Research Articles Base: The Law Of Entropy

Foundation Programme   ASSIGNMENT F06(3)     Read the following carefully and execute the tasks specified at the end. You must hand in your completed assignment, which conforms to the format requirements specified,       EXHIBIT A     Extract from ‘Thinking Director’ Magazine (published four times p.a.) March 2006:   When is a strategy not a strategy? When it’s a marketing strategy.   Felix Neyasnislov investigates non-consensual use of terminology     The Law of Entropy The Japanese think that the law of entropy applies not only to organisms and machinery, but also to organisations.  What are organisations after all, but collections of human beings, which qualify as organisms? (The same pattern is of course observable everywhere in the universe.)  From the moment of the creation of a business, there are forces at work, both internally and externally, which tend toward disintegration.   The best that human endeavour can hope to achieve is to defer the eventually inevitable collapse or death of the organism or organisation to the latest time possible.  Over the years, but particularly toward the end of the last century, businesses have focused on “strategy” as a means of prolonging organisational cohesion.   Strategic obfuscation? There is, however, no universal consensus as to what the term “strategy” actually means.  One might be forgiven for arriving at the conclusion that the plethora of terms (‘Vision’, ‘Mission’, ‘Corporate Aims’, ‘Strategy’, ‘Corporate Strategy’, ‘Strategic Objectives’, ‘Functional Strategies’) used (seemingly synonymously) by those who ‘know the speak’ is a deliberate attempt at obfuscation.    A further complicating factor when it comes to defining terms is that since businesses have been more drawn to adopt a “pull” approach to satisfying demand, the boundary between marketing and corporate strategy has become blurred.  [See e.g. Mintzberg (2002) ‘The Strategy Process’, (4th International Edition) Prentice Hall]   Defining terms Objectively? Q. “So when is an objective a ‘corporate objective’?” A. “When it is too all-encompassing to be merely a marketing objective.” Namely, when it is not a marketing objective.  So, an objective is a ‘corporate objective’ when it is not a marketing, or presumably any other type of objective.  This is, of course, circular, but there is no easily identifiable boundary – and why should there be? I have a dream … “Vision” is another tricky one.  A sensible interpretation might be ‘a vision of what the future will be like’.  Dilbert mocks the vision statement of the Microsoft Corporation, “A computer on every desktop”.  Bearing in mind that Microsoft’s business is software for computers, and that there is not currently a computer on every desktop, it could be argued, however, that this is a bland, pragmatic statement of probability.    Blurry-eyed frog Other business leaders have used the term ‘vision’ to mean ‘what their businesses will be doing in the future’ (for it is always in the future that plans will be executed).  This would seem to blur the distinction between what the future will be like on the one hand, and what an organisation plans to do in that time on the other.   Either way, some idea of how the future will shape up is necessary in order to be able to perform even routine operations like taking customers’ orders or money.  For, say, a retailer to imagine that its impact on society is going to be so great as to influence the very process of technological change itself would surely be indicative of a somewhat inflated organisational ego, because there are very few organisations worldwide (outside defence) capable of such a profound impact on society.    But then again, to imagine in times of great change that anything will stay the same is to behave like Handy’s frog, which will allow itself to be boiled alive if heated gently enough.   Fundamental objectives All businesses aim at survival, growth and profit.  ‘How long?’ and ‘how much?’ are the burning issues.  Big businesses, multi-nationals and the like, aim at long-term survival, sustainable growth, and optimum (as opposed to maximum) profit.   Empirical research [Halal (1977) ‘A Return-on-Resources Model of Corporate Performance’, California Management Review Summer 1977, Vol.XIX, No. 4) shows that big businesses that include social objectives among their corporate objectives perform better than those that do not.  The whole area of contribution to social objectives is known as Corporate Social Responsibility (CSR).   Blackmail or pressure? Pressure groups, often employing the services of professional “lobbyists”, have been and continue to be quite effective in influencing governments.  It is not so much that their ideas make good policy, but that they have become rather good at embarrassing “the Great and the Good” and drawing media attention.    “Back covering” has very much become the order of the day and governments are no exception – they will therefore take steps to prevent a repeat. One might therefore assert that customers have an even greater influence over strategy than do shareholders.   Power to the People Sometimes the consumer is prepared to co-operate by refraining from buying a company’s, or even a country’s produce.  Rhodesia (as it then was), South Africa, Shell, McDonalds, Burger King, Bennetton, Nike, and Reebok, and Barclays Bank have all modified their position in response to consumer boycotts or unwanted media attention.    European social values have come to make consumers reluctant to participate in any way in unethical conduct.  Some people would even prefer to discard purchases if they discover unethical conduct by the seller (or even a supplier of the seller) has occurred, disregarding the ensuing inefficient depletion of scarce resources.  Ethical conduct is now an imperative, which must be embedded in strategic objectives   A little of anything never hurt anybody? Many products in the vast economic output of the world have been found to inflict harm on people or the natural environment and others are suspected of doing so:     -        Whether increased mobile use will ultimately cause a rise in the number of cerebral tumours is unknown – we have not been in the game long enough to find out.    -        Nuclear energy, which has been a “Goodie” (producing armaments, making the UK a nuclear power in the Cold War), a “Baddie” (producing accidents like Chernobyl and steadily rising quantities of waste that take 2 – 10 000 years to degrade – for an overkill advantage), and is now a rising star again (not producing greenhouse gases).   -        Judges frequently make the point that were it not for ‘the demon drink’, many crimes would not be committed. (Eighty percent of offences against the person are alcohol-related.)  It is said to be more dangerous than heroin, since the alcoholic does not notice a problem arising while the addiction is taking hold.    -        Even political leaders can be trapped. There are more alcoholics than heroin addicts, yet alcohol remains on sale relatively cheaply under license (while heroin is illegal and relatively expensive).  Government revenues from alcohol and associated sales are significant.  The Chancellor’s Budgets frequently increase the tax on alcohol and tobacco.   -        From an ecological perspective, one might equally wonder how the petrol or diesel engine motorcar, which depletes a phenomenal quantity of the world’s metal and fuel resources and contributes significantly to greenhouse gases, can be allowed not only to continue, but also to increase?   It’s all down to Joe All that is required to change this situation is for consumers to stop buying and using these products!  In other words, what is and is not acceptable is a matter of whether the strength of public beliefs outweighs its desire for the perceived benefits of purchase or use.                       Friends of the Ozone Layer   Friends of the Ozone Layer is a pressure group, set up with charitable status in 1987.  It has more than 10 000 members worldwide, each paying a p.a. subscription.   An extract from ‘Friends of the Ozone Layer’ Magazine (an A5 booklet published and distributed nationwide to its 8400 UK members monthly) September 06 appears below:       Packaging Policy     While accepting packaging as an evil necessary in the interests of the preservation of perishables, FROTOL estimates that at least 20% of all packaging is unnecessary.  To address this senseless waste of resources over time, while accommodating the law of diminishing returns, FROTOL demands a 10% cut in packaging across the board every year for the next five years.                 L&P Thermopack Ltd.   Mogul Mogul Design was a partnership of Lyn Evans, an industrial designer, and Paul Durrant, a production engineer.  When the UK’s engineering industry began its rapid contraction and middle managers were made redundant in droves in the 1980’s, Lyn and Paul set up on their own.  They re-mortgaged their homes to buy machinery and used their redundancy pay to tide them over until the contracts came in.  In the beginning, they were a bit green and there were some hiccups.  More than once, clients received drawings and plans, only to fail to place an order or pay for work done.  What could Mogul have done about it?  They couldn’t afford costly legal battles.  They just knuckled down to the next job.   They eventually landed a contract doing the packaging for various Netto own brands.  This would become their “bread and butter”.  A steady revenue stream gave them space to consider the way forward.    When they were working late one evening and Paul went out to get fish and chips they saw a gap in the market.  Paul came back with the fish and chips wrapped in one sheet of greaseproof paper, two sheets of white paper, and then three sheets of newspaper.  He had been out just ten minutes in the cold and the food was no longer piping hot.   “That’s the trouble with fish and chips,” he said apologetically.  “If you take it outside, even in the summer, you finish up eating lukewarm fish and cold chips – and there’s nothing worse than cold chips!” “I wonder why they don’t use those McDonald type insulating boxes.  They’re far more thermally efficient,” said Lyn.   Paul paused, holding a chip between thumb and forefinger, halfway to a half-open mouth.  Lyn thought he looked like he had been transfixed in time and was just about to ask whether he thought it would be worth looking into, when Paul said, “I guess we’d have to do at least 500K to make it a worthwhile shot.” (He meant half a million units.)   They explored the idea and it took off. They became L&P Thermopack Ltd.  Within the first year, a £40 000 revenue stream was attributable to its product.  A newly appointed salesperson spent what Lyn and Paul thought was far too long “looking at the market more carefully”, but when she ultimately went out and secured orders from all sorts of other take-away chains (Turkish, Greek, Mexican, hamburger and ‘hot dog’ bars, etc.), they exchanged impressed glances.   Revenue had topped the £1m mark within three years and £2m within five.  Within ten years they had a XX% share of the UK’s take-away packaging market.   Of course all these achievements, though led from the helm, have been accomplished by a growing number of employees, these days in Estonia, where labour and premises costs, though rising, remain at less than 30% of UK prices.  Paul and Lyn now operate from an HQ in Manchester (although they have ‘company villas’ at holiday resorts all over Europe as well as homes in London and Manchester).   As global temperatures increase and public discomfort rises the media look for candidates for behaviour change and the packaging industry does not get off lightly.  Products of the same type as Paul and Lyn’s main product lines are said to contribute to global warming, degradation of the ozone layer, and as much to the UK’s litter problems as plastic bags.   Tasks: 1)               Global Village: Pressure groups Evaluate the extent of the threat to the UK packaging sector posed by public reaction to mainstream news headlines on: global warming, the perceived culprits, and solutions proposed by pressure groups such as Friends of the Ozone Layer.                                    (15)   2)               Global Village: Business Ethics Justify your opinion as to the extent to which the professional conduct of small business leaders such as Lyn and Paul should be influenced by ethical considerations beyond those required by law?                                                                                                       (15)         3)               Business Orientation: Corporate strategy a)     Analyse the difficulties Lyn and Paul might face if they adopt a diversification strategy.                                                                                                                       (8) b)     Explain three strategies other than diversification, which Thermopack Ltd. might adopt to address the threat to UK sales. (12)                                                                                                                                                                                                        (20)   4)               Business Orientation/Communications: Marketing/Customer Relations L&P Thermopack Ltd. receive the letter shown in Appendix B (opposite) from a disgruntled customer.  Compose an appropriate reply.                                          (10)   5)               Finance & Accounting                                                           a)     From the accounts given, calculate the following ratios for L&P Thermopack Ltd.: i)                    Gross profit percentage ii)                  Net profit margin iii)                Gearing iv)                Return on Capital Employed v)                  Return on Net Assets vi)                Current Ratio vii)              Acid-test Ratio                                                                                              (15)   b)     Comment on (i) – (iii) below based on the ratio results obtained in a) above.  (Assume inflation is on average 2.75% for the whole of 2006 rising to 3.0% for 2007.) i)                    L&P Thermopack Ltd.’s solvency ii)                  the Company’s attractiveness to prospective investors who might have been persuaded to purchase shares in the business over the next year. iii)                L&P Thermopack Ltd.’s chances of survival over the next five years.                                                                                                                                  (25)   6)               Business Media In terms of communicating with their publics, what steps should L&P Thermopack Ltd. take to mitigate potential damage to their business caused by bad publicity?     (20)                                                                                           Credit:ivythesis.typepad.com

When is a strategy not a strategy? When it’s a marketing strategy

Foundation Programme ASSIGNMENT F06(3) Read the following carefully and execute the tasks specified at the ...