt of Shipment Schedule (SS), Supplier’s Invoice & Bill of Lading [B/L] (Negotiable & Non-Negotiable Copy).
Information in SS:
Date of Shipment.
Type of freight paid.
At usage at sight
Submission of Negotiable Copy of B/L to Shipping Co.
Submission of Non- Negotiable Copy of B/L to Ministry of Health for Approval of Material (as required under Drugs Act).
Delivery Order (Delivery Challan) receives from Shipping Co.
Submission to Custom for Clearance of Shipment.
Receipt of SHIPMENT
Certificate of Approval for Material by Ministry of Health alongwith exemption certificate (if any).
LTR Up to the Quality
Receipt of Agent’s Bill
Testing of Shipment by QC
Materials’ Average Lead Time
GSK Pakistan only uses air freight to acquire imported materials and its lead time is approximately 120 days. Note that when materials arrive they also take clearance time which is about 4-5 days for air freight

Corporate Profile Vision And Goals Of Osim Commerce Essay

OSIM International Ltd was believed a global leader in healthy lifestyle products. The company was originally founded by Ron Sim in Singapore in 1980 (OSIM Ltd., 2010). During that time OSIM was under the name of R Sim Trading, an electrical and household appliance company (OSIM Ltd., 2010). Using their small start-up capital, the company engages with the promotion of household products such as knife sharpeners, knife and mobile clothes drying rods. Apparently, in 1989, the company listed with the name “Health Check and Care”, and later on shifted their main focus to healthy lifestyle products. The time following this created great development for the company, and it manages to produce outlets in Indonesia and Malaysia (AsiaPulse News, 2002).
The company’s vision was to become the global leader in healthy life style products whereas their mission was to challenge the spirit of their clients. The goal of the company was to bring the healthy lifestyle to their consumers (Business Times-Malaysia, 2003 and New Straits Times, 2003).
Financial Standing  
The profitability ratios (Daroca, & Nourayi, 1996) in Appendix, the OSIM International Ltd’s 2009 revenues grew by 1% from 62% in 2008 to 63% in 2009. This along with an increase in selling, general and administrative costs has contributed to a reduction in net income from a gain of -21% in 2008 to a gain of 5% in 2009. From the record of OSIM’s balance sheet (see Appendix), the company actually suffers from profit decline due to the effect of global recession (Offers Style: New OSIM Store Now Open, 2004).
Figure 1. OSIM’s Profit and Turnover
Source: Osim International Ltd., 2009
As seen in Figure 1, the 2007 and 2009 performance is expressive compared in 2008. From these results, we can deviate that OSIM was not performing well in 2008 as compared to their expressive 2007 and 2009. Despite of some downturns in 2008 due to the global business crisis, the year 2010 shows interesting trend. From the gathered information, it is expected that in 2010 both the revenue and net income of OSIM will be constantly moving upward (See Appendix for complete details).

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OSIM’s PESTLE Analysis
Political Conditions – political influences include government stability, taxation policy, foreign trade regulations and social welfare policies (Davies, & Lam, 2001). The political situation of Singapore is very stable now or even in the knowing future, all of these are provided by its stable and high visibility law (CIA Worldfact 2010). This will assure OSIM and other foreign businesses that the political condition of Singapore will help them to have a stable operation in area. Actually, the corruption-free government, excellent political condition and highly developed and competent infrastructure of Singapore have caught the attention of investments from more than 7,000 multinational corporations from the United States, Japan, and Europe (Transparency International, 2009).
Economics- Singapore is an attractive market for medical home care technology makers and the newest trends. The opening of OSIM and the growth of medical home care technologies is supporting the demand for health services in Singapore. OSIM does not worry that the legislation could severely set back their most effective marketing (New Straits Times, 2003). Actually, Singapore is a highly developed and successful free-market economy. As of 2009 Economic Indicators, the CPI or the consumer price index of Singapore is 100 with Annual Inflation Rate of 0.6 (CIA Worldfact, 2010). Singapore has also 3% (2009 est.) unemployment rate with the GDP of $235.7 billion (2009 est.) (CIA Worldfact, 2010). Actually, Singapore enjoys an outstandingly open and corruption-free background, stable prices, and a per capita GDP higher than that of most developed countries. The economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and on a growing financial services sector (CIA Worldfact, 2010). Real GDP growth averaged 6.8% between 2004 and 2008, but contracted 2.1% in 2009 as a result of the global financial crisis (CIA Worldfact, 2010). As seen, there are lot of foreign businesses found in almost all sectors of the economy of Singapore. Basically, more than two-thirds of manufacturing contribution and direct export sales are provided by foreign business, although there are services sectors that remain ruled by government-linked businesses (CIA Worldfact, 2010).
Social cultural – In terms of social aspect, OSIM is quite in advantage in Singapore considering that the standards of living of people in destinations served by OSIM is good and most of them have the capacity to pay for their home healthcare technology needs. However, OSIM still needs to consider the tastes and lifestyles of people especially, their willingness to buy technology-based home care products (New Straits Times, 2004) since Singaporean consumers could prefer traditional medicine or Chinese physician rather than high tech equipment. But because of the advent of new technologies in any setting, this is a good timing for OSIM to grab the opportunity (Barton, Newell, & Wilson, 2002). The nature of its workforce is also part of external environment of OSIM whereas the Singaporeans are able to cope with the changes implemented in OSIM.
Technological – Today, e-business has become an integral part of operations in any business industry, with ultimate objectives of not only achieving cost saving but also generating additional revenue (Hormozi, Hostetler, & Middleton, 2003). Beyond to enhance their current product line, their further investment should be focus on improving and incorporating appropriate new technology. In Singapore, OSIM implemented and ambitious to become Asia’s leading Home Health-care products manufacturer and distributor and the company is determined to provide greater ease and convenience for its customers and business partners-enhancing efficiency and economic benefits, as well as creating new opportunities for further business growth (New Straits Times, 2004).
Legal – As with any other business industry of the world, there are rules and regulations that restrict or support the facilitation of the business in the Home Health-care products market in the areas where OSIM operates (New Straits Times, 2004).
Environmental – There are currently no major environmental issues faced by the OSIM in Singapore considering that Home Health-care products are not only good for people but also to our environment (New Straits Times, 2004).
OSIM’s SWOT Analysis
With respect to the given information in the company website, the following presentation will show the SWOT analysis of OSIM. Actually, SWOT analysis can provide a framework for identifying and analyzing strengths, weaknesses, opportunities, and threat (Feist, Heely, Lu, & Nersesian, 1999).
Adapted from:
TOWS Matrix
From the SWOT presented the TOWS matrix for OSIM’s operation in Singapore is made.
External Opportunities
External Threats
1. Enhance and expand the market of its Internet Business
2. Growth of the company’s subsidiaries.
3. Increased customer loyalty.
4. International consumer reach through the use of e-commerce or internet marketing
1. Emergence of highly competitive company.
2. Economic downturn.
3. Increasing prices of key inputs.
Internal Strengths
Focusing on internet marketing approach to enhance internet market.
Providing high quality content to gain customer loyalty and good customer relationship
Strong reputation and resources of OSIM to attract industrial expertise which can improve customers’ trust in considering its Internet channel.
Consideration of joint venture and sustainable merger and acquisition to improve and expand market portfolio in other parts of the globe.
Enhancing home healthcare products and services to meet the need of the target market.
1. Good Customer relationship
2. Diversified products and services offered to different customers in the international contexts
Internal Weaknesses (W)
Managing financial resource effectively to minimise weaknesses
consider joint venture and other investment to international market to enhance customer reach
Applying strategic management structure to gain shareholders and stakeholders’ trusts
Investing in information technology infrastructure
Enhancing brand loyalty though customer satisfaction.
1. Inability to manage financing sources
2. Limited access to international markets.
Adopted from:
Porter’s Five Forces of OSIM
A Five-Force model (Ali, 1993) was conducted in the context of the global home health care industry . Despite being a market leader, OSIM is not yet resting on its laurels of success, but instead, continuously innovating and developing their company in order to maintain what it has managed to achieve up to this time. The following identifies the five forces of OSIM:
Industry Competitors- In the global business industry, regulatory and technological changes are the main catalysts, making entrenched competitive structures obsolete and mandating the development of new products, new processes, new strategies, and new public policies toward the industry under analysis (Leuz, Pfaff, & Hopwood, 2004). Financial centres, in vigorous competition with each other, have undergone further regulatory change in their efforts to capture a greater share of international trade in financial services, even as common efforts at the regional and global level have tried to support safety and soundness and a reasonably level competitive playing field (Pike, & Neale, 1999). Basically, there are numerous home health care players in the industry, included in the list is OSIM, who strive for market leadership in all their business aspects. As such, the level of industry competition is very stiff and very aggressive.
Potential Entrants- Natural barriers to entry in the global home health care industry include the need for capital investment, human resources, and technology and the importance of economies of scale. It also includes the role of contracting costs avoided by a close relationship between the vendor and its client, which in turn is related to the avoidance of opportunistic behaviour by either party.
Buyers – Home health-care products have a long history–a history rich in product diversity, international scope, and, above all, continuous change and adaptation. These competitive changes have forced adaptations, and in general have improved the level and efficiency offer to clients, thereby increasing transactional volume. Coupled with these, the customers have become informed concerning home-health care products that OSIM-like companies offer.
Suppliers- The suppliers to this industry are mainly the providers of technology and materials in home health-care firms use in the conduct of their businesses. There is an enormous variety of new ‘hard’ and ‘soft’ technologies at work within the said industry. Hard technologies include advances in telecommunications, computers, analytics, software tools, and video communications, which are enabling participants to have better information at lower cost; to integrate this information with thinking, communication, and analysis; and, finally, to use the resulting knowledge along with other technologies to distribute services to clients more efficiently, effectively, and economically.
Substitutes -There is a high level of substitutes for the healthy and lifestyle products industry, evidenced by the numerous numbers of major players in the global market. The cost to transfer to another beauty firm is also relatively low, so the substitution rate is pretty high.
Grand Strategy Matrix
Adapted from:
In terms of grand differentiation strategy of the company, OSIM belong to the market in which the growth was slow. However, the company was the leading business in this industry that defines their strong competitive position.
Differentiation Strategy
In order to place OSIM as a leader in Home Healthcare Products, there should be a so-called differentiation strategy that clearly identifies why OSIM is different from other brands. The differentiation strategy of OSIM was based on their:
Wide experience in home health care market – as they have been in the business for almost 42 years now, their directors can consider their experience in operating venture as strength (OSIM Ltd., 2010).
Reasonable price offerings of products and services- since they able to keep their overheads low, this allows them to have better control of their prices. This is considered strength because naturally, people would look for a reasonably-priced place to stay in that equally do not sacrifice service and product quality (OSIM Ltd., 2010).
Already has developed a good reputation for value for money – since they have been operating for great number of years, they already have built a name for themselves, attracting a number of loyal customers along the way (OSIM Ltd., 2010).
Good industry skills – the directors of different divisions of OSIM are natural for the business that they ventured into, both being outgoing and friendly, the most important public relation skills that clients look for (OSIM Ltd., 2010).
The Boston Consulting Group Approach (BCG Matrix)
There are 9 important business units for the OSIM, which are grouped according to the city or country that their operation is located: Singapore, China, Hong Kong, Indonesia, Malaysia, Taiwan, Canada, UAE and USA.
Figure 1 BCG Matrix
Adapted from:
Cash Cow – a business unit that has a large market share in a mature and slow growing industry. Thus, it requires a little investment and generates cash that can be used in other business units (QuickMBA 2007). Malaysia is the only business unit that was included in the said category. This is because OSIM is considered as one of the most prominent and famous home health-care products distributor. Above all, one of the most important aspects to be considered is the number of competitors in the country.
Star – a business unit that has a large market share in a fast growing industry. This business unit generates cash, however, due to the rapid growth of the market, they require investment in order maintain the lead of a specific company (QuickMBA 2007). Hong Kong and Singapore are the two business units which included in the said category. OSIM is considered as one of the first home health care products manufacturer and distributor in the world, particularly in Hong Kong and Singapore. Because of that, OSIM had been able to gain competitive advantage, in terms of image towards the Chinese, Singaporeans and foreign visitors. However, because of the growing economy of the said cities, it had resulted to the growing number of players in the industry, thus pushed OSIM Hong Kong and Singapore to focus on different strategic plan and implementation that will maintain their competitive advantage.
Question Mark or Problem Child – a business unit that has a small market share in a high growth market. A problem child requires resources in order to grow market share, however, the fact if they will be successful and become stars is not sure (QuickMBA 2007). Canada, China and Indonesia are the three business units that were included in the said category. In China, OSIM has a small share in the market because of the extensive competition, primarily from the local players in the area. The said situation is the same in Canada. On the other hand, the OSIM was included in the said category because; the hotel was one of the newly developed hotels of the group.
Dog – a business unit that has a small market share in a mature industry. UAE, Taiwan and USA are three of business units that belong to the said category. The reason behind the said analysis is because of the fact that UAE, Taiwan and USA are considered as three of the most prominent cities in the world. Thus, there are different huge companies that have already started their operations in there. Although it is important to consider that a dog may not required substantial cast, it is connected to the capital that could be better be deployed elsewhere, however in the case of the OSIM UAE, Taiwan and USA, it is considered as strategic purpose of the group in order to introduce their brand in the West and some parts of Asia.
Competitive Profile Matrix (CPM)
Critical Success Factors
Weighted Score
Weighted Score
Weighted Score
Market share
Price Competitiveness
Financial position
Product quality
Consumer loyalty
Adapted from:
With regards to competitive profile matrix, OSIM surpasses their top competitors OMRON and Sanyo. Actually, OSIM leads the victory in terms of market share and price competitiveness. The said key factors are OSIM’s edge against their competitors considering that their primary markets are located in Singapore, Hong Kong and currently no company poses a significant threat to them as a major competitor (Osim International Ltd. 2009). The company believed that they have the have a competitive edge over their competitors in their primary markets as their extensive distribution network of outlets is dedicated to home health-care products. As part of the business development of the company, they currently exercise the full control over their point-of-sales network and dictate to their distribution chain ‘how’ to sell and not only ‘what’ to sell (Osim International Ltd. 2009). Furthermore, OSIM also control their supply chain, from the design of the products up to the distribution and marketing of the products. In general, the company considers Sanyo and Omron as their competitors.
Overall Recommendation for Future Development
For the success and future development of OSIM, it is recommended that internal condition must be considered. Basically, the most important to consider was the human factor as it is the heart that’s drive the company. Having the right culture and people to create conducive environment, and be lead by strong visionary leaders and champion management that capable to manage its people and process. The external condition on the other hand, as shown in the PESTLE analysis must be also considered. With strong and stable external environment will contribute for the need to change strategic option. Furthermore, the full support from our Group and re-alignment with our other Hub is important without it it’s impossible to achieve the vision and mission. In terms of financial aspect all strategic option should involve financial investment that in term will bring cost benefit and growth. Especially in its market development by acquisition potential BPO that is more desirable and can bring in capital and value to OSIM. Apparently, in order to cope with the change the organization structure also need to realign and change. Especially in its organic growth, where having the right type of people and culture is the key to success. It structure management is important to execute the strategic option. Moreover, external market trend is more into technology with faster and reliable system. With high speed connectivity the market had been more competing and broaden it market widely. As seen each strategic option has very own risk but with stern control and better risk management can mitigate any potential risk and minimize the impact.
For continues success of the company, OSIM must also consider change management that will be the potential barrier since OSIM is still in it comfort zone. By doing an organisational development and learning it can identify the risk and overcome the barrier of change.
OSIM is passionate with customer importance and makes every effort to be an “all-weather umbrella” to its clients, by considering diverse strategies for varying situations. It had to branch out in order to equate revenue and expenditure, reduce risk and stay profitable, with an equal importance in its ability to anticipate change. The business of OSIM has begun a strategy of major expansion and growth with one clear objective, which is to establish themselves as one of the world’s top distributor of Home Health care products, and these strategies are based around a philosophy of organic growth and a transition towards becoming a client-oriented business.
With this detail, the business must go on to find innovative software programs and relate effectively to other companies that produce these software programs to become updated with the latest improvement in the World Wide Web. The business must economically and efficiently generate a good connection with their clientele and shareholders, to incessantly operate. OSIM must constantly conceptualise and execute good projects to be able to set trends in the industry. Apart from developing business strategies, the business have to focus on building employee and customer associations, in harmony to strategic management concepts, for it is necessary to establish and focus on the needs of the clientele, as clientele are the motive for being alive in the business.
In the end, businesses engaged so much in technology has its share of good and bad impacts, socially, economically and even environmentally. In addition, it has to be noted that retailing of home health care products is not one industry but many. Hence, the achievement of sustainable special intention business or its continual development for the collective benefits of the world, may therefore depend on a change in strategy and planning of the industry in order to identify common ground more easily, and to exploit further returns without sacrificing the one that lays the golden egg, in manner of speaking. All said, future research may have to focus on participatory planning involving business, governments, host communities and campaigners with a greater view to common ground.
Evaluation of Learning
In this project, I learned I lot of things when it comes to strategic management and handling a business. I learned that to sustain the development of a certain business, they should not only regularly assess the value of their portfolio of its business but also the overall business practices and movement in the global market. They need to be positioned on fast-growing opportunities, whether geographically or by market segment through choosing to invest in businesses with long-term tail-wind profiles.
In reflecting OSIM’s case, there are numerous business strategies that can be use in order to maintain business progress and development. All these efforts are conducted to ensure that the welfare of the business organization is preserved along with aims and goals toward sustainable organizational success and development. The fact remains that there are always unexpected as well as unintended risk environments that cannot be controlled by the members of the management executives and staff of business organizations. As such it is important to consider the faculty, benefits as well as advantages of implementing and utilizing strategic management, tools and techniques. At the level and global hazards present in the current business market environments, it is wise to ensure that the image and overall well-being of the business organization is constantly protected. These are possible through strategic use and application of company policies from which the company will benefit.
I also learned in this project that the business process and practice in terms of business management strategies clearly indicated the importance of management in averting and entirely preventing detrimental business chaos that economies may bring to business organizations. In the case of OSIM, it is evident that strategic management are highly influential in the formulation of business strategies. It was taken into account that any business and financial endeavour that will be implemented by business organizations should be assessed and evaluated using the existing company policies that are greatly influenced by the precautionary management.
The results of the analysis carried out on performance, financial and marketing indicated very significant effects on business sustainability, even amidst the threats of unrest (Riahi-Belkaoui, 1998). Therefore, we could conclude that the business strategies such financial and marketing could still be expected to improve business sustainability faster than average.
The strategies of OSIM focus more on the management and access of information rather the creation of irrelevant services and products. For this reason, OSIM has developed a unique set of guiding principles – simplicity, cost-efficiency and effectiveness. Total commitment to these principles makes the products of OSIM very user-friendly to its customers. OSIM was able to achieve a broad market leadership through various acquisition deals over the years even there is a stiff competition in the market. The strategies of OSIM are focused mainly on driving the growth of its home health care products and services and improving the company’s financial performance. These innovations have also helped secure significant acquisitions and partnerships. And more importantly, these innovations have led to the release of the potentials of the company’s employees, thus building a quality performance- based culture.
On the other hand, OSIM’s strategies in the home health care and technology industry changed for the better at the start of the new millennium and began pursuing products differentiation. True enough, the differentiated home health care products of OSIM were able to satisfy the needs of customers through a sustainable competitive advantage. This also justified that the bargaining power of their customer is high while the treat of their substitute and new entrant is low because of their extensive efforts in maintaining the quality of their products. Moreover, this allowed OSIM to desensitize the prices of their products and instead focused on the values that generated not only a comparatively higher price but also a better margin since these things could help to avoid business downfall.

Evaluate The Influences Of Performance Management Commerce Essay

The principle objective of this dissertation is to analyse and evaluate the influences of performance management (PM) in a Hospitality Organisation as well as the impact on employees and the organisations overall growth. The analysis also aims on demonstrating how performance evaluation provide helpful guidelines in assessing, evaluating and appraising employees performance in a Hospitality industry and rewarding or providing them with training and development where needed. The paper also explains how goal setting theory helps motivate employees when applied in order to perform better in a Hospitality industry. Therefore, the study aims on the impact of Performance Management on the employees and Hospitality organisation overall growth.

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In the past few years, the Hotel Industry has come across numerous changes. It suggests that no industry is resistant to resulting consequences of deregulation or the increasing growth of global competitors. One of the results of this progression in many hospitality organisations is the increase in reasonable obsession with quality and productivity. Hence, it is currently more essential to measure performance accurately in order to reward the employee and guide if any performance related problems through training and development. (Swan & Margulies, 1991:3)
Few decades ago, performance management was a primitive process and widely used to distinguish between good and bad performers. Whereas, now performance management is a vital factor in many job types and levels. Performance Management is not only used to distinguish but also to make various decisions about salaries, promotions and analyse the employee performance related problems in order to counsel and implement appropriate strategies to archive the Organisations objectives.
The conventional approach, unless handled with consummate skill and delicacy, constitutes something dangerously close to violation of the integrity of the personality.
Managers are uncomfortable when they are put in the position of “playing god” the respect we hold for the inherent value of the individual leaves us distressed when we must take responsibility for judging the personal worth of a fellow man. Yet the conventional approach to performance management forces managers, not to only to make such judgments and to see them acted upon, but also to communicate them to those who had been judged. (McGregor, 1957:37)
The “conventional” approach McGregor worried about is the practice of periodically determined whether and to what extent a given person has lived up to certain predetermined requirements. It is the “playing god” aspect that concerns managers the fear that what gets put on a piece of paper might spell the end of a man’s career, or the dashing of his hopes and aspirations (McGregor, 1957:38).
(McGregor, 1957:40) saw what so many managers have reported about performance management: that it is tricky, often subjective, and in many ways dangerous thing to do.
These managers feel that there is something inherently wrong with “judging” a man or woman. There are dreadfully afraid of making a once-and-for-all judgment which turns out to be wrong, and they are as much or more afraid of having to tell someone they are going to give him or her a “low rating” (McGregor, 1957:38).
The key purpose of PM in organizations is that it helps in; measuring the effectiveness of performance in the organization also, it helps in identifying training needs and largely promotes motivation towards work. But, how exactly does performance management help in running the organization? Every organization has a set of objectives and functions and the main task is to accomplish the desired objectives and functions. This can only be achieved, if the employees know their duties well. Employees form an important asset of the company, therefore they should be provided with a proper package, remuneration and good training and development. All these facilities will only help the employee to be highly motivated towards their work and would help in producing the right output i.e. performance.
Performance management is used all over the world. Many organizations use PM in order to develop a clearer picture of their organization. The process allows an organization to measure and evaluate an individual employee’s behaviour and accomplishments over a specific period of time (DeVries et al., 1981).In recent years the attention towards performance management has increased rapidly, due to its important potential implications ,relating to fair employment practices and the because of increasing concerns about employee productivity in the organization.(Pearce and Porter,1996 ) What ultimately lies is the end product which is performance which has to proper, therefore, in order to achieve that, the employees should be utilized to the full extent.
Organizations have to be organized and systematic in their approach, so that they can extract the exact performance from their employees which can help them, to create a balance between performance and organizational objectives.
Performance management : Overview
The primary function of performance management is inform employees about the job, the effort needed to satisfy the job title, work ethics and attitude expected from them.
Performance management not only strive to assist individuals and the organizational performance but also formulates a baseline for future planning and strategies. The following are the main purposes of PM:
Establish a common vision among the employees by communicating the Hospitality organisations objectives about customer service and satisfaction through a mission statement.
Allocating of individual performance target parallel to the overall organizational targets.
Generate a formal assessment of the progress with regards to the targets and where necessary provide training.
Periodic assessment to evaluate the PM effectiveness towards the organizations overall performance and development. (Coates,1994)
According to McEvoy and Cascio (1990), the employees of the organization should be informed about their duties i.e they should be made aware of what is expected from them and have effective orientation approaching effective performance. Hence, the purpose is to provide the employees with essential information about their job and motivate them to work towards organisational objectives and goals. Employees find it easier when objectives are set in order to achieve targets. Locke’s (1968) Goal setting theory suggests that employees’ performance can be determined by the conscious goal levels. The theory is summarized as follows:
High level of performance is produced when hard goals are set than easier ones.
Higher levels of output are achieved due to few hard goals.
Behaviour is highly regulated by intentions.
How widespread is performance management?
Performance management is commonly used in most of the Western countries. From 1970 to 1980, in US the percentage of Hospitality Organisations using performance management increased from 89 % to 94% (Locher and Teel, 1988). In UK, similar to US experience a rapid rise in the use of PM (Armstrong and Baron, 1998). Big sectors such as Financial Services and Hospitality Industry in the UK prominently use appraisal. Cully et al (1998) suggested that the development of PM was primarily towards middle managers and few professional industries but todays is widely applied to non-managerial works and professionals. Developing countries like China, India, Hong Kong and japan are readily accepting and using PM.
Objective of the study:
The aim of this study is to explore the operation and effects of performance management in Multinational Company. It will assess whether the appraisal process creates a positive response or negative response from employees and assess the subsequent impact on employee attitudes and behaviours. The appraisal process studied is that of a Multinational company in UK. The appraisal system of this company was designed to improve employee productivity. The findings, suggests that the performance management system is important in the Multinational company among employees and the organization. The study also explains how performance management systems have encouraged employee development in the organization considered. An over view of the existing literature relevant to this topic is considered in the following chapter.
Structure of the Dissertation:
Chapter 1: Introduction:
A brief introduction about the purpose of the research is given. A brief overview of performance management is presented. Then the research objective is mentioned. Then a brief description about the remaining chapters is given.
Chapter 2: Literature review:
Chapter 2 comprises of Literature review. It starts with the history of performance management system. It explains how performance management system was evolved in the industry and what its current importance in the industry is. The chapter then, explains 10 the various concepts relevant to the subject. The purpose and perception of appraisal system is explained. This is followed by the process of performance management. The literature review was designed to explain the main motive of the research, therefore accordingly the relevant literatures pertaining to the research was only considered.
Chapter 3: Research methods
Chapter 3 comprises of research method adopted in the research. This chapter gives an overview of the research and the research objective. It then explains the purpose of qualitative research adopted in the research. It then highlights the relationship between the study and the research method adopted. The majority of the chapter explains how the data was collected for the research and the process of data analysis.
Chapter 4: Analysis of Data
Chapter 4 comprises of the Analysis section. This section gives a brief introduction to the parameters on which the employees are tested in the organization and the scale on which they are judged are explained. This chapter then explains the findings of the research. This section broadly explains the reaction of the employees, of the appraisal system of their company.
Chapter 5: Conclusion
Chapter 5 concludes the research by stating briefly the findings of the research and sums up the whole research. The conclusion also suggests recommendations for future.
Chapter 2
Performance management (PM) can be defined as the goal-oriented process that makes sure that the organisational processes work towards enhancing productivity of the employees and the organisation. It is an essential factor in achieving organisational objectives through measuring and improving the significance of the workforce. PM also consist of incentive goals and the corresponding incentive values which helps the relationship between performance and incentives.
The major focus in Business these days is performance management system. Even though the primary role of every HRM department is to contribute to performance, it is also important to provide training and performance appraisal. PM is a dynamic continuous cycle, unlike performance appraisal that arises at a specific time. In an organisation, every member or employee is a part of the on-going cycle. Every element of the PM system i.e training, appraisal and remuneration is associated and works towards the organisational effectiveness and each member works should be guided in accomplishing the set goals of the organisation. However, it is crucial to provide necessary training to improve the worker’s skills where needed as there is a direct co-relation between training and achieving organisational effectiveness. Additionally, there is a close relation between wage and performance in achieving organisational objectives.
As said by Robert J. Greene, CEO of Reward Systems Inc, “Performance management is the single largest contributor to organizational effectiveness. If you ignore performance management, you fail.” It is important that organisations to more strategic approach when dealing with performance appraisal. Therefore, the organisation should avoid “check the box, write a comment” ritual, and incorporate its mission statement and visions to the PM system.
Performance Appraisal
Performance Appraisal (PA) can be described as a formal process of assessment and evaluation of the employees on an individual as well as group level. The word “formal” is crucial, as it is important that the managers or supervisors review the worker or individual on a periodic basis. Even though, PA is only an element of performance management, it is very crucial for the success of performance management as it directly relates to the strategic plan set by the organisation. It is critical to evaluate team performance in many organisations where teams exist but PA in most companies concentrates on individuals. As emphasized, achievements, objectives and strategic plans set for development can be examined and evaluated by an effective PA system.
Although PA is somewhat considered as negative, unpopular and managers try to avoid the efficiency it provides. Not many Employers like conducting PA and workers dislike receiving them especially when it’s negative. Studies suggest that around 80% of workers are not satisfied with the PA system. Hence, if that is the case, why is it not yet eliminated? The sole reason why PA should not be eliminated is because it offers various opportunities to improve results and efficiency in an organisation which is important in today’s global marketplace which is highly competitive. Therefore, eliminating PA would be considered as a risky decision. Avoiding PA could also cause legal ramifications. Even after all the consideration, development of an effective PA system will always be an important function in management.
Uses of Performance Appraisal
In many organisations, an appraisal system assists in achieving numerous goals. However, in few firms PA is used in measuring and improving individual as well as organisational performance. The most common issue with PA is that a lot is expected from one form of PA system plan. For instance, a plan that is strategically designed to improve and develop employee skills may not be used in deciding wage increases. Although, if an appraisal plan is well designed it can be used in accomplishing the set objectives as well as performance.
Human Resource Planning
It is important to record data/information of employees in a firm so that it is easy to identify the potentials of who deserves to be promoted or have any area to improve. PA also helps in revealing if there is insufficient number of workers. An appraisal system should be designed and planned after considering the strengths and weaknesses of the HRM of the organisation.
Recruitment and Selection
Through the process of performance analysis, organisations can determine the performance potential on an applicant. Studies show that successful employees display specific behavioural traits while performing tasks. The data processed through performance evaluation help in setting standards for behavioural interviews. In the process of selection process, the employee rating can also be used as a variable against which test scores are compared.
Training and Development
Training and development is crucial for any employee as it acts as way to communicating what is expected and how. PA helps in drawing attention to these specific needs of training. For example, if an employee’s job involves the skill of creative writing and by the process of evaluation it reveals that he or she lacks in it or has poor knowledge about it, the employee will need appropriate training sessions. When managers of a firm lack the capability of administering disciplinary action, they need the necessary training to deal with this problem. Hence, identifying deficiencies and obstacles can be overcome by T&D sessions which develop and improve individual’s skills allowing them to perform better. An appraisal process does not train and develop individuals but determines the training needed by providing data.
Career Planning and Development
Career planning can be described as a never-ending cycle in which an individual sets profession goals and means to achieve them throughout his or her lifetime. However, career development is a more formal approach used by organisations. It involves recruiting suitable qualified and experienced people when required. PA can determine an employee’s potential through assessing its weaknesses and strengths. The data is also useful to counsel junior staff member and assisting in career plans.
Compensation Programs
PA evaluations help in making decisions dealing with wage or salary regulations. It is believed that organisations should reward employees with increase in pay when excellent performance is achieved. In order to increase performance, an organisation should implement well planned and designed PA systems and award the efficient workers. This not only increases performance but also keeps employees motivated to achieve better in future..
Internal Employee Relations
PA evaluation can provide crucial information used in making decision about the internal employee relations i.e promotion, demotion, transfers and dismisses etc. For example,
Performance appraisal data are also used for decisions in several areas of internal employee relations, including promotion, demotion, termination, layoff, and transfer. For example, an employee’s performance in one job may be useful in determining his or her ability to perform another job on the same level, as is required in the consideration of transfers. When the performance level is unacceptable, demotion or even termination may be appropriate.
Assessment of Employee Potential
Some organizations attempt to assess an employee’s potential as they appraise his or her job performance. Although past behaviours may be a good predictor of future behaviours in some jobs, an employee’s past performance may not accurately indicate future performance in other jobs.
The best salesperson in the company may not have what it takes to become a successful district sales manager, where the tasks are distinctly different. Similarly, the best systems analyst may, if promoted, be a disaster as an information technology manager. Overemphasizing technical skills and ignoring other equally important skills is a common error in promoting employees into management jobs. Recognition of this problem has led some ¬rms to separate the appraisal of performance, which focuses on past behaviour, from the assessment of potential, which is future-oriented.
Performance Appraisal Process
As shown in Figure 8.1, the starting point for the PA process is identifying speci¬c performance goals. An appraisal system probably cannot effectively serve every desired purpose, so management should select the speci¬c goals it believes to be most important and realistically achievable. For example, some ¬rms may want to stress employee development, whereas other organizations may want to focus on pay adjustments. Too many PA systems fail because management expects too much from one method and does not determine speci¬cally what it wants the system to accomplish.
The next step in this ongoing cycle continues with establishing performance criteria (standards) and communicating these performance expectations to those concerned. Then the work is performed and the supervisor appraises the performance. At the end of the appraisal period, the appraiser and the employee together review work performance and evaluate it against established performance standards. This review helps determine how well employees have met these standards, determines reasons for de¬ciencies, and develops a plan to correct the problems. At this meeting, goals are set for the next evaluation period, and the cycle repeats.
Establish Performance Criteria (Standards)
There is an old adage that says “What gets watched gets done.” Therefore, management must carefully select performance criteria as it pertains to achieving corporate goals. The most common appraisal criteria are traits, behaviours, competencies, goal achievement, and improvement potential.
Certain employee traits such as attitude, appearance, and initiative are the basis for some evaluations. However, many of these commonly used qualities are subjective and may be either unrelated to job performance or dif¬cult to de¬ne. In such cases, inaccurate evaluations may occur and create legal problems for the organization as well. This was the case in Wade v Mississippi Cooperative Extension Service where the circuit court ruled: In a performance appraisal system, general characteristics such as leadership, public acceptance, attitude toward people, appearance and grooming, personal conduct, outlook on life, ethical habits, resourcefulness, capacity for growth, mental alertness, and loyalty to organization are susceptible to partiality and to the personal taste, whim, or fancy of the evaluator as well as patently subjective in form and obviously susceptible to completely subjective treatment by those conducting the appraisals.
At the same time, certain traits may relate to job performance and, if this connection is established, using them may be appropriate. Traits such as adaptability, judgment, appearance, and attitude may be used when shown to be job-related.
When an individual’s task outcome is dif¬cult to determine, organizations may evaluate the person’s task-related behaviour or competencies. For example, an appropriate behaviour to evaluate for a manager might be leadership style. For individuals working in teams, developing others, teamwork and cooperation, or customer service orientation might be appropriate. Desired behaviours may be appropriate as evaluation criteria because if they are recognized and rewarded, employees tend to repeat them. If certain behaviours result in desired outcomes, there is merit in using them in the evaluation process.
Competencies include a broad range of knowledge, skills, traits, and behaviours that may be technical in nature, relate to interpersonal skills, or are business-oriented. Some managers recommend that cultural competencies such as ethics and integrity be used for all jobs. There are also competencies that are job-speci¬c. For example, analytical thinking and achievement orientation might be essential in professional jobs. In leadership jobs, relevant competencies might include developing talent, delegating authority, and people management skills. The competencies selected for evaluation purposes should be those that are closely associated with job success.
Research conducted by the University of Michigan Business School and sponsored by the Society for Human Resource Management (SHRM) and the Global Consulting Alliance determined that success in HR is dependent on competency and speci¬c skills in the following ¬ve key areas:
Strategic contribution: Connecting ¬rms to their markets and quickly aligning employee behaviours with organizational needs.
Business knowledge: Knowing how businesses are run and translating this into action.
Personal credibility: Demonstrating measurable value; being part of an executive team.
HR delivery: Providing efficient and effective service to customers in the areas of staffing, performance management, development, and evaluation.
HR technology: Using technology and Web-based means to deliver value to customers.
Goal Achievement
If organizations consider ends more important than means, goal achievement outcomes become an appropriate factor to evaluate. The outcomes established should be within the control of the individual or team and should be those results that lead to the ¬rm’s success. At upper levels, the goals might deal with ¬nancial aspects of the ¬rm such as pro¬t or cash ¬‚ow, and market considerations such as market share or position in the market. At lower organizational levels, the outcomes might be meeting the customer’s quality requirements and delivering according to the promised schedule.
To assist the process, the manager needs to provide speci¬c examples of how the employee can further his or her development and achieve speci¬c goals. Both parties should reach an agreement as to the employee’s goals for the next evaluation period and the assistance and resources the manager needs to provide. This aspect of employee appraisal should be the most positive element in the entire process and help the employee focus on behaviour that will produce positive results for all concerned.
Improvement Potential
When organizations evaluate their employees’ performance, many of the criteria used focus on the past. From a performance management viewpoint, the problem is that you cannot change the past. Unless a ¬rm takes further steps, the evaluation data become merely historical documents. Therefore, ¬rms should emphasize the future, including the behaviours and outcomes needed to develop the employee, and, in the process, achieve the ¬rm’s goals. This involves an assessment of the employee’s potential. Including potential in the evaluation process helps to ensure more effective career planning and development. You should remember that the evaluation criteria presented here are not mutually exclusive. In fact, many appraisal systems are hybrids of these approaches.
The most known purpose of performance management is to improve performance of individuals. Performance management has basically two important purposes, from an organizational point of view: The maintenance of organizational control and the measurement of the efficiency with which the organization’s human resources are utilized. (Cummings and Shwab.1973 pg. 55) but ,there are also a variety of other declared purposes and desired benefits for appraisal, including: Improving motivation and morale of the employees, clarifying the expectations and reducing the ambiguity about performance, determining rewards, identifying training and development opportunities, improving communication, selecting people for promotion, managing career growths, counselling, discipline, planning remedial actions and setting goals and targets.(Bratton and Gold,2003:284, Bowles and Coates,1993).
However, according to Armstrong and Baron, there is rise in more harder and judgmental forms of performance management than softer and developmental approaches. Therefore there has been a shift in performance management away from using it for career planning and identifying future potential and increased use of it for improving current performance and allocating rewards.(Redman and Wilkinson,2001: pg.60) Performance management can be used as an effective tool to improve employees’ job performance by identifying strengths and weaknesses of the employees and determining how their strengths can be best utilized within the organization and overcome weakness over the period of time. The next question that comes into mind is that who gets more out of the appraisal process the organization or the employees?
Who obtains more gain out of it? Either the organization or the employees or both of them. The following study gives us an explicit understanding of the different purposes of performance management in the organizational context and highlights the different key features of performance management. It also helps us to know who benefits from the appraisal system.
Mcgregor (1972) in his paper, “An uneasy look at performance management” said that formal performance management plans are designed to meet three needs, one of the organizations and one two for the individual: The following are his ideas about PA. Firstly, PA provides systematic verdict to back up salary increases, promotions, transfers, demotions or terminations. Secondly, PA forms a means of telling subordinate how he is doing, how his performance is towards the organization and suggesting the changes in his behaviour, attitudes, skills or job knowledge improvements ,they let him know “where he stands” with the boss. Thirdly, PA is increasingly being used as a basis for coaching and counselling of the individual by the superior.
Similarly, Murphy and Cleveland (1995) studied how performance management is used in organization. They compared ‘between individual’ and ‘within-individual’ performances. The ‘between individual’ performances was able to provide information to make decisions regarding promotion, retention and salary issues. The ‘within individual’ performances was useful in identifying the training and development needs which includes performance feedback, identifying the strengths and weaknesses of employees as well as determining transfers. Another use of performance management was found out through this study was that of ‘ system maintenance’ which was used to identify the organizational goals and objectives, to analyze the organizational training needs and to improve the personnel planning system of the organization. Finally, documentation purposes are to meet the legal requirements by documenting personnel decisions and conducting validation research on the performance management tools.
Bowles and Coates (1993) conducted a postal survey of 250 West Midland hospitality companies in June 1992, where the organizations were asked questions pertaining to the use of PM in the organization. These questions included the perceived function of PA in the management of work, its strengths and weaknesses, the role of commitment in the management of work. Through their survey they found out that PA was beneficial in the following ways:
PA was beneficial in developing the communication between employer and employee,
It was useful in defining performance expectations and
Identification of training needs.
An important study in the field of employee’s performance management program was conducted by Redman et al (2000) on National Health Service Trust hospital (UK). In this study, they explained the effectiveness of performance management in public sector. Their research was mainly to check in what context does performance management hold an upper hand in proving its worth in the public sector. The results however were pretty surprising. The results obtained showed that performance management was considered as ‘organizational virus’. Nelson (2000) adds that PA largely helps the employee to have a focused and fixed approach towards the target goal. He elaborates that appraisal system acts like a boosting factor for the employee to do his job well. It recognizes the employee’s capabilities in order to achieve the given objective and function. It also helps in knowing the shortcomings of the employees and acts like an important element, for career development and planning.
How is PA conducted? Shudnt b a question
Performance management system should not merely be a checklist of ‘do’s and don’ts ‘, it should provide a wider perspective to the employees. Performance management has to be designed in such a way that, both, the employee and the organization can obtain fruitful results from it. A performance management system should be made in such a way that the organization can ensure proper accomplishment of goals; at the same time the employee can expect clear and concise work expectations. Knowing what is expected from them is the first step in helping one cope better with the stress usually associated with lack of clear divisions. (Baker, 1984) 

Advantages Of Organisational Change Commerce Essay

The crux of this report is a discussion on organization change and whether the changes are good or it does damages that are not reparable. Firstly, organisational change is an essential part of today’s globalised work life. In modern’s economy, teams and organisations face rapid change like never before. Globalisation has not only boosted the markets and opportunities for more development and profit, it also provides opportunities for organisational members to process. However, in general, change processes make demands on both employees and management, regardless of the content of the change process. Facing of the tide of globalisation, one of the dominant disputes that human resource professional’s face is what method to improve organisational competitive advantage in the hastily changing environment. Organisational change come about multiple reasons, it is undertaken to ameliorate the accomplishment of that particular organization or a portion of the organization, for instance, a process or team. For organisations to be able to prosper, it is essential for them to go through an important alteration at different sections during their growth. Significant organisational change occurs when the overall strategy of an organisation changes, for instance, in order to achieve appropriate outcomes, accumulation or take away a big portion or usual procedure, and/or desire to alter the nature on how it works. Organisational change can bring about pros and cons.

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Advantages of Organisational Change
Change can assist a business to keep up with industry trends, making it more appealing to promising consumers as well as maintaining present consumers. For instance, one way to make sure that a business does not fall behind when an opponent established and markets a successful new product is by establishing and advertising a related product of its own.
In the process of organization change, employees will be able to acquire new skills, seek new opportunities and exercise their creativity in ways that eventually favors the organization through extra ideas and increased commitment. Knowledge transfer takes place during the process when people have idiosyncratic information that is valuable to other people, and thus learning takes place during the change.
In addition, the capability to clasp change can assist employees in a business by developing new opportunities. For instance, a worker who actively applies himself/ herself to learning the new office technology can also train others who are more uncertain. This leadership role has caused the employee to position himself/ herself as a person who has the ability to guide others and is capable of assuming extra responsibilities, making her a credible candidate for approaching promotion.
Furthermore, businesses that are capable at handling or even embracing change can promote an environment that stimulates innovation. Employees will be more willing to think in a more creative manner if their ideas are acknowledge by a manager or the business owner. By stimulating employees to think in a more creative manner will enable a business grow in long run. Either a good product or a marketing idea will enables a small business to achieve it success.
Finally, an erudite or personnel change in an organization can result in employee attitudes and morale being positive. When there is a change in human resources philosophy, it enables a much relaxed work ambience, for instance, dress down day on Friday; this kind of idea will definitely make the employees overjoyed. When an inflexible manager is substitute with one who always listens to employees’ ideas and feedbacks, employees will feel that their efforts are acknowledged and that they will give in their best regarding their job functions.
Disadvantages of Organisational Change
When major change takes place, the impact of transformation of an organisation can be effective and may frequently create complicated challenges. Change can present a risk and certain level of danger. The end results can be very costly and sometimes beyond recovery in terms of time, money, human resources, or equipments. It is known that human nature oppose change, especially if it is perceived to influence one’s lives adversely.
When an organsation is undergoing organisational change, such as: re-structuring, or merging, it will result in employees going through the feelings of tension, stress, and uncertainty, which results in the impact on employees’ productivity output, achievement, and engagements toward the organisation (Ashford, et. al., 1989). In other words, the aftermath can be out of discipline. The norm prefers foreseeable future but change disrupts it, which cause confusion and potentially an erosion of assurance. An employee lose confident and their ideas are not supported and acknowledge by the higher management may increase the stress of the employees and this might lead to staff not performing well in their daily work routine.
Secondly, during organisational change, staff members might experience loss of attachment. Most of the time, change requires working with new members, such as a new leader, or a new team. Gradually, employees will feel attached and develop a sense of faithfulness to their colleagues. Having to break up this faithfulness, can often be pressurised and make people anxious. Employees feel that the environment is doubtful, low tolerance of ambiguity, less freedom and ideal time for work, thus they will are unwilling to take risk, and therefore becoming less motivated and committed to making contributions.
Thirdly, organisational changes might lead to staffs having low morale. When the staffs opposed a change that is taking place in the workplace, they become less confident and felt hopeless about their professional future with the organisation. This is specifically so when there is a deficiency of communication within the organisation regarding the change. Lowered morale can disperse throughout the whole company, which will result in issues with both recruiting and retention of the workers.
Lastly, organisation change may result in less efficiency in employees. This is due to the employees spending much time focusing on withstanding the changes taking place in the organisation, which will results them becoming less attentive in their daily work routine which is affiliate with their jobs. Being less attentive in their work will reduce the level of adeptness and achievement among staff; this can influence the organisation’s fundamental. In reality, a decreased level of adeptness is the main reason why there is an organisation change, as changes are frequently build to reform a more cogent and productive company.
Change within an organisation will enable some type of improvement within an organisation. Even though the main intention is to bring out positive effects, but these changes frequently brought about some affection and sensation to those who are affected indirectly and directly. Although change may be a certain portion of handling profession, it is often not welcomed by employees, leaders or owners of the business. Employees are afraid to leave their comfort zone or they are afraid that they are not able to adapt to a different situation. Changes can affect a business’ success in long run and have a positive impact on it, while on the other hand a change that is short term can be agonizing.
In addition, change cannot be avoided. Some types of changes that will tend to affect employees such as reducing bonus, reducing monthly salary or even take away their benefits. All this changes might result in employees being devastated, especially to those who are the sole breadwinner. It is a challenge for organisations to make adeptness and betterment within its anatomy, while at the same time managing employee’s self-esteem and support for the organization and its responsibility. In conclusion, if changes are made, especially large-scale reorganisations, it is essential to communicate and associate all of the employees to the extent in which it can ensure a successful development.

The Express Transportation And Logistics Industry Commerce Essay

Using examples from FedEx Corporation and your own research on the Global Transportation and Logistics Industry, critically evaluate the: Strategic Vision and visionary Leadership behind FedEx Corporation
Federal Express is a global express transportation and logistics company that offers customers a single source for global shipping, logistics, and supply chain solutions. It was founded in 1973 by Frederick W. Smith. Since its inception FedEx pioneered the express delivery industry. The company focused on the core business of express delivery and provided overnight delivery services to the customers globally. However, the transformation of businesses and customers from old economy to the new economy forced FedEx to reposition itself from ‘overnight delivery service’ to a ‘one-stop-shop’ for the entire logistics requirement of the business. The company became the logistics service provider of leading organizations, like, General Motors.

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During the late 1960s, Frederick Smith (Smith) chanced upon an idea to start an airline courier company. During this period, it was common practice to send packages as cargo on commercial carriers like American, United or Delta Airlines. This practice had a number of drawbacks because passenger airlines usually operated during the daytime and were grounded at night. In addition, freight forwarders (the company responsible for carrying the packages from the airport to the destination address) usually did not offer home delivery. Smith felt the need to start an airline courier company that would address all these problems. During his college years, he recognized that the United States was becoming a service-oriented economy and needed a reliable, overnight delivery service company designed to solely transport packages and documents. He wrote a Yale term paper on this idea, and received ‘C’ grade. His professor thought it would never work. Fortunately for Frederick Smith, he didn’t take it to heart and ended up building that company he dreamed of.Smith found investors willing to contribute $40 million, used $8 million in family money, and received bank financing. He started Federal Express with over $80 million, making it the largest company of its time ever funded by venture capital.
In the last 36 years, FedEx has expanded horizontally with its five subsidiaries to include FedEx Express (formerly Federal Express), FedEx Ground (formerly Roadway Package System), FedEx Custom Critical (formerly Roberts Express), FedEx Logistics (formerly Caliber Logistics), and Viking Freight. As a result, the FedEx family has been able to compete collectively in the express transportation and logistics industries. FedEx’s strategy is to corroborate on selling and synergies for all FedEx companies, but run operations separately and keep each company’s strengths and markets separate. Today, services offered by FedEx include worldwide express delivery, ground small-parcel delivery, less-than-truckload freight delivery, and global logistics, supply chain management, and electronic commerce solutions. Federal Express is the world’s largest package delivery company today.
FedEx began its’ operations with the sole focus of improving customer segmentation, pricing and quality of services for the overnight delivery market in the United States. Since then, it has grown to provide leading document and freight services for the entire North America and for over 212 countries abroad.
Federal Express Corporation had the visionary leadership to become the first mover in the express transportation and logistics industry leaving FedEx with one source of differentiation: their ability to help in the control of the entire supply chain management.
FedEx Firsts…
Company dedicated to overnight package delivery
Offer next-day delivery by 10h30
Offer Saturday deliveries
Offer a time definitive service for freight
Money-back guarantees and free proof of performance services that now extend to its worldwide network
The company’s ability to use technology and create its own supply of resources has made it difficult for competitors to match the company’s standards for service.FedEx has been successful mainly because of their technological advancements. Technology has allowed them to have superior customer service and quality that was unparalleled by any company. No company was able to offer overnight delivery of packages with the speed and precision that Federal Express did.
FedEx’s modeling capability gave them a competitive advantage as they implemented new methods and technology. They currently have a SuperHub with several regional hubs and packages are managed and tracked by a system called COSMOS. COSMOS – Customers, Operations and Services Master Online System, a centralized computer system to manage people, packages, vehicles and weather scenarios in real time. This system allowed customers to know where their packages are at all times and was later integrated for web use, allowing customers to track packages over the Internet. In addition, the customized delivery service of the company is unique in the market.
Mission Statement
The Mission Statement of FedEx is “to produce superior financial returns for stockholders, by providing high value-added logistics, transportation and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards”.
This mission statement shows that FedEx has a clear focus. (1) The main focus is to bring returns to stockholders. (2) They will emphasize adding value above and beyond just their service of transporting an object from one place to another. (3) Their focus of operations will be logistics, transportation, and related information. This mission statement is focused enough to keep FedEx from diversifying into for example, food products; yet vague enough to allow growth in all of those areas.
Federal Express holds a People-Service-Profit philosophy. The ‘People’ goal is the continuous improvement of management’s leadership. The ‘Service’ standard is 100 percent customer satisfaction. The ‘Profit’ goal is much like any other company’s goal, and is essential to long-term viability. This philosophy governs how FedEx runs its business, and defines strategies.
Federal Express Five-Point Strategy
Federal Express has five strategies that govern business tactics. These are to improve service levels, lower unit costs, establish international leadership and sustain profitability, get closer to the customer, and maintain the People-Service-Profit Philosophy.
The unique FedEx operating strategy works seamlessly – and simultaneously – on three levels.
Compete collectively by standing as one brand worldwide and speaking with one voice.
Operate independently by focusing on our independent networks to meet distinct customer needs.
Manage collaboratively by working together to sustain loyal relationships with our workforce, customers and investors.
People: We value our people and promote diversity in our workplace and in our thinking.
Service: Our absolutely, positively spirit puts our customers at the heart of everything we do.
Innovation: We invent and inspire the services and technologies that improve the way we work and live.
Integrity: We manage our operations, finances and services with honesty, efficiency and reliability.
Responsibility: We champion safe and healthy environments for the communities in which we live and work.
Loyalty: We earn the respect and confidence of our FedEx people, customers and investors every day, in everything we do
Transportation and logistics infrastructure within FedEx Corporation
FedEx started its operation by sending eight packages on the first night, of which 7 were trial run addresses from one employee to another. The company has since grown to handling an astonishing 9.8 million shipments per day.
An overview of FedEx’s Infrastructure:
Handling 9.8 million shipments per day
More than 700 aero planes,
Daily lift capacity of 12 million kilograms
Servicing more than 220 countries through 375 airports
Workforce of more than 140,000 permanent employees worldwide
500,000 calls are dealt with professionally
With this Infrastructure and new ones being added over time , the Purple Promise of “I will make every FedEx experience outstanding” is achieved with the collection and delivery of each shipment.
Physical goods when transported over trucks on a highway usually travel the most frequented routes. But as more vehicles start traversing that highway, and as the trips become longer, packages get delayed, go astray, arrive spoiled, or don’t arrive at all. To solve this problem, faster, more attentive carriers with their own hardware and infrastructure came into being: FedEx, UPS, Airborne Express, and so on. These new carriers pay attention to speed, tracking, billing, quality of service and automation. They also devised systems that didn’t travel through the middle of town, except for final delivery, and didn’t change hands en route. And finally, they offered lots of optional services to make life easier for both shipper and recipient.
Home delivery infrastructure:
As part of Infrastructure expansion plans of its U.S. delivery network, FedEx Corp. will add another 9 distribution hubs, bringing its total number of hubs to 39. In addition, a new home-delivery facility planned for Florida will be able to process more than 10,000 packages per hour.
The three hubs that are under construction are in Dallas, Cincinnati and Hagerstown, MD, the fourth hub in Memphis, TN. The hub expansion project will also expand the 30 existing hubs; this will nearly double the company’s average daily hub package volume capacity by the end of its 2010 fiscal year.
The expansion project will support a sharp growth in FedEx’s shipments to consumers on behalf of online retailers. The new Florida satellite distribution center, in Pompano Beach near Fort Lauderdale, will be three times the size of the two existing facilities combined, and will open with a workforce of approximately 356 employees and independent contractors, an increase from the current combined figure of 200 employees and independent contractors.
FedEx Smart Post’s best-of-breed technology ensures swift package processing and delivery. This technology provides shipment visibility throughout the delivery process of the packages while they are en route to their destinations. This enables to know always where the packages are and where they’re going next.
Advanced control systems, sophisticated automated sorters, and state-of-the-art data-collection devices enable FedEx to collect detailed information about every package. And the highly proficient logistics team is fully equipped to sort hundreds of thousands of packages each day.
The client tools are housed on a secure Web site, customized to meet the unique needs of each client. These tools provide timely access to package delivery information, logistics analysis, manifest detail, and billing statements, as well as the ability to create necessary reports needed in planning the package delivery strategy.
As a leader in the package delivery industry, FedEx provides with data and reporting needed to examine and enhance logistics operations on an ongoing basis.
Virtual information infrastructure at FedEx Corporation.
Though FedEx began as an express air delivery company in the early 1970s, it has successfully transformed itself into an integrated transportation and logistics service provider. A major part of FedEx’s success is directly attributed to its committed use of information technology (IT). IT has not only facilitated its business processes like operations, customer service and employee training but also integrated its information network with that of its clients to provide them with seamless logistic and supply chain solutions.
Dennis Jones, former Chief Information Officer (CIO) of FedEx says –
“IT (information technology) is a function that has a strategic value because the essence of our business is taking a basic service and adding information technology services to transform into a value added product. And that is very important. Any company can move freight from point A to point B. But the way you make it a valuable product to your customer is to wrap it with intensive information technology capabilities”.
Leveraging Information Technology
In the late 1970s, FedEx saw a great benefit in using IT to simplify its business processes. Smith had very early on understood that speed, reliability and customer service was an essential factor for success in the global transportation industry.
IT in Human Resources
FedEx had in place Interactive Video Instructions (IVI) that allowed employees to take advantage of slack periods to train themselves at any time of the day. The program was used for training and test preparation (Customer service employees at FedEx were tested twice a year on job knowledge).
IT in Customer Service
FedEx also used IT to improve upon its customer service, by monitoring various aspects of a customer’s transaction. The goal was to achieve “100% accuracy, quality, and customer satisfaction” on all transactions. One such system that FedEx used was the Service Quality index (SQI) that quantified every part of a transaction like “Was the package undamaged? Was the customer billed correctly?”
Using the Internet
The widespread use of the Internet from the early 1990s threw open significant opportunities for FedEx. Since the company already had an EDI based system on which it had spent a lot of money, FedEx decided to use a combination of Internet and the EDI. One example was the implementation done for the purchasing of products. FedEx purchased a product from a company called Ariba. Ariba was a requisitioning system that was housed on the FedEx intranet. The system was set up so that suppliers could maintain a database of catalogs that could be accessed by any FedEx employee.
The company website hosts more than 6.3 million unique visitors per month and handles on an average over 2.4 million package tracking requests daily. More than 2 million customers connected with the company electronically every day, and electronic transactions accounted for almost two-thirds of the more than five million shipments FedEx delivered daily. FedEx operates one of the world’s largest computer and telecommunications networks- more than 75,000-networked computers and thousands of hand-held computers that recorded and tracked shipments. FedEx’s data center processes more than 20 million information management system transactions daily, more than any other US company.
The company is involved in connecting 39 hubs across the globe, operating 677 planes and 90,000 vehicles, monitoring 200,000 employees and delivering six million packages daily in 220 countries where every second was important. This is the ‘FEDEX EDGE’, for which the company is known for. FedEx transformed both customer and business transportation model with higher speed, reliability, application of information technology, improved material handling system and streamlined logistics network. The company popularized the concepts of ‘just-in-time’ and ‘build-to-order’ which reduced customer’s lead time and increased productivity. Apart from venturing into ‘logistics solution provider’ the company was able to maintain its leadership position in small package and light freight market through its unique ‘hub and spoke’ model.
The role information technology has played in FedEx’s strategy is exciting. By using IT as a major part of its business, FedEx has reached an almost entirely new group of people. It has maintained its reputation and increased its business at the same time. IT has created a greater opportunity for customers in the global market. They can now request service, pay for that service, and track the package online. Customers no longer need to speak to FedEx. They are now free to order as they need, twenty-four hours per day, seven days per week. Because of this, FedEx’s strategy has changed. It is now focused on the use of the Internet and other technological advances. Because this is such a critical aspect of the strategy, the implementation of the strategy had to be almost immediate. To compete with other major businesses in the industry, FedEx had to provide a service to customers that could be accessed using technology. They also had to provide a package tracking service. As they developed this service, their reputation and business grew.
FedEx has done several things with its value chain to develop new business. First they have always recognized the need to have technology and IT work to communicate the logistics that they run. They have developed internet technologies that work simply and efficiently to enable customers and sellers to use FedEx as a go between. This has enabled many companies to integrate FedEx technology into their own web sites for customers to use.
Question Two: – Branding and business structure up until 19 January 2000
Using information from the case study and your own research, critically evaluate the benefits and limitations of Merger and Acquisition (M&A) strategies in the Global Transportation and Logistics Industry.
Discuss how FedEx Corporation managed the acquisition of Caliber Systems in 1998, and determine whether or not the acquisition of Caliber Systems was a success or failure?
Mergers & acquisitions in the Transportation & Logistics industry
The Transport and Logistics (T&L) sector is characterized by a significant level of privatisation, finance-raising and merger and acquisition activity. Transactions are often complex and impacted by the regulatory environment, competition issues, or need for contracted subsidies to support operations.
We have witnessed many privatizations of bus companies, ports and airports which have created successful private sector groups that have continued to grow via further acquisitions. In other segments there is ongoing global consolidation within and between operators from the courier, parcel, freight forwarding and contract logistics arenas. Postal organizations and railway companies that have historically been more nationally oriented are now seeking opportunities to expand into cross-border markets driven by a more commercial focus and liberal regulatory regime.
Transportation & Logistics
The Transportation & Logistics (T&L) industry forms the backbone of global supply chains. Postal operators as well as large logistics providers play a dominant role as key stakeholders in the T&L industry. In recent years some former national Posts have undergone an extensive transformation to emerge as multinational providers of complex logistics and financial services. These evolved entities face new competition in their core markets of mail delivery through the liberalization of markets and privatization.
At the same time, former Posts may be able to leverage their years of experience in collecting, processing, transporting and delivering national and international mail in order to develop and provide a broader palette of logistics based services, upstream with direct mail activities and downstream with package delivery and payment services. Further, many existing logistics and express companies have expanded well beyond simple delivery services and are now managing all aspects of the supply chain. These ongoing trends have changed the face of an industry which has become increasingly focused on serving customers in all parts of the world.
Mergers and Acquisitions: Three types
Merger: A transaction where two firms agree to integrate their operations on a relatively coequal basis because they have resources and capabilities that together may create a stronger competitive advantage.
Acquisition: A transaction where one firm buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of businesses.
Takeover: An acquisition where the target firm did not solicit the bid of the acquiring firm.
Problems in
Achieving Success
evaluation of target
Too much
Large or
extraordinary debt
Inability to
achieve synergy
Managers overly
focused on acquisitions
Too large
market power
Overcome ent
entry barriers
Lower risk
compared to developing new products
Cost of new
product development
Increased speed
to market
Avoid excessive
Reasons for
Benefits of Acquisitions
Increased Market Power: Acquisition intended to reduce the competitive balance of the industry
Overcome Barriers to Entry: Acquisitions overcome costly barriers to entry which may make “start-ups” economically unattractive
Lower Cost and Risk of New Product Development: Buying established businesses reduces risk of start-up ventures
Increased Speed to Market: Closely related to Barriers to Entry, allows market entry in a more timely fashion
Diversification: Quick way to move into businesses when firm currently lacks experience and depth in industry
Reshaping Competitive Scope: Firms may use acquisitions to restrict its dependence on a single or a few products or markets
Problems with Acquisitions
Only a “financial team” assembled and they make “the decision” (should have two teams: one financial and one organizational – where the organizational Team says “Yes” or “No”
Integration Difficulties: Differing financial and control systems can make integration of firms difficult
Inadequate Evaluation of Target: “Winners Curse” bid causes acquirer to overpay for firm
Large or Extraordinary Debt: Costly debt can create onerous burden on cash outflows
Inability to Achieve Synergy: Justifying acquisitions can increase estimate of expected benefits
Overly Diversified: Acquirer doesn’t have expertise required to manage unrelated businesses
Managers Overly Focused on Acquisitions: Managers may fail to objectively assess the value of outcomes achieved through the firm’s acquisition strategy
Too Large: Large bureaucracy reduces innovation and flexibility
FedEx Corporation has made 31 acquisitions while taking stakes in 3 companies. FedEx Corporation has 22 divestitures during this period.
FedEx-Caliber Merger:
Reason for Merger: FedEx and Caliber believe that the combination of the two companies will permit their customers to take advantage of a broader portfolio of services and choices at a level of excellence unmatched by any competitor. Stockholders of both companies will become stockholders of a $15 billion powerhouse in global transportation and logistics.
When FedEx announced in October 1997 that it was buying Caliber System for $2.4 billion, observers warned that the merger could disrupt FedEx’s already profitable express shipping business. Observers were wrong. FedEx finalized its Caliber System merger in January 1998, and by the end of that year, the new company, FDX, was posting a seven percent increase over the same quarter the year before. Domestic income grew 30 percent that period, from $168 million to $217 million. The company claimed that its tough cost controls and low fuel prices contributed to this short-term growth. FedEx subsidiaries that came from Caliber Systems also grew. RPS, the largest subsidiary besides FedEx, grew 14 percent for the period, while Viking Freight grew seven percent.
In the long-run, the merger strengthened FedEx’s overall health. UPS largely rebounded from a crippling 15-day strike in 1997, and now the two companies compete head-to-head for the express-shipping business in most markets. While FedEx does battle, several smaller companies continue their reliable service for niche markets, such as logistics operations, business-to-business transportation, overseas shipping, and small package delivery. FedEx has ensured its long-term survival by buying several of these smaller companies. After the Caliber System merger, FedEx included six operating divisions: FedEx; RPS, the second-largest small-package shipping business; Roberts Express, the world’s largest express trucking firm; Viking Freight, a leading regional trucking company; Caliber Logistics, a logistics outsourcing firm; and Caliber Technology, an order fulfillment operation.
Question Three: – Events leading up to the January 2000 reorganisation
Using appropriate examples from FedEx Corporation, critically evaluate FedEx’s financial and non-financial performance in the context of developments in the “Internet market and e-tailing” up to the January 2000 reorganisation.
Financial Performance Analysis
FedEx has an impressive performance record. In 1998 they had revenues of $15.9 billion grown 15 percent from 1997. Sales have been growing steadily for the past five years. The net income, though, isn’t that impressive. It even declined in 1997, from the rising fuel costs during that year. However, in 1998 it grew from $200,000 to $500,000. That could be from reduction in operating costs, or from the acquisition of the subsidiaries which had lower operating costs compared to Federal Express.
FedEx’s financial statements shows that its assets have not been utilized as well as other firms in their industry, but their profitability is better than other industry firms. Still they must decrease selling and administrative expenses while increasing sales. Many of their technological advancements have been financed primarily with internal cash, which decreases long-term debt. Future assets possibly and should be invested in the international market and new businesses, while still investing a decent percentage for technological advancements. Today FedEx has a competitive advantage over other firms and if they continue the practices that they have in the past, while also opening up to new ideas, FedEx will remain a powerhouse in the package delivery industry.
The financial ratios for FedEx clearly show that it is the market leader in this industry, have outstanding sales, a healthy profit, and a safe amount of debt. These ratios over time show a steady increase, except for year 1997, where fuel costs hurt FedEx deeply.
Company Analysis
In this section we shall discuss FedEx’s strengths and weaknesses as a company, opportunities and threats.
S.W.O.T. Analysis
Company Strengths and Resource Capabilities:
Globalism: Federal Express operates on a global scale in 211 countries. They provide services that appeal to most of the world, realize tremendous revenues and also achieve global economies of scale.
Innovation: Federal Express took airplanes and trucks and used them differently than any other company before them. This is innovation. They have first-mover advantage in name recognition because of this innovation. This has helped them to remain the industry leader since 1973.
Technology and Communication: Federal Express uses and continues to search for new technology. They allow spending of $1billion a year, 10% of total revenues, for information technology. That commitment keeps customers from switching to other providers. Federal Express also has excellent communication with their customers. They use tracking devices on all shipments, and customers can find out where their shipment is through many different avenues including a user-friendly Web site. Federal Express customers are assured that FedEx will always be on top of technology.
Strategic Vision: Federal Express’ will always have competent top managers in charge of strategic direction. Frederick Smith built an industry leader, and kept it in that position since 1973.
First-Mover Advantage: Federal Express has had first-mover advantage in several areas. (1) Being a global express transportation company. (2) Advanced technology and communication throughout the company’s operations. (3) Incorporating smaller companies with similar operations under its belt to synergize and control more of the market.
Strong Brand Image: In 1990, Federal Express became the first company awarded the Malcolm Baldrige National Quality Award in the service category. In 1994, Federal Express became the first global express transportation company to obtain simultaneous system-wide ISO 9001 certification in international quality standards. Federal Express has also developed their own quality system that matches their customer’s standards.
Company Weaknesses and Resource Deficiencies:
Rising Prices: Federal Express’ prices are above their competitors’. This can be a weakness if their customers do not perceive a difference between Federal Express and its competitors’ services.
Labor Disputes with Pilots: Federal Express pilots have formed the Fedex Pilots Association. This organization demanded changes in the pilots’ salaries, retirement benefits, and the fact that Federal Express outsources some foreign flights instead of giving their own pilots the job. The pilots have a Web site where news is posted and feelings are discussed. During the busy Christmas season in 1998, the pilots threatened to strike. Federal Express and the Fedex Pilots Association have developed a tentative agreement, which is published on the pilots’ Web site. However, the pilots do not believe this agreement fully meets their expectations. This dispute is definitely an internal weakness for Federal Express, considering they have 3,500 pilots employed with them. Their operations would suffer if there were strikes. When UPS employees went on strike in 1997, Federal Express took the extra 800,000 shipments a day. If Federal Express employees went on strike, their competitors could gain an advantage.
Running Subsidiaries Separately: FDX has deliberately chosen to keep their companies separate. In FDX’s 1998 Annual Report, CEO Frederick Smith states, “Simply layering the unique resource and operating requirements of a time-definite, global, express-delivery network onto a day-definite, ground small-package network would surely result in diminished service quality and increased costs. Under the FDX umbrella, we will leverage our shared strengths while operating each delivery network independently, with each focused on its respective markets.” Frederick Smith is confident this will be a strength, instead of a weakness. Time will tell.
Company Opportunities:
Expansion Globally: Federal Express can continue to expand globally, including the other companies under FedEX.
Expansion Internally: Federal Express can continue to acquire more companies, and expand into new technologies or areas in their industry.
Run Subsidiaries Together: If FDX doe

Value Chain At Siemens Wind Power Commerce Essay

Siemens is a world-class service provider with over 30 years of experience in providing high quality services with superior safety principles. Based on this significant knowledge, a flexible range of service solutions have been designed for both onshore and offshore projects, to optimize the output of wind turbines throughout their lifetime.
The purpose of the Service Department is to repair damaged main shafts of the wind mills. The range of operations in the service department can be divided into two main categories: On-site repairmen and substitutions of the damaged or broken main shafts.
At Siemens Wind Power the service department in many cases is prioritized down in the organization because it is costing the company money, and not really generating any money. The service department it just building up inventory, and haven’t run since January 2009.
So we decided to take a look and make a analysis of their value chain to have a overview of the current situation and to see if there are any problems which need solving.
A value chain is a chain of activities for a firm operating in a specific industry. A value chain typically consists of inbound distribution or logistics, manufacturing operations, outbound distribution or logistics, marketing and selling, and after-sales service. These activities are supported by purchasing or procurement, research and development, human resource development, and corporate infrastructure.

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We used the Value Chain framework of Michael Porter from the strategic management book because it breaks down the activities of the organisation into its many parts. Contribution of each part can be analysed for its contribution to the total value added by the organisation. Afterwards this can be used to see where to put in the effort and make improvements.
The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.
Primary Activities:
Inbound Logistics :
Includes receiving, storing , inventory control , transportation scheduling
They have a safety stock in Denmark in Tinglev that consist 5 pieces of each component and in USA they have the safety stock in Huston and consists 10 pieces of each component. The safety stocks are enough to cover demand of 35 days according to their forecast. Production capacity is 30 turbines a week of the 2.3 and 4 a week of 3.6 and they have 60.000 components.
Process when a part is broken: Demounting the defect shaft and then can be transported directly to Brande, or through the regional Headquarter and then mount it. Then it is send back to Fabriksvej and repaired and then to Tinglev, where it fills up a container, which consists of 2 main shafts. Lead time of one year of main bearings from the assembly department.
Includes machining, assembly, equipment maintenance.
The Costumers have to make the foundation, electricity and have the infrastructure. They are only buying turbines, costumers has to know for themselves the weather conditions etc. A wind mill costs approx. 18 mio. DKK for turbine without SLA. Siemens promises in the SLA that the windmill is running 95 % of the time. But it is actually running 97% of the time. Siemens fulfill the customers’ service contracts through the SLA (service level agreements) which is made in corporation with the customers. They have a Monitoring department that can see if the main bearing gets too hot and then switch it off and in the UK have their own monitoring departments but sometimes it brakes when it is turned on again.
Siemens can monitor the costumer without the SLA, but don’t, because they didn’t pay for the service. Only if the customers want it later, they can start monitoring them.
Outbound Logistics
The activities required to get the finished product to the customers: warehousing, order fulfillment, transportation, distribution management
In the past Siemens faced a problems with higher demand than expected and couldn’t deliver spare parts to the customer because of low safety stock levels there were a demand for 10 in UK because they were broken down, but Siemens only have the safety stock of 5, which is not sufficient but also keeping a high level of safety stock is also not good because it takes lots of money to keep components in the stock.
Siemens is not prioritizing the service department regarding the suppliers when they need to share capacity on old components, broken components or new components. When it is new components, the service department forecast a year ahead, to meet the demand.
Siemens in order to reduce variability in demand and increase flexibility in order to meet the demand they try to build a corporation with the service regions; USA, Germany & Uk to get a forecast from them at least 4 months ahead. Further they ask the regions to have service materials on stock, so they don’t get to many urgent orders. There is also a safety-stock in USA, which covers the demand for 35 days.
From this they are making forecasts to their suppliers, for them to be able to plan their capacity, they use Delta forecasting and using Delphi method compared with failure rates. The forecasts are updated every month by the demand management department.
Marketing and Sales:
The activities associated with getting buyers to purchase the product.
The Siemens service headquarters is located in Brande, Denmark for both onshore and offshore services. In order to optimize knowledge transfer and customer value globally, regional service centers have been established. These main offices are located in:
The United States of America
Singapore and
In an effort to stay close to the customer in the complex European region, the heart of the wind industry, smaller offices are also set up in:
The United Kingdom
Germany and
They get the most revenue of selling turbines .The markets are Europe, USA and Asia Pacific . Onshore is not growing in Europe, but in the USA and New Zealand it is expanding. Siemens are the best wind turbine manufacturers they offer high quality and good service for the ones who are willing to pay for it.
Their windmills are running 97% of the time, compared with Vestas´ windmills, which are running under 95 % of the time.
Brand name Siemens and with the history of bonus they are adding value to their product. The service department crew is adding value when there is a problem with the customers’ windmills. The service department has a monitoring department which monitors the windmills all the time.
The activities that maintain and enhance the product’s value, including customer support, repair services, installation, training, spare parts management.
The Costumers have to make the foundation, electricity and have the infrastructure. They are only buying turbines, costumers has to know for themselves the weather conditions etc. A wind mill costs approx. 18 mio. DKK, for turbine without SLA. Siemens promises in the SLA that the windmill is running 95 % of the time. But it is actually running 97% of the time. Siemens fulfill the customers’ service contracts through the SLA (service level agreements) which is made in corporation with the customers.
They have different types of SLA´s to meet the costumers’ needs. When a windmill breaks down, Siemens takes the part back and replaces it with a new one. Siemens Service department repairs the broken part, and then sell it again to another customer, 40 % of the sights (customers) are buying the long term SLA. Only in the service department; the costumers who pay more for SLA, get service first. 70 % want service, only pays 40 % for the quick lead time. 30 % don’t want service, but can buy spare parts.
In the service department there are two main categories of operations:
The first type of repairment is taking place on-site by service teams, send out by the service department in Brande, or by one of the regional headquarters in Houston, Germany or in the UK. On-site repairmen’s are taking place when the detected problem is a minor damage that can be fixed without removing the main shaft, and when the repairment can be done within the scope of the service level agreement. This means that the turbine has to be up and running again within one week.
The second type of repairment is when Siemens is facing a more serious damage that cannot be fixed on-site then the service department calls for a repaired main shaft from the safety stock, to use as a substitute for the operating and damaged main shaft. The regional headquarters are responsible for planning and execution of the arrangements needed to do a successful changeover of the main shaft. The teams which are send are trained especially for this operation, and the dissembled shafts are then transported to Denmark, where the repairment is taking place.
Technicians and monitor regions are responsible for telling if they have the new shafts. They communicate to the service department to supply new parts.
When it comes to repairing the wind mills Siemens has to face a seasonality. In the winter is not possible to fix any problems in the field that’s why Siemens is trying to fix as much mills as they can before winter in October and November. The second pick period is after the winter when mills not repaired before winter need to be fixes as soon as possible in March and April.
Support Activities.
Procurement of raw materials, servicing, spare parts, buildings, machines.
When a part breaks down within the 2 years; first it is sent from supplier to Siemens in Tinglev, and sold, then to the suppliers when it is broken, where it is renovated, then back to Tinglev and then to the new costumer who buys it. First when it goes to the supplier it is seen if it is better to scrap or renovate. After two years, you evaluate if it should be send to suppliers or renovate it yourself? They sell them as renovated parts for 80 % of the price.The supplier is out of the corporation with Siemens after 6 months if there are problems with the supplier. They have good suppliers which are flexible. At least 2 suppliers on each part. Suppliers have to pay if the turbine is down, if it is their fault. Many suppliers are owned by Siemens, on the main parts. Blades, gearboxes etc.
They have stock in USA and in Tinglev, to supply with a new component, when broken down. Suppliers: Spain for main bearing. Normark are for shafts. Stockgos Germany, bearing houses
Most parts from Europe are from suppliers but they don’t have that many suppliers in the USA. So have to build up a supplier network. Siemens has the most expensive turbines and best quality. They are selling service in the US and they have a service facility but no repair.If the parts are under guaranty the supplier will supply a new part or a renovated part. The hours the technicians use will be paid by the supplier. For the most parts Siemens are able to renovate themselves.
Technology Development
Includes technology development to support the value chain activities, such as Research and Development, Process automation, design and redesign.
Thanks to process technology developed by Dr. Gerald Hohenbichler (44), steel manufacturers can now save energy by processing metal in continuous strands. Hohenbichler’s groundbreaking solution enables molten raw steel to be rolled immediately after casting, reducing a mill’s energy requirements by as much as 45 percent.
Siemens Energy has installed the first prototype of a newly designed direct-drive wind turbine. The new SWT-3.0-101 DD is a gearless turbine with a power rating of three megawatts (MW). Its rotor has a diameter of 101 meters. The prototype was installed near the Danish town of Brande, where Siemens Wind Power headquarters is located. The intelligent, straightforward design of the turbine makes gearboxes unnecessary. The new turbine will officially be launched in 2010.
Human Resource Management
The activities associated with recruiting, development (education), retention and compensation of employees and managers.
They have a new strategy; they are now finding the costumers themselves, because of the financial crisis. Siemens has already fired 400 workers in Brande and 200 in Ålborg.
Siemens training centers offer thorough training programs to ensure that all service personnel are trained to our stringent safety and quality standards. Training centers are located in:
Brande, Denmark
Bremen, Germany
Newcastle, UK
Houston, United States.
Firm Infrastructure
Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc.
Peter Löscher, President and CEO of Siemens AG.
The firm’s margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation.
Now that we have an overview of Siemens Supply chain we observe that they are facing some problems. We have received information regarding the possibility of investing into a new regional service department in the states which in our opinion might prove to be a very good answer to the problems that they are facing now and since the USA market is expanding for Siemens, a local risk hedging service department may indeed benefit the company. A service department who would communicate with the current service regions and the new found production plant in the USA. Having a repair department in the U.S would cut down the transportation and handling lead times and costs.
The profitability for the service department and Siemens as a whole would be to reduction of inventory costs, because the inventory will be reduced in the service department of broken shafts, when it starts running again. There would be a reduction in transportation costs; severely if they implement a service department in the US, and namely if they optimize the flow in Denmark. It will also reduce the capital bindings in defect components which are in the service department’s inventory.
Also a good idea would be built up a supplier network in the USA because most of the parts come from the European suppliers.
Choosing the right supply chain strategy
Once the production plant and service department are build they need to have a right supply chain strategy which prepares them for the new business challenges and opportunities.
A simple but powerful way to characterize a product when seeking to devise the right supply chain strategy are the two key uncertainties faced by the product which are demand and supply. Demand uncertainty is linked to the predictability of the demand for the product.
In order for Siemens to choose the right strategy they have to follow some steps in order to understand what is going on with their supply chain.
A first step would be to figure out what time of product are they selling functional products or innovative products .Functional products are ones that have long product life cycles and there for stable demand, while innovative products are products that have short life cycles with high innovation and fashion contents as we can see clearly, different supply chain strategies are required for functional versus innovative products. Functional products tend to have less product variety than innovative products, where variety is introduced due to the fashion-oriented nature of the product or the rapid introduction of new product options due to product technology advancements. Demand for functional products is much easier to forecast, while demand for innovative products is highly unpredictable due to the differences in product life cycle and the nature of the product, functional products tend to have lower product profit margins, but the cost of obsolescence is low; whereas innovative products tend to have higher product profit margins, but the cost of obsolescence is high.
A second step would be to choose their supply chain characteristics. A “stable” supply process is one where the manufacturing process and the underlying technology are mature and the supply base is well established. An evolving supply process is where the manufacturing process and the underlying technology are still under early development and are rapidly changing, and as a result the supply base may be limited in both size and experience. In a stable supply process, manufacturing complexity tends to be low or manageable. Stable manufacturing processes tend to be highly automated, and long-term supply contracts are prevalent. In an evolving supply process, the manufacturing process requires a lot of fine-tuning and is often subject to breakdowns and uncertain yields. The supply base may not be as reliable, as the suppliers themselves are going through process innovations. While functional products tend to have more mature and stable supply process, that is not always the case. There are also innovative products with a stable supply process.
Demand Uncertainty Reduction Strategies
Only through information sharing and tight coordination can one regain control of supply chain efficiency. Sharing of demand information and synchronized planning across the supply chain are crucial for this purpose.
Supply Uncertainty Reduction Strategies
Free exchanges of information starting with the product development stage and continuing with the mature and end-of-life phases of the product life cycle has been found to be highly effective in reducing the risks of supplier failure. So a good idea for Siemens would be to form a supplier hub in the USA operated by a third-party logistics company which would manage the replenishment and inbound logistics of the parts and materials to a warehouse (known as the supplier hub) which would be in close proximity to the Siemens plant. The inventory at the hub would be owned by the suppliers. The use of the hub will allow the suppliers to have much better information about Siemens needs and consumption patterns of their parts as well as about the inventory in transit. This will result in a more effective management of inventory replenishment and inbound logistics by the suppliers thereby reducing the supply uncertainties for Siemens.
Supply Chain Strategies
Some uncertainty characteristics require supply chain strategies with initiatives and innovations that can provide a competitive edge to companies.
These strategies can be classified into four types:
Efficient Supply Chains: these are supply chains that utilize strategies aimed at creating the highest cost efficiencies in the supply chain. For such efficiencies to be achieved, non-value-added activities should be eliminated, scale economies should be pursued, optimization techniques should be deployed to get the best capacity utilization in production and distribution, and information linkages should be established to ensure the most efficient, accurate, and cost-effective transmission of information across the supply chain. The role of the Internet in this case is that it enables the supply chain to have tight and effortless information integration, as well as enabling production and distribution schedules to be optimized once the demand, inventory, and capacity information throughout the supply chain are made transparent.
• Risk-Hedging Supply Chains: these are supply chains that utilize strategies aimed at pooling and sharing resources in a supply chain so that the risks in supply disruption can also be shared. It is therefore a risk-hedging strategy. A single entity in a supply chain can be vulnerable to supply disruptions, but if there is more than one supply source or if alternative supply resources are available, then the risk of disruption would be reduced. A company may want to increase the safety stock of its key component to hedge against the risk of supply disruption, and by sharing the safety stock with other companies who also need this key component, the cost of maintaining this safety stock can be shared. Such inventory pooling strategies are quite common in retailing, where different retail stores or dealerships share inventory. The Internet plays a key role in providing information transparency among the members of the supply chain that are sharing inventory. Having real time information on inventory and demand allows the most cost-effective transshipment of goods from one site (with excess inventory) to another site (in need).
Responsive Supply Chains: these are supply chains that utilize strategies aimed at being responsive and flexible to the changing and diverse needs of the customers. To be responsive, companies use build-to-order and mass customization processes as a means to meet the specific requirements of customers. The customization processes are designed to be flexible. Order accuracy (i.e., accurate specification of customer requirements) is the key to the success of mass customization. Again, the Internet has enabled very accurate and timely capturing of highly personalized requirements of customers as well as fast transfer of order information to the factory or customization centers for the final configuration of the product.
• Agile Supply Chain: these are supply chains that utilize strategies aimed at being responsive and flexible to customer needs, while the risks of supply shortages or disruptions are hedged by pooling inventory or other capacity resources. These supply chains essentially have strategies in place that combine the strengths of “hedged” and “responsive” supply chains. They are agile because they have the capability to be responsive to the changing, diverse, and unpredictable demands of customers on the front end, while minimizing the back-end risks of supply disruptions.
Given the different nature of demand and supply uncertainties of different products, different supply chain strategies are needed for different products.
The Right Supply Chain Strategy
Innovative Products with Evolving Supply Processes
Companies with innovative products and evolving and unstable supply processes have to utilize the combination of risk-hedging and responsive strategies. The appropriate strategy here is to establish “agile” supply chains. Demand and supply uncertainties can be used as a framework to devise the right supply chain strategy. Innovative products with unpredictable demand and an evolving supply process face a major challenge. Because of shorter and shorter product life cycles, the pressure for dynamically adjusting and adapting a company’s supply chain strategy is mounting. Using the Internet to develop agile supply chains with information sharing, coordination, and postponement has enabled companies to compete successfully in their market places. The challenges are great, but so are the opportunities.
To be continued today

Business Organisations In A Global Context Commerce Essay

The process of strategic planning is not simple and easy one, it involves a lot of industry research and clear understanding of your market, your customers, your competitors, your team, your core competencies, the environment in which you are operating, changing parameter, your vision and mission etc. These are not easy question to answer as well as it’s not a quick process. Effectively management of people can produce substantially enhanced economic performance. A plethora of terms have been used to describe such management practices: high commitment, high performance, high involvement, and so forth.

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A social unit of people, systematically structured and managed to meet a need or to pursue collective goals on a continuing basis. All organizations have a management structure that determines relationships between functions and positions, and subdivides and delegates roles, responsibilities, and authority to carry out defined tasks. Organizations are open systems in that they affect and are affected by the environment beyond their boundaries.
Globalisation is a phenomena that is used to interact among different countries attempting to develop global economy. It is a process of connecting the world’s markets and business with each other. It is basically a process by which different economies, cultures and societies are combined together by latest communication system. Globalisation has been defined by different experts at different places, according to an economist Harris (1993), “the increasing internationalisation of the production, distribution and marketing of goods and services is globalisation”. Another definition of globalisation is “the functional integration of national economies within the circuits of industrial and financial capital”.(Rhodes, 1996).
The key differences between global business operations:-
Businesses operate in a global context: even if they do not trade directly with other countries, they might be affected by a domestic shortage of skilled labour or may be subject to developments on the global financial markets. Globalization and international business as business terms are often used synonymously in casual conversation.
As economic pressures continue to abound, many corporations are looking within their organizations to determine how to improve operations and reduce costs. Cost constraints, efficiency gains and productivity measures are commonly sought to achieve this objective. It is no surprise that development of or improvement in an enterprise’s service delivery model is desired. Many companies have developed some aspect of shared services, and many more have embraced the outsourcing service delivery model as one lever to drive economic improvement. However, we believe there are plenty of opportunities remaining with respect to shared services in general along with some terrific opportunities for an emerging concept called “global business services” to drive significant improvement and manage all service delivery model alternatives.
A successful shared services model typically incorporates these concepts:

Focused company resources
Process ownership as a key characteristic
Critical values of partnering, teamwork and adding value
Effective leverage of tools and technology
Accountability by specialists with service focus (internal and external)
Strong communications and governance principles
Centre of excellence and a company asset for developing talent
Results that emphasize efficiently meeting customer requirements
Focal point for company best practices

Responsibilities of organisations
Importance of ethics in the business world is superlative and global. New trends and issues arise on a daily basis which may create an important burden to organizations and end consumers. Nowadays, the need for proper ethical behaviour within organizations has become crucial to avoid possible lawsuits. The public scandals of corporate malfeasance and misleading practices, have affected the public perception of many organizations. An organization’s responsibilities are not limited to primary stakeholders. Although governmental bodies and regulatory agencies do not usually have ownership stakes in companies in free-market economies, they do play an active role in trying to ensure that organizations accept and meet their responsibilities to primary stakeholder groups. Organizations are accountable to these secondary stakeholders.
All companies, especially large corporations, have multiple stakeholders. One way of classifying stakeholder groups is to classify them as primary or secondary stakeholders. Primary stakeholders have some direct interest or stake in the organization. Secondary stakeholders, in contrast, are public or special interest groups that do not have a direct stake in the organization but are still affected by its operations.
The impact of external factors on organisations: There is a simple rhyme which goes:
Environment to each must be. All there is that isn’t me.
You can see therefore that the business environment consists of all those things outside the business. The business needs to keep a watchful eye on the environment because it is continually changing. Key elements in the environment are:
1. Competition. Rival companies are continually changing what they have to offer. They may lower prices, bring out new products, engage in exciting new advertising campaigns, and a range of other activities.
2. Political factors. The action of government affects business and other organisations. Governments are continually changing the rules and the laws that affect business. This is illustrated by the way in which government rules affect schools. Simon Jenkins in an article in The Sunday Times, on 24 September 2006 illustrates this well when he wrote: ‘This government tries to keep control of every school. Since coming to office its education department has issued 500 regulations, 350 policy targets, 175 efficiency targets, 700 notes of guidance, 17 plans and 26 separate incentive grant streams.’
3. Economic factors. The economy consists of businesses, individuals and government. The international economy consists of the economies of all the countries in the world. The economy consists of many markets – the market for goods, the market for services and the market for money are key parts of this. These markets determine the price that business has to pay for its resources such as labour, and raw materials. Businesses are continually affected by changes in the economy.
4. Social factors. Society is made up of all the people in a given area. It is important to be able to find out what the main trends are that are happening in society because these trends affect business. For example, changes in age patterns, such as the increasing numbers of older people in the population, determine which goods are popular. Then there are social trends which are affected by fashion – for example this year some goods will be ‘in’, whereas next year nobody or very few people will want to buy them.
5. Technological factors result from the development of new techniques, i.e. new types of products and new processes to make products. For example, recent years have seen a massive change in information technology which has transformed the way we run our lives. For example, today more than 90% of young people possess a mobile phone. (
The impact of global factors on business organisations
Businesses are affected by an external environment as much as they are affected by the competitors. Global factors influencing business are legal, political, social, technological and economic. Understanding of these factors is important while developing a business strategy.
a. Social factors – These factors are related to changes in social structures. These factors provide insights into behaviour, tastes, and lifestyles patterns of a population. Buying patterns are greatly influenced by the changes in the structure of the population, and in consumer lifestyles. Age, gender, etc all determine the buying patterns and understanding of such changes is critical for developing strategies which are in line with the market situations. In a global environment it is important that business strategies are designed keeping in mind the social and cultural differences that vary from country to country. Consumer religion, language, lifestyle patterns are all important information for successful business management.
b. Legal factors – These factors that influence business strategies are related to changes in government laws and regulations. For a successful business operation it is important that the businesses consider the legal issues involved in a particular situation and should have the capability to anticipate ways in which changes in laws will affect the way they must behave. Laws keep changing over a period of time. From the point of view of business it is important that they are aware of these changes in the areas of consumer protection legislation, environmental legislation, health & safety and employment law, etc.
c. Economic factors – These factors involve changes in the global economy. A rise in living standards would ultimately imply an increase in demand for products thereby, providing greater opportunities for businesses to make profits. An economy witnesses fluctuations in economic activities. This would imply that in case of a rise in economic activity the demand of the product will increase and hence the price will increase. In case of reduction in demand the prices will go down. Business strategies should be developed keeping in mind these fluctuations. Other economic changes that affect business include changes in the interest rate, wage rates, and the rate of inflation. In case of low interest rates and increase in demand Businesses will be encouraged to expand and take risks. Therefore, business strategies should have room for such fluctuations.
d. Political factors – This refers to the changes in government and government policies. Political factors greatly influence the operation of business. This has gained significant importance off late. For example: companies operating in the European Union have to adopt directives and regulations created by the EU. The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Business must consider the stability of the political environment, government’s policy on the economy etc
e. Technological factors – These factors greatly influence business strategies as they provide opportunities for businesses to adopt new innovations, and inventions. This helps the business to reduce costs and develop new products. With the advent of modern communication technologies, technological factors have gained great impetus in the business arena. . Huge volumes of information can be securely shared by means of databases thereby enabling vast cost reductions, and improvements in service. Organisations need to consider the latest relevant technological advancements for their business and to stay competitive. Technology helps business to gain competitive advantage, and is a major driver of globalization. While designing the business strategies firms must consider if use of technology will allow the firm to manufacture products and services at a lower cost. Firms can select new modes of distributions with the help of technology. It has become easier for companies to communicate with their customer in any part of the world. (
Strategies employed by organisations operating globally
Operations strategy is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm long term corporate strategy. Operations strategy addresses very broad questions about how these major resources should be configured to achieve the desired corporate objectives. Some of the major long-term issues addressed in operations strategy include:
• How large do we make our facilities?
• What type of processes do we install to make the products or provide services?
• What will our supply chain look like?
• What will be the nature of our workforce?
• How do we ensure quality?
Managing culture, society and economy challenges
Companies move to other countries to expand their business and to increase the profits. When companies do move to other countries they face different challenges like meeting local customers demands, understanding the rules or regulations of local government, language problems etc. If we sum up these problems generally there are three main problems in moving business to overseas countries which are social, cultural and economic factors. Companies do have to understand the culture of the country so that they can run their business properly. They have to understand their social customs and economy of the country. For example McDonalds, KFC or Subway, these companies have operations all over the world. They sale poultry, pork and meat products. Now expanding their business to Asian countries, they first get knowledge about their social, cultural and economy factory. Taking example of Muslim countries, when these three companies moved to Muslims countries they cannot sell Pork or Non-Halal products in Muslim countries because it is against their cultural values or religious values. So they do sell Halal products to these countries and avoid selling of Pork. This shows that companies have to change themselves according to local culture and social life to do good business in other countries. Also they do offer prices according to local economy or purchasing power of customers. They cannot apply the same prices both in US, UK, India and Pakistan because the economic condition of all these countries is different.
There is no doubt that with the progress in globalisation living standard of people in many countries has improved but there is also no denial to the fact that most of benefits are being gained by developed countries. They are exploiting the rights of developing countries in the name of globalisation. The income gap between developed countries and developing countries has been increased which is a matter of concern. Through globalisation many companies have also gained benefits especially multinational companies and big companies. They are getting huge profits through globalisation. But they are also exploiting people’s right to some extent, like they are not giving the same pays to developing and developed countries.

Brief History Of HBL Commerce Essay

Stragtegic Human Resource Management helps an organization achieve productivity and effectiveness, by sharing the overall vision of the organization, sharing goals and objectives, and making sure that Human Resource is not just a department, but the whole organization speaks of HR as the core division, which means that organization is employee centered.
Strategic HR changed a number of things in HBL. It updated the way plans were made, shifting to strategic plans, from a one-man show to bringing everybody on board, encouraging idea generation and sharing proposals, different departments sharing their plans of what to look for in the coming year and democratic decision making by appointing a Strategic Planning Division and appointing member from the Board of Directors that goes through each plan and then the CEO communicating the approved plan to the departmental heads. By this, the plan became not just an objective, but more of a bible.
At HBL, after the privatization, a number of initiatives were taken, from right sizing and getting rid of lethargic employees, to introducing golden handshake schemes, from moving to performance management system to inducting young blood that brings in creative ideas. Concepts like employee engagement and job rotation became part of the policy, organization-wide rewards programs were introduced.
An inevitable change in culture was also accomplished, it from the seniority based to performance based culture. Overall structure of the organization was also made flatter, removing additional levels and bureaucracy.
It is the prime Bank in country established in 1941 having a registered head office in Karachi. It was nationalized in 1974, but recently on 26th February 2004 it has been privatized by Government of Pakistan and is taken over by Aga Khan Fund for Economic Development (AKFED). They acquired 51 percent of shares of HBL.
It is one of the largest Banks of Pakistan with 1439 branches, having total assets of Rs. 1,139,554,000, 5 million total number of customers helping in generating Rs 13 million profit currently.
Brief History of HBL
HBL established operations in Pakistan in 1947 and moved its head office to Karachi. Our first international branch was established in Colombo, Sri Lanka in 1951 and Habib Bank Plaza was built in 1972 to commemorate the bank’s 25th Anniversary.
With a domestic market share of over 40%, HBL was nationalized in 1974 and it continued to dominate the commercial banking sector with a major market share in inward foreign remittances (55%) and loans to small industries, traders and farmers. International operations were expanded to include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and the Netherlands.
On December 29, 2003 Pakistan’s Privatization Commission announced that the Government of Pakistan had formally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). On February 26, 2004, management control was handed over to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees.
HBL has a wide array of customers, belonging to a wide range of business divisions, from individuals to corporate, from Islamic banking to commercial banking. They are divided into three main categories, as follows:
Individual Customers

Car, Home Loans
Credit, Debit Cards
Deposit Accounts
Phone Banking
Mutual Funds
Salary Plus

Business Customers

Corporate Banking
Commerical Banking
SME Banking
Global Treasury
Investment Banking
Cash Management
Zarai Banking
Asset Management

Islamic Banking

Deposit Accounts
Financing Products
Diminishing Musharaka
Trade and Value added Services

To make our customers prosper, our staff excel and create value for shareholders
“Enabling people to advance with confidence and success”
Our values are the fundamental principles that define our culture and are brought to life in our attitudes and behavior. It is our values that make us unique and unmistakable. Our values are defined below:
This is at the core of everything we do. The markets in which we operate are becoming increasingly competitive, giving our customers an abundance of choice. Only through being the very best – in terms of the service we offer, our products and premises – can we hope to be successful and grow.
We are the leading bank in Pakistan and our success depends upon trust. Our customers – and society in general – expect us to possess and steadfastly adhere to high moral principles and professional standards.
Customer Focus
We understand fully the needs of our customers and adapt our products and services to meet these. We always strive to put the satisfaction of our customers first.
We believe in giving opportunities and advantages to our employees on the basis of their ability. We believe in rewarding achievement and in providing first-class career opportunities for all.
We believe in the advancement of society through the adoption of enlightened working practices, innovative new products and processes, and a spirit of enterprise.
Brief Introduction
Human resource, being the pulse of any organization, is its most precious asset. And training plays a vital role in tapping and developing its potential to the utmost. With this key factor in mind, HBL pioneered its first training program in 1946, in which Muslim youth were recruited after an extensive tour of leading academic institutions.

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There are 78 employees in the HR department. According to Adnan-ur-Rehman Khan, Senior Manager, Human Resources at HBL “Worldwide, the practice is of having 100 to 1 ratio, i.e. to have one employee of HR department per 100 employees of other departments. In Pakistan, however due to low importance of HR as a strategic function, it is okay to have 1000 to 1 ratio instead.”
Bank is a service industry, automation cannot be done. Every activity has to be managed by human beings, a particular department is therefore unavoidable.
Trust and loyalty can only be ensured by human beings. Banking involves money, which is why ensuring trust is extremely important.
Housing 13,000 people is not an easy job. HR department at HBL deals with the factors associated with human beings like counseling, behavior management, motivation and job satisfaction.
Since the organization is “heterogeneous, complex and large” a proper HR department exists to manage the diverse needs of large internal customers’.
Catering to administrative and long term strategic needs of employees. Support functions are required in order to help employees work towards organizational goals.
Internal job posting:
This is the most traditional method which most of the companies are following in which CV’s are being collected from company’s website and other sources and then after the filtration process desired individuals are called for the interview. HBL actually grooms and trained their employees in different departments and whenever there is a vacancy they always prefer their trained employees. This adds a lot to the current employees’ confidence and morale, which they have a better chance to be promoted and thus strive to achieve higher than expectations.
Entry level hiring: fresh graduates for MTO’S and non MTO’S:
MTO admission program is being conducted in 6-7 certified universities, students who have a GPA above certain level can apply. They are being passed through screening and interview processes and then HR team hire them. Non MTO’s are selected from B grade universities are passed from a testing process which is being outsourced, then they are also passed through an interview process and are shortlisted.
Mid career:
CV is being selected from the database of bank which points out the basic skills required for the job. After this HR team selects candidates who can perform these required tasks very effectively. These candidates are preferred to already have a career of at least 8-10 years so that they can understand the job demands properly.
Cross function hiring:
Hiring from different departments is also preferred as one of the recruitment method at HBL. For example while hiring for retail banking they also look into corporate banking’s department. Similarly hiring for HR department can be done from compliance and audit divisions.
The bank’s Training Division has gained renown for its excellence and efficiency and was called upon to assist in training personnel for other upcoming baking institutions. With the passage of time this assistance became a testimonial of the bank’s valuable contribution towards establishing and developing of other commercial banks within the country where several trained Habibians went to work with senior, middle and junior levels. Word of its skills spread far wide which led to many international banks sending their personnel to HBL for training.
Presently HBL manages full-fledged teaching facilities and support staff at Karachi, Lahore and Islamabad. The training programs are conducted with the latest aids and equipment and involve extensive training to new recruits, and existing staff with specialized courses that cater to the different cadre of personnel on topics of Management, Marketing, Selling, Accounting and Finance, Banking Law and Practice and Internal Procedure. Speakers from other prestigious institutes are also invited to deliver lectures.
Methods used:

On the Job training
Group Discussions
Outdoor training

Rewards and Recognition
For them “remuneration” is the key element of employee engagement. Two elements of remuneration:

Annual salary
Performance-related benefit

Performance is more than just achieving financial objectives. As a bank they pride themselves at their unique culture and values Every employee receive a values rating that reflect how employee live at their values and culture, which influence their performance related awards. . Those with the lowest value ratings would receive no annual performance related bonus, even if they achieve all their financial targets. The rating criterion is as follows
“A” is a role model.
“B” is an exemplary.
“C” lived value with more time.
“D” needs to learn values.
These ratings denote your bonuses as well as pay increments. These ratings are purely awarded on the basis of performance and as mention earlier for that key performance indicators (KPI) plays a significant role. Along with these ratings they also give rewards for some particular achievement as recently they have arranged a 3 day holiday trip to Malaysia for their remote banking employees for performing significantly well.
HBL manages its workforce by “not hiring everybody.” S. Ali Raza Zaidi, VP, Personnel Division said “Now a days, there are companies that deal help in delivering services, which helps in keeping our workforce under control. Take credit card sales for example. These companies go for aggressive sales and telemarketing. There are not our employees, but bring us business and charge a fee for the service. In this way, HBL is also outsourcing some of the services, for which we don’t need to actually employee people. However, if supervisor is needed, that must be a company’s person.”
They motivate their employees to be courageous and bold enough to raise their voice against the system and for the system. There is a leadership board on internet to which every person is accessible and writes whatever he thinks should be done to improve the organizational effectiveness and then he is called to explain his idea in front of Board of Directors.
This further elaborates the openness that is quite visible in the culture at HBL, where every employee is given confidence to speak what they feel is right and raise voice against anything that is bad, anonymity is of prime importance and HBL makes sure the whistle blowers remain behind the curtains.
Motivating the employees is of primary importance to any organization. HBL follows below criteria:
The salary and employee benefits your bank provides serve a major role in recruiting, retaining, and motivating staff. While salary and benefits are not the “most” important aspect of your jobs, they definitely contribute to recruiting, retaining, and motivating superior employees. The quest to compensate employees fairly is an ongoing challenge. If your bank pays employees too little, you may risk alienating and losing valuable employees. If you pay too much, you may be unwisely spending company resources. How much your bank can afford for employee salaries can determine the caliber of talent you attract to your organization.
Performance plays a significant role in motivating the employees. Performance of the employee can be judge by the employee himself. As in the beginning of the year targets are being set for the employees performance so by the end of the year employees themselves can see that what they have achieved and what more they can earn with their performance.
Transition to Strategic HRM
Strategic Human Resource Management practices enhance employee productivity and the ability of agencies to achieve their mission. Integrating the use of personnel practices into the strategic planning process enables an organization to better achieve its goals and objectives.
With the advent of today’s economy where services contribute to a major share of the GDP and the fact that the service sector is essentially people centric, it is vital that the “people first approach” be accepted by the organizations for sustainable business strategy. The practice of SHRM demands a proactive and hands on approach by the management as well as the HR department with regards to the entire scope of activities ranging from staffing and training and development to mentoring and pay and performance management.
Adnan-ur-Rehman Khan, Senior Manager, Human Resources “We’re not a small firm, we’re in fact one of the biggest banks of Pakistan, having experience that ranges to decades. With so much experience, the one thing which we learnt is that people are your most important, and irreplaceable asset. You want monetary gains, you cannot ignore the human resource of your firm. This is infeasible today, as it is in future. If you’re to go ahead, and really fulfill the vision, you have to trust your people. Invite them on the same platform, listen to their problems, and encourage them to speak their heart out. This essentially means that you welcome them on the big table, show them the big picture, share your mission, and treat your people like your stakeholders. Only in this way, by treating people as your strategic element, you can get the competitive edge against competitors.”
Planning process
Strategic Planning Division is made up of Board of Directors which evaluates previous performances, current market trends and forecasts future potential on a yearly basis. BoD evaluates several proposals and modified goals.
All the core departments of HBL are involved in the strategy formulation, the formation of following years’ strategy is a combination of inputs and proposals from departments like Marketing, Operations, IT, Finance and Human Resource.
According to Adnan-ur-Rehman Khan, Senior Manager, Human Resources at HBL “The strategy is not just what the next year would be like, it is more like fulfilling the vision, which cannot be done without coordination of each department, responsibility and commitment of every employee of each division. The strategy is made when each department is on same page, one platform. This is what strategic planning means. The process, though extensive, only goes through with considerable consensus. The Strategic Planning Division votes on the proposals, and suggests recommendations if needed. After going through the extensive process of planning and strategizing, the plan takes the shape of a ‘bible’.”
Policy making is done by feedback process i.e. input, process, output and feedback. Input is provided by the BoD and top management, and then they are circulated in the organization. Employees work according to these policies and then their pros and cons are observed for the future policy making.
Significance of strategic planning:
Planning out the future of any business is the best way to guarantee success. It seems difficult in beginning, but as the time goes by, a strategy is what helps a business move in the right (planned) direction. At HBL, once approved strategic plans become “bible” for the whole organization, every department is given particular goals to meet; every department comes up with its own strategy on how to achieve those goals.
SBUs are also encouraged to come up with their own business strategy, since each business division has better understanding on deciding the action plan to meet targets. According to Adnan-ur-Rehman Khan, Senior Manager, Human Resources at HBL “every division is allowed to come up with its own strategy to meet the set targets, top management is flexible in this regard.”
Types of Strategic Goals
Strategic goals are monetary and non monetary. Monetary goals are highly centralized and cascaded down to businesses and interpret these goals to SBU’s and non monetary goals are transferred to support functions and support functions interpret them. Performance management system reviews the performance of SBU’s and support functions, if any discrepancy is found, departmental heads are taken to task.
Monitoring Performance Management System
Progress of implementation of strategic goals is continuously monitored, if any discrepancy is found between performance level and set goals, it affects performance appraisal process. If everything goes as planned, performance management eventually helps in the performance appraisal of employees. Performance Management’s core objective is manage talent, motivation, commitment of the employees towards the organization and its vision.
They have very strong evaluation process in which the evaluation is started right away from the 1st day of joining to the bank. Right from the first day the immediate supervisor of an employee has a meeting with him and they both discusses about the goals, objectives and what is being expected from him. They have key performance indicators through which the performance of each and every employee is being analyse. With the help of this key performance indicators and the discussion with the supervisor the employee had a clear idea and road map that what he has to do and what is expected from him. The goals are being set by the mutual understanding between the employee and his supervisor. This evaluation is being done on the semi annually basis. On the basis of this evaluation employees get their pay raise and ratings. The more rating points you earned the more pay increments you will get.
Communication of Goals
CEO communicates these goals to direct reporters i.e. departmental heads which are further communicated to functional heads who set their respective targets. For example: the functional head of retail banking sets their target to collect the deposits of Rs 25 million and now it is to be increased to 35 million by 2013. Retail banking allocates goals to its further 20 regions after a meeting with their respective heads. Regional heads might require more resources so HR department arranges for that as well (Example quoted by S. Ali Raza Zaidi, VP, Personnel Division, HBL).
Policy Making and Risk Management
Board Human Resource Committee (BHRC) includes chairman, president and one independent board member. These three members issue recommendations on HR Initiatives and policies. Similarly there are committees of compliance and risk which deals with the matters like compliance with government policies on employment, ethical issues, matters like sexual harassment and the like.
Transformation from Public to Private
In 2003, under the government of General Musharraf a commission called Pakistan Privatization Commission was formed, under the leadership of Shaukat Aziz HBL, along with many other companies, was privatized and 51% of its shares were sold to Aga Khan Fund for Economic and Development (AKFED).
Right Sizing of Workforce:
Earlier when HBL was a public organization its culture was lethargic, many people under burdened, all responsibilities were shared vaguely. When it went private one of the strategic decisions taken was of right sizing. From 31000 employees all over Pakistan, in 1997, the number was shrunk to around 10000 and it stands at 13000 as of 2012. The right sizing did not create an ethical issue because the nature of the organizational holding was changed.
Workforce cut down to 13000, which increased the productivity level and motivation because the less-productive employees were laid off which increase individual work load but not so much as to over burden employees and helped organization cut down cost of additional employees that were not contributing enough.
From Annual Confidential Report to Performance Management system.
Initially HBL used to do the performance appraisal on annual basis and this process was called annual confidential report which was as the name suggests kept confidential to the top management only. After privatization bank moved towards performance management system which was by nature more transparent, open to input from various departments and was reviewed on a continuous basis to make sure that the performance of employees is in line with the strategies made at the top.
Paradigm Shift to Growth-Oriented
According to Adnan-ur-Rehman Khan, Senior Manager, Human Resources “While some organizations are strictly business oriented where the only thing that matters is money, on the other extreme there are people centric organizations which are primarily concerned with its workforce, HBL took a midway approach. The organization believes in welfare of its employees by channeling their efforts towards achieving monetary goals. Bank’s culture is such that it’s the people who bring in profits so it should be people who are benefits the most from the profit which cannot be done without organizational growth in the terms of greater market coverage.”
Organizational Transformation by introducing Golden Handshake Scheme
When the organization realized that the current workforce could not come with many creative ideas and lacked physical efficiency and could not cope with changing market trends due to resistance to change, HBL introduced golden handshake scheme. Under this scheme 25/55 rule was established i.e. the employees with 25 years of experience within the bank and 55 years of age were offered 5 months cumulative salary and their services were recognized as an honor to HBL.
Inducting Young Blood
Previously discussed golden handshake scheme helped HBL to induct young blood. Since youth is more inclined towards updating themselves with latest techniques, open to change, have superior physical strength and more creative mind, this strategy helped increase efficiency in the organization. This young blood equipped with the creative mind and greater insights of recent market trends helped te bank to grow in the face of fierce competition.
Tracking Employee Demand and Supply
Management at HBL is alert on upcoming vacancies, and how to fill them up. Whenever an employee is about to leave, he must serve the one month notice period, the company first looks at the internal pool of candidates, those who are most eligible to be promoted. If there is no replacement available in the current employees, the bank goes the through the external recruitment process (mentioned above in recruitment process).
Employee Engagement
Job rotation and transfer is done every 3 years according to the policy. The assignment should be changed for this purpose. Nobody is allowed to work more than three years on the same position, he is either promoted or his job is changed, job rotation is a key policy at HBL.
Job rotation program is also there for Management Trainee employees who are being rotated to different departments after every 6 months. HBL derives following benefits from their job rotation policy:
Explore the Hidden Talent Job Rotation is designed to expose employees to a wider range of operations in order to assist managers in exploring their hidden talent. In the process, they are moved through a variety of assignments so that they can gain awareness about the actual working style of the organization and understand the problems that crop up at every stage.
Individuals Explore Their Interests: Sometimes, employees are not aware of what would like to do until they have their hands on some specific job. If their job is rotated or they are exposed to different operations, they can identify what they are good at and what they enjoy doing.
Identifies Knowledge, Skills and Attitudes: Job Rotation helps managers as well as individuals identify their KSA (Knowledge, Skills and Attitudes). It can be used in determining who needs to improve or upgrade his or skills in order to perform better. This helps in analyzing training and development needs of employees so that they can produce more output.
Motivates Employees to Deal with New Challenges: When employees are exposed to different jobs or assigned new tasks, they try to give their best while effectively dealing with the challenges coming their way.
Satisfaction and Decreases Attrition Rate: Exposing employees to different tasks and functions increase their satisfaction level. Job variation reduces the boredom of doing same task every day. Moreover, it decreases attrition rate of the organization.
Align Competencies with Requirements: Alignment of competencies with requirements means directing the resources when and where they are required. It assesses the employees and places them at a place where their skills, competencies and caliber are used to the highest possible extent.
Career counseling when needed
Employees who are not able to perform or want to leave the organization voluntarily they were given incentives which were added in their benefits. In other cases where employees with good performance are planning to leave the organization then they are provided with proper career counseling by the HR manager himself and his reservations are also sorted out to maximum extent.
Employee as family
To motivate the employee’s non monetary benefits are also there which includes gatherings, trips to foreign countries, picnics, visits, lunches and formal dinners. This helps the employees feel like part of the family, rather than just workers. This is essential in terms of relationship building, and increasing communication between the top management and other employees.
According to Adnan-ur-Rehman Khan, Senior Manager, Human Resources “HBL follows the strategy of diversification, since it deals with different customers, in different markets. We have a different group of customers for Islamic Banking, different for Corporate Banking. We aggressively look for new divisions that have a high potential of growth. For example, we were the pioneers of Zarai Banking, which made our portfolio diverse.”
HBL is suppose to be a heterogeneous, complex and large organization therefore there are multiple strategies used. Centralized approach is used for financial dealings is used.
Top management is flexible in this regard that every function can devise its own business strategy.
Core Divisions at HBL
HBL’s pioneer division is Agri financing. They are market leaders and other banks are following HBL. The division deals in providing farmers with necessary financing.
Second core division at HBL is Retail Banking.
Seniority based culture to performance based culture
When the bank was Public limited, the culture was more inclined towards “promotion comes with age and loyalty.” The transition to Private limited company ensured that the culture be changed performance based. The seniority now holds less weight as compared to actual performance, when it comes to performance appraisal.
Employee Work hours and Overtime issue
HBL has a very strict policy against overtime. Overtime is not appreciated much. Timings are followed strictly. Every employee is supposed to leave the office at 5.30 PM, the usual off time of the organization. If an employee is sitting late and working, he is obliged to answer as to what took him to register overtime. The culture is such that when more than 95% employees leave on time, including the top management, employees are generally demotivated to stay late as well.
Customer responsiveness delivers an excellent customer experience. As a global research reported, 81 percent of banks with strong capabilities and competencies for delivering customer experience excellence are outperforming their competition. An effective customer response strategy enables a bank to deliver the highest standards of customer care at a time when the customer most needs it. That level of care makes an important contribution to customer satisfaction and long-term loyalty.
Head of resourcing instead of head of recruitment. Outsourcing worker services,
The purpose of an organizational structure is to help in creating an environment for human performance. It is then, a management tool and not an end in its own. Although the structure must define the task to be done, the rules so established must also be designed in the light of abilities and motivation of the human recourse available. By analyzing the organizational structure of HBL presence of the following elements can be found in its structure.
Transition towards flatter organization
Another change in the private limited company was the removal of additional levels in the organizational hierarchy, this helped in reducing the communication gap between employees and management, and among