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Airline Industry Analysis

The past decade has been a challenging one for the global airline industry. The terrorist attacks of September 11, 2001 sent the industry into a downturn in the first half of the decade, while the second half of the decade saw skyrocketing jet fuel costs and economic downturn send passenger numbers down and costs upward. In addition, the nature of competition within the industry has seen tremendous change. Discount carriers like Ryanair and Air Asia have reshaped the low end of the market while at the upper end several Gulf-based carriers have established themselves as global players at the expense of Europe and Asia’s legacy carriers. As a result of these changes to the competitive and macroenvironments, the airline industry is in a state of creative destruction today, making it one of the most challenging industries in which to operate, yet also an industry in which there is tremendous potential for growth for companies with a good business model.

This paper will analyze the global airline industry in the context of its macroenvironment, including both a Five Forces and a PESTLE analysis. The life cycle of the industry will be analyzed, and the additional topic of security will be discussed, as this subject has also had a high impact on the direction of the industry in recent years. After this analysis has been conducted, an analysis of the industry using a resource-based perspective will be conducted. Air travel is a confluence of a number of critical resources, each of which can yield significant competitive advantage to a firm.

Five Forces Analysis

Michael Porter’s Five Forces are supplier power, buyer power, threat of substitutes, threat of new entrants and intensity of rivalry. When put together, these forces can help understand the degree of attractiveness for the industry. For firms within the industry, their position within these forces may also dictate the industry’s attractiveness (for example a firm with high power over suppliers in an industry with generally low power over suppliers). The five forces are graded on a low-medium-high scale, and the attractiveness will be determined by putting these five scores together (QuickMBA/Porter, 2007). The airline industry is generally unattractive at present, although for some firms the condition of the industry has resulted in significant opportunity to steal market share from weakened legacy carriers.

There are several suppliers to the airline industry — key cost inputs include labor, airplanes and jet fuel. Supplier power is generally high. Labor suppliers are an exception as they have relatively low power over airlines. The airlines offer thousands or tens of thousands of jobs each. Much of the labor is not specialized, reducing its power. Even that labor which is unionized can be circumvented by the airlines if necessary — ground crews have limited bargaining power when airlines can simply fly their planes to another country to have them serviced. Airplane manufacturers have only moderate power over airlines. The suppliers are more concentrated, which should give them buyer power but the intensity of rivalry between the two major players (Boeing and Airbus) is very high. In addition, the airplane manufacturers have high fixed costs, which means they must sell a sufficient number of aircraft to cover those costs. They need the airlines as much as the airlines need them. The result of this symbiotic relationship is that aircraft suppliers have moderate power. Jet fuel suppliers have high bargaining power over airlines. The price of jet fuel is determined by global commodities markets, which gives airlines almost no pricing control. As a result, airlines are compelled to use sophisticated hedging strategies in order to manage their fuel costs. Even with these strategies, fuel costs can be virtually the sole determinant of airline profitability, as was the case during the fuel cost run-up from 2004-2008 (ATA, 2006).

Power of buyers is moderate in the airline industry. Buyer volume is low, but other factors drive buyer power such as information, price sensitivity, substitutes and competition. Buyers have a high degree of information available to them, in particular online, that allows them to compare prices, routes and flight times of a wide range of carriers. For most major journeys, there are myriad options available, and since buyers can easily compare these options, it gives them some bargaining power — not as much for negotiation but certainly for choosing one carrier’s offer over another’s.

Most airline buyers are price sensitive, not only in choosing between airlines but also in choosing between airlines and substitutes. There is evidence that price sensitivity of airline passengers, including business passengers, has increased significantly in recent years (Shane, 2004). That said, airlines set the prices. Most airlines use sophisticated algorithms to set their prices according to demand conditions, timing and a wide range of other factors. This allows airlines to maximize revenue for each flight — a combination of load factor and price per passenger. The bargaining power of buyers is also dependent on substitutions. For trans-continental flights, airlines have significantly more bargaining power in the absence of land-based options such as railways and roadways. On routes within continents, airlines have reduced bargaining power, exceptions given to long-distance flights.

The threat of substitutes is moderate to low. This is dependent on the particular route — intercontinental routes and long-distance routes within the same continent have a low threat of substitutes as alternate transportation modes are lengthy, time-consuming or downright impossible. On short and medium routes that do not cross large bodies of water, there is a moderate threat of substitution. Air travel is much faster than any other mode, giving it a distinct competitive advantage over other types. However, on these routes, price sensitive consumers may choose land-based modes of transportation. Air travel would then typically appeal more to time-sensitive consumers. An additional threat of substitution comes from forms of communication, in particular from business customers. It has been noted that during difficult economic times, companies will sometimes reduce their business travel expenses and utilize email, telephone, videoconferencing and other modes of communication in place of personal meetings. While evidence shows that videoconferencing is, of itself, a relatively low threat with substitution rates between 2.5-3.5% (Denstadtli, 2004), airlines often run flights where the profitability margin is only a few passengers, so at uptick in any substitution form could compromise profitability in the industry.

The threat of new entrants is relatively high. Despite would appears to be high fixed costs, economies of scale, a steep proprietary learning curve and high capital requirements, there appears to be no shortage of companies able to start airlines. Most of the industry’s strongest competitors today have emerged in the past twenty years, including the majority of discount airlines and the Gulf airlines. The ready availability of surplus airplanes, access to secondary airports and the demand among consumers for improved airline service all contribute to the high treat of new entrants.

The intensity of rivalry is moderate. There is low concentration in the global industry and air travel capacity appears to be sufficient to allow for new entrants. Corporate stakes are relatively low, as is the diversity of rivals and product differences. Despite these factors, the number of competitors and geographic specialization of national-based airlines has allowed for the industry to develop without strong rivalry.

Overall, the airline industry is generally unattractive. It probably should not be, given the forces acting upon the industry, but the airline business is anomalous in many respects. The pricing power of suppliers is generally high, and the pricing power of buyers is moderate, meaning that airlines are limited in the degree to which they are able to pass price increases along to their customers, most notably on intercontinental flights were substitutes are almost non-existent. The high threat posed by new entrants is another factor that makes the industry unattractive.

PESTLE Analysis

The political environment has a strong influence on the airline industry. Airlines are heavily regulated, both for safety reasons and for strategic reasons. Many national carriers are subsidized or owned by governments and this assistance at times has a direct impact on industry competition, such has been suggested of the Gulf-based carriers such as Emirates, which was financed by Dubai’s royal family (Pae, 2008). The political environment has also in recent years impacted the industry on the basis of its security procedures. Not only have airports been compelled to implement more sophisticated security measures, reducing passenger counts, but airlines have been forced to invest more in security themselves. In the U.S., increases in security costs since 2001 have run at an estimated $5.6 billion annually (Grossman, 2007). Due to the fact that airlines only have moderate pricing power over the customers, the industry has had to absorb part of these costs.

The economic environment has a strong influence on the airline industry. Air travel is strongly correlated to the global economy. As a consequence, the industry has faced a significant decline in demand since the outset of the economic downturn (Freeman, 2009). There are signs, however, that the economy is improving. Western economies with stable banking systems, such as Canada, are already raising interest rates and even in nations with weak banking systems such as the U.S. are seeing modest improvements in economic indicators.

The social environment is favorable for air travel. The mode still holds tremendous cachet with consumers and is favored when consumers can afford it. There is some consideration that the airline business is a major contributor to greenhouse gases and therefore global warming, but as of yet the industry has not come under serious public pressure as it is generally viewed by the public as a necessity rather than a luxury in this regard.

The technological environment is favorable, and the airline industry has typically responded well to technological change. While some developments are in the form of new airplane technology, for airlines the more important developments are those that reduce back-end costs. For example, the use of online reservation and check-in has been a core strategy for discount airlines to reduce costs (Starmer-Smith & Alleyne, 2009). Information technology has also facilitated other developments such as large airline code-sharing groups.

The legal environment concerning airlines is complex. The industry is highly regulated and in some cases — such as security – that regulation is shifting. Because airlines often fly between different countries, they are subject to the laws governing multiple nations. Airlines in general have little difficulty navigating their legal environments but the complexity of these environments can occasionally be a threat to a route or its profitability.

The airline industry has a heavy impact on the environment. This places it at risk with regards to sanction or legal action in future. However, the industry’s environmental impacts have yet to come under significant scrutiny and no talk of economic sanction has resulted from the environmental impacts of the airline business. As a result, this environment does not yet have a strong impact on the airline industry, even if it has the potential to do so.

The different environments paint a picture of an industry that is generally favorable. The economic environment presents the most significant challenge to the airline industry, with the political environment also having a strong impact. The other environments are generally favorable, at least for the time being. The airline industry has been able to dodge the major threats in most of its environments, with the notable exception of the economy, to which the fate of the industry is inextricably tied.

Resource-Based View

The resource-based view is a means of analyzing a firm in the context of the resources or tools it has at its disposal (Wernerfelt, 1984). The resources must be either valuable, rare, inimitable or non-substitutable in order for the firm to be able to use it to gain competitive advantage or preferably sustainable competitive advantage. Resources can be any of assets, capabilities, processes, firm attributes, knowledge that the firm controls.

The best way to analyze the airline industry from a resource-based perspective is to analyze the most successful companies in the industry to understand from where they draw their sources of competitive advantage. Critical resources that have been identified are systems, routes, corporate culture and strategic alliances.

Airlines can succeed by developing systems that have a lower cost structure than similar systems at competing airlines. For example, many discounters operate with a system that emphasizes online booking, and Ryanair has extended this to include online check-in (Starmer-Smith & Alleyne, 2009). This has allowed the company to have a lower cost structure than many of its competitors, who cannot do away with manual check-in gates.

Pricing systems can also allow an airline to gain competitive advantage. Unlike some other operating systems, pricing systems have more potential to be proprietary and therefore be considered “rare.” Airline pricing strategy is based on complex algorithms. These algorithms both help the airline forecast demand and set prices. The result is that they should deliver to the airline the optimal combination of ticket sales and ticket prices to maximize revenue (Knapp, 2003). The airline with the best algorithm should in theory have the best revenue optimization.

Airlines also derive competitive advantage from the route they hold. The routes can range from valuable to non-substitutable depending on the route’s distance and exclusivity. This resource arises from the limited capacity of airports and the fact that some major markets consistently bump up against this capacity. For many airlines, access to key airports is a critical success factor. In many cases, an airline can have a dominate position at a given airport, arising from either competitive strength or from government decree. Such access allows the airline to extract higher rents for flights to and from that airport. Access to transcontinental routes is also considered valuable, since those routes are not readily substitutable. Airlines with exclusive access to those routes can charge higher rents, effectively subsidizing operations on more competitive routes. Qantas, for example, used the Sydney-London and Sydney-Los Angeles routes to help it compete domestically against carriers unable to service those highly profitable routes.

In addition, certain geographies can be used to competitive advantage. In the United States, many airlines tend to fly a hub-and-spoke system. This means that for most airlines, finding a supportive and low-cost hub or handful of hubs, each with strong geographic location, is crucial to the development of the business. Central hubs such as Dallas-Fort Worth or O’Hare are particularly strong bases of operations from which to build networks that span the entire country. Similarly, international airlines use this model to gain competitive advantage. Taiwanese airlines such as EVA and Air China use this model to drive trans-Pacific business from a range of Asian cities and the Pacific coast of the Americas, often in conjunction with code-sharing agreements. The Gulf-based carriers have used their geographic location to develop route networks that match up cities in Europe with cities in Asia, including small and mid-sized airports. As an example, a consumer flying between two major cities such as Istanbul and Kuala Lumpur might have been required in the past to make multiple plane changes; today, one change in the Gulf can make such a route happen. This has been a tremendous source of competitive advantage for the Gulf-based airlines as there are no geographic competitors between Europe and Asia due to the large number of unstable countries in that corridor.

Corporate culture can also be a source of competitive advantage. This firm specific attribute can be duplicated by other airlines, but not easily. Perhaps the best example of building corporate culture to a source of competitive advantage in the airline industry is Southwest Airlines. This company’s culture was forged in part by the vision of early leadership and the need to acquire strong employee buy-in for the firm’s strategies, and partly as a response to the genuine threats the firm faced from larger competitors. The Southwest corporate culture delivers consistently higher levels of customer service and high commitment to cost reduction, each of which supports the company’s two main strategies. As a result, Southwest has been the most consistently profitable airline in North America. In the Gulf, the culture of excellence has been cultivated at Etihad, to drive the high levels of service that differentiate that airline. These examples show how culture has been used to foster both a low-cost strategy and a differentiated strategy.

Strategic alliances also form a source of competitive advantage in the airline industry. For many airlines, a means to increase capacity is code-sharing, often in large industry blocs. These blocs can help airlines to increase their capacity, by sending customers of other airlines to their airlines. The Star Alliance is one such bloc, comprised of airlines around the world. These alliances also allow for improved marketing synergies between the members of the group.

Because the resource-based view is internally-focused, it allows for insights that the design school models leave out. The airline industry is complex, so there are a number of different factors from which success can be generated. The design school models, such as the PESTLE and Five Forces, are useful in describing the external environment in which the airlines operate. For a specific airline, the SWOT analysis can provide some insight into the potential strategic directions going forward. These tools are useful in that they compel the manager to consider a broad range of variables that can impact on the business.

Compared with the design-school models, the resource-based view allows the manager to understand which of the company’s assets and systems can be used in order to gain competitive advantage, and to what degree that competitive advantage exists. Managers can easily analyze the success factors for competing airlines and weigh these against their own strategy. The resource-based view is perhaps most analogous to the “strengths” component of a SWOT analysis, but is more in-depth because it focuses the manager on a wider range of variables. When undertaken on an industry-wide basis, the resource-based view can shed light on resources utilized by all competitors, not just the one firm.

The resource-based view of strategy can be an especially powerful tool when matched against some of the design school models; the two approaches are complementary rather than mutually exclusive. In particular, the design school’s analytical tools provide the backdrop of knowledge against which it is easier to understand how the different resources can lend an airline competitive advantage. Once the industry conditions are understood, it is easier to understand how some firms are able to thrive in the same circumstances in which other firms struggle.

One area where the resource-based view appears to have considerable advantage over the design school models is that it is more focused on building sustainable competitive advantage. A SWOT analysis, for example, can reveal opportunities that an organization can exploit, but these opportunities may be short-lived, easily duplicated by competitors or otherwise limited in their value. It is not that such opportunities should be passed over, but they are inherently ephemeral in nature if they do not result in the firm creating sustainable competitive advantage.

The resource-based view focuses management away from chasing such short-term opportunities and towards activities where the organization can generate sustainable competitive advantage. To illustrate this, consider the example of Ryanair. That airline was launched to exploit an opportunity in the marketplace for a low-cost provider of airline services. Naturally, as Ryanair became successful, a wide range of competitors entered the marketplace with the same strategy, something that could have been predicted by the relatively low barriers to entry in the industry. The success of Ryanair initially was attributable to the company identifying and exploiting an opportunity — all of which could have been done utilizing design school models. That Ryanair has continued to be the industry leader in terms of pricing and market share despite a host of competitors entering the market can only be explained by taking a resource-based view. The company was able to build a corporate culture that facilitated constant cost-cutting initiatives. It was able to build a strong brand, and was able to forge strong relationships with key airports that gave it a first mover advantage over new entrants. Some of these competencies are imitable, but not perfectly so. In essence, other companies can come close to Ryanair in some respects, but cannot beat Ryanair in all respects. As a result, Ryanair remains the industry leader in the European discount airline business. It is only through the resource-based view that we are able to understand precisely how Ryanair has been able to sustain its success over the long-term.

The airline industry is a difficult one in which to operate and is moderately unattractive, but over the course of the past decade a number of firms have demonstrated two key things about the business. The first is that there are opportunities that can be exploited. With most legacy carriers operating more or less the same business model, firms with more creative models have been able to differentiate themselves and win market share. The second thing is that some of these advantages are sustainable. The legacy carriers have suffered in the past decade in part because they had so few sources of sustainable competitive advantage. The new carriers that have emerged and taken large amounts of market share have been much more competitive. Their strategies have been more comprehensive, and stem largely from a resource-based view used in conjunction with traditional design school analysis, whereas the legacy carriers have not demonstrated this degree of strategic competency. The result is that not only are the new carriers, both discounters and luxury airlines, winning market share and growing rapidly, but they are doing so in a manner that is sustainable over the long run.

Works Cited:

Adapted from Porter, M. (2007). Porter’s Five Forces. QuickMBA. Retrieved March 30, 2010 from http://www.quickmba.com/strategy/porter.shtml

No author. (2006). Rising jet fuel prices hamper airline industry’s extraordinary cost-cutting efforts. Air Transport Association (ATA). Retrieved March 30, 2010 from http://www.airlines.org/news/releases/2006/news_4-11-06.htm

Shane, J. (2004). American Bar Association 2004 annual meeting aircraft financing subcommittee. U.S. Department of Transportation. Retrieved March 30, 2010 from http://ostpxweb.dot.gov/s-3/data/abafinancesubcomtespeech8-6-04.pdf

Cote, J-P., Marcotte, P., Savard, G. (n.d.) A bilevel modeling approach to pricing and fare optimization in the airline industry. Universite de Montreal. Retrieved March 30, 2010 from http://www.iro.umontreal.ca/~marcotte/ARTIPS/RevMan2.pdf

Denstadtli, J. (2004). Impacts of videoconferencing on business travel: The Norwegian experience. Journal of Air Transportation Management. Vol. 10 (6) 371-376.

Pae, P. (2008). Dubai’s Emirates Airline eyes U.S. To reach lofty goal. Los Angeles Times. Retrieved March 31, 2010 from http://travel.latimes.com/articles/la-trw-emirates7jan07?page=1

Freeman, S. (2009). As air travel stalls over economy, airlines deals take off. Washington Post. Retrieved March 31, 2010 from http://www.eturbonews.com/8277/air-travel-stalls-over-economy-airline-deals-take

Starmer-Smith, C. & Alleyne, R. (2009). Ryanair to remove airport check-in desks. The Telegraph. Retrieved March 31, 2010 from http://www.telegraph.co.uk/travel/travelnews/4736024/Ryanair-to-remove-airport-check-in-desks.html

Grossman, D. (2007). An airline industry wish list. USA Today. Retrieved March 31, 2010 from http://www.usatoday.com/travel/columnist/grossman/2007-06-11-airline-challenges_N.htm

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal. Vol. 5 (2) 171-180.

Knapp, L. (2003). Algorithms key to cheap air fare. Wired. Retrieved March 31, 2010 from http://www.wired.com/science/discoveries/news/2003/04/58353

Communication Technology in the Hospitality Industry history essay help

Communication Technology in the Hospitality Industry

Computers, global telecommunications and the Internet have all fundamentally changed the manner in which companies of all types and sizes operate and market their businesses today. In fact, information and communication technology (ICT) have been responsible for fueling the globalization of the marketplace and these same forces have contributed to the resurrection of the travel and tourism industry following the major downturn the industry experienced following the terrorist attacks of September 11, 2001. Today, the tourism industry is the largest industry in the world and the hospitality sector that is supports has enjoyed the results of this upsurge. Some hospitality organizations, though, have benefited from their ICT initiatives in more significant ways than others, but it is clear that virtually any type of company competing in the hospitality industry can benefit from the use of ICT provided that certain factors are taken into account during its selection, implementation and administration. Therefore, to gain some valuable insights into what is involved, this paper provides an overview of the use of information and communication technology in the hospitality industry today to determine the impact that information technologies have had on the industry’s structure as well as an examination of ways in companies are using these technologies to add value to their business proposition by measuring the added value originating from IT. A Porter’s five forces analysis of the hospitality industry is followed by an analysis concerning how both existing and emerging IT technologies can be used as a source of competitive advantage. Finally, a summary of the research and important findings are presented in the conclusion.

Review and Discussion

Background and Overview

The term “hospitality industry” is an umbrella reference for all of those companies that have as their primary purpose the provision of food, beverages and accommodations for sale on a commercial basis (Lucas 2003). The most common activities or sub-sectors in the International Standard Industrial Classification of all Economic Activities (ISIC) Division 55 (Hotels and restaurants) are (a) hotels, (b) restaurants, (c) bars (this designation includes pubs and clubs) and contract catering (Lucas 2003). As noted above, the hospitality industry is part of the tourism sector which is the largest industry in the world and is estimated to employ more than 255 million people, accounting for fully 10% of employment worldwide (Spillane 2001). Given the enormous numbers of people that are competing in the hospitality industry, it is clear that a competitive advantage is needed to survive and grow. Because the hospitality industry depends on delivering high quality products and services with a view towards providing high levels of customer satisfaction, this competitive advantage will naturally be related to this function. For instance, according to Spillane, the tourism industry “has now grown into a modern, mature industry where workers are forming their professional identity. These ‘hospitality professionals’ are primarily concerned with customer satisfaction. But that’s not always easy to achieve and many problems can — and do — arise” (2001, 16).

Problems with customer satisfaction are certainly not unique to the hospitality industry, of course, but companies competing in this service industry in particular must depend on a track record of satisfied customers in order to sustain their existing levels of operations and to grow their businesses in the future. Because the hospital industry typically caters to a global consumer base, providing consistently top-notch services in such a transcultural environment can be a daunting enterprise that is fraught with opportunities for failure. Indeed, the tourism and hospitality industry have had a global focus in the past, of course, but this focus has become increasingly pronounced in recent years due in large part to the innovations introduced by ICT. In fact, according to Egger and Buhalis (2008), “As more consumers move online, travel has become the most commonly sold online product” (16). As a result, the competitive environment in which companies in the hospitality industry operate has become increasingly fierce in recent years and there has been a push among many companies to “reinvent or differentiate themselves successfully, especially if they become homogenized as predicted by some researchers. In particular, destination organisations will need to seek competitive advantage by providing a quality service product” (Wahab & Cooper 2001, 37). Therefore, companies competing in the hospitality industry must take advantage of every resource available to help them achieve the operational capability to both deliver high quality customer services as well as to communicate this feature to the prospective clientele. These companies must also be able to identify trends in the marketplace that have the potential to affect their operations and to monitor costs and other operational data in the process. All in all, it is hard to imagine how these processes were ever accomplished efficiently without ICT, and these issues are discussed further below.

Applications of ICT in the Hospitality Industry

The research shows that there are a number of ways in which ICT can help to facilitate the development of a competitive advantage for companies competing in the hospitality industry and innovations continue to be introduced that hold a great deal of promise for this industry in the future. According to Crandall and Gao (2005), “Specific applications in the hospitality industry have also been recognized, such as reservations and sales and marketing functions” (31). There are a number of other applications currently being used as well. For instance, according to Domke-Damonte and Levsen (2002), “As information technology usage has increased greatly due to more user-friendly applications, cheaper and faster software and hardware, and major advances in telecommunication capabilities and usability, more business are including the Internet in their strategies” (31).

Although there is no “one-size-fits-all” IT solution available for all companies competing in the hospitality industry, the research shows that the manner in which hospitality organizations can use ICT to develop a competitive advantage depends on their location, targeted customer base, size and the type of services offered; however, there are also some common approaches being used that can serve as good examples of how these techniques are being applied by hospitality companies today. For example, all hospitality organizations need timely information concerning what their customers want, what the most popular tourist destinations are at a given point in time, and what their competitors are doing to remain competitive and it is in this area in particular that ICT can help. In this regard, Taylor advises, “No business, and especially no customer service intensive business, can operate without information. From the broader understanding of what customers want, need, and desire to the feedback concerning how well a business has met those demands, information provides the rudder to guide the service ship” (2002, 36). Based on his empirical observations and experiences, this analyst cites as especially salient the following examples of how hospitality organizations’ ICT failed in recent months:

1. The information system has failed if the international travelers who comprise 80% of a hotel’s business have no World Wide CNN on their TVs.

2. The information system has failed if a business does not know why first time visitors to its facility seldom return.

3. The system has failed if 60% of a business’ customers are Jewish and the business does not provide Kosher food in its restaurant.

4. The system has failed if a company’s front-line workers know customers’ most common complaints, but management only knows the complaints listed on the complaint cards filled out by one-fifth of one percent of its customers (Taylor 2002, 36).

Because customer service is the focus of the hospitality industry, it just makes good business sense to use these technologies to their best advantage in acquiring needed information. As Taylor emphasizes, “Customer service requires market research, communication barrier reduction, and proactive use of the information subsequently generated. Customer service requires knowing when customers are upset and being willing to take action to recover from a service failure” (2002, 36). Instances of these types of customer service feedback can be easily categorized, the information plugged into a database and trended to identify failures and opportunities for improvement, but other information related to customer satisfaction and current trends is also important. It is in this area that ICT can play a major role. The information-gathering function has historically been a labor-intensive and time-consuming operation but ICT has changed this in major ways. In the past, Domke-Damonte and Levson report that, “Information relating to the future of an industry required interorganizational cooperation at the local level. With increased, cheaper, and more user-friendly access to the Internet for noncomputer specialists, much of this information can now be collected by small business owners” (2002, 31). In addition, even an inexpensive personal computer with Internet access can provide smaller companies with a competitive advantage. For instance, Domke-Damonte and Levsen note that, “The World Wide Web can be used to investigate competition, gain information about innovative practices within the small hotel industry, and stay ahead of the curve on the technological, regulatory, and economic issues that target the industry” (2002, 31). Contributing to the utility of information technologies is the proliferation of off-the-shelf software applications, some of which are specifically designed for the hospitality industry. In this regard, Higgins (2002) reports that Micros Systems Inc. introduced a custom application specifically for the hospitality industry early on, and despite the lingering effects of the September 11, 2001 terrorist attacks on the market, this company and others such as BDM International Inc. are continuing their efforts to provide hotels, restaurants and other organizations competing in the hospitality industry with the information technology they need to become more competitive (Bear 1999). More recently, companies such as Avendra have started offering integrated software applications that are specifically designed for various segments of the hospitality industry. This company’s integrated software application provides purchasing support for food and beverage operations, room operations, engineering/building and construction, administrative, professional and financial services; cleaning solutions and sanitizing systems; grounds and agronomy maintenance; as well as gift shop and spa equipment operation and products (Avendra’s purchasing programs 2010).

According to Richer (201), a trend that has experienced substantial growth recently is the ability for online systems to collaborate in a networked fashion to search bed banks and other third party product suppliers to provide customers with real-time availability and booking options. In this regard, Richer notes that, “Virtually every system supplier is offering operators the ability to sell far more than their own stock. Systems now offer seamless connectivity to bed banks, transfers, flights and other products” (4). It should be noted, though, that Richer also cautions, “There is a danger that with universal connectivity to relatively few bed banks, tour operators will all end-up selling the same stock, so commoditizing the industry. It is very important for operators to maintain their own unique identity and remain competitive by continuing to negotiate contracts directly with the hotels which they sell most. They should only use third parties to supplement their own stock, so widening the range of product on-sale but maintaining a unique core” (5).

Besides the foregoing, companies competing in the hospitality industry can launch a sophisticated Web site for free or a modest monthly charge that promote their business and provide the means for potential customers to arrange their own reservations at hotels or restaurants (Domke-Damonte & Levsen 2002). Taken together, there are three basic ways that ICT can help companies competing in the hospitality industry better reach their market:

1. Gaining information about the industry in general and specific local competitors;

2. Developing Web sites to transfer information about a specific hotel to prospective customers; and,

3. Developing a Web site where customers may make and check reservations directly with a specific hotel through the Internet (Domke-Damonte & Levsen 2002, 31).

Besides the foregoing information-gathering function, ICT can also be used by companies competing in the hospitality industry to custom-tailor their message for existing and potential customers. According to Spillane (2001), “There are many different ways to tailor the service to meet the needs of individual customers” (16). The customization process can take place along two dimensions at a minimum:

1. Companies must consider whether the characteristics of the service and its delivery system lend themselves to customization; and

2. Companies must determine how much judgment customer contact personnel can exercise in defining the nature of the service received by individual customers; some service concepts are relatively standardized, while other services offer customers a wider range of options (Spillane 2001, 16).

In addition, hotel franchisees typically purchase specific interfaces for the franchising brands’ own reservation system (Luftman 2003).

Porter’s Five Forces Analysis

According to Kermally (2003), Porter’s five forces framework can provide an improved analysis and understanding of the competition that exists in a particular industry. This author points out that, “In order to construct a competitive strategy, an organization needs to know what is likely to happen in the markets in which the organization delivers its products and services. It also has to know who its competitors are in a particular industry structure” (Kermally 2003, 58). In order to accomplish this type of strategic analysis, it is helpful to refer to the rules of the competition governed by the five competitive forces described by Porter in his five forces model, and these forces are applied to the hospitality industry and its competitive environment in Table 1 below.

Table 1

Porter’s Five-Force Hospitality Industry Analysis

Force

Overall Assessment

Analyses and Comments

Power of Buyers

ICT provides travelers and other potential customers with the ability to shop and compare offerings and prices and can even give them a virtual tour of a company’s facilities before they make a purchase decision. Internet usage statistics point to more than one billion users worldwide, with an astronomical growth rate of about 15% per month, a growth rate that translates to 180% per annum, compounded monthly (Eger 2006). The Internet’s most popular component is the World Wide Web which has been widely integrated into the marketing, information, and communications strategies of almost every major corporation, educational institution, charitable and political organization, community service agency, and government entity in the developed world; there has never been an innovation in communications that has been so widely or rapidly adopted by the public (Eger 2006, 18).

ICT levels the playing field for companies competing in the hospitality industry, with small- to medium-sized enterprises enjoying the same opportunities for promotion and customer relationship marketing as their larger counterparts. This point is made by Richer (2010) who advises, “New entrants into the marketplace are using the latest development languages to construct straightforward yet reasonably comprehensive reservation systems that are specifically designed for online sales” (3). In addition, Richer notes that, “Selling online need no longer be an expensive exercise. There has never been a better time for smaller operators to compete on a level playing field with their larger competitors who can more easily afford heavy investment in technology” (4).

Power of Suppliers

ICT provides hospitality organizations with the ability to customize their offerings and promote them in a cost-effective fashion based on current trends and the analysis of their customer relationship marketing data. In addition, hospitality organizations can use information technologies to improve their internal operations by automating many human resource functions and by improving communication throughout the organization (Conophy 2005).

The cost-effectiveness of information technology applications mean that smaller marketing budgets can be translated into more competitive pricing levels.

Threat of Substitution

The hospitality industry survived for thousands of years without ICT, but it is reasonable to suggest that the ubiquity of these technologies and their importance to the operation of businesses of all types today indicate that there are no viable substitutions currently available to replace them.

Some low-tech alternatives remain useful in the hospitality industry; for example, customer comment cards are an effective way to collect customer satisfaction feedback and brochures and fliers continue to be used as responses to mailed inquiries for information.

Threat of Entry

The barriers to entry for the hospitality industry are directly related to what type of enterprise is involved. Restaurants or bars can be launched for far less, for example, than a hotel.

Major chains enjoy brand recognition creating a major hurdle for start-ups.

Internal Rivalry

The research was consistent in showing that although ICT has made the hospitality industry more competitive, some hospitality organizations collaborate with their competitors (and others) to help redefine their destination and improve business for all.

For instance, Domke-Damonte and Levsen note that, “A firm may collaborate with direct competitors, customers, suppliers, and other organizations providing services to their customers in an effort to build its competitive position” (31).

Overall Industry Assessment

As part of the travel and tourism industry, the hospitality industry has regained much of the business that was lost immediately following the terrorist attacks of September 11, 2001;

The current global economic downturn has affected this industry as well.

Using IT Technologies to Achieve a Competitive Advantage

Perhaps the most important contribution that information technologies have made to the hospitality industry in recent years is the manner in which it has improved customer service and the level of professionalism among hospitality organizations, and these outcomes can be used to gain a competitive advantage. In this regard, Jafari emphasizes that, “During the past several years, nothing has increased professionalism or more greatly enhanced customer services within the tourism industry than automation. Technology will continue to change the way companies plan, co-ordinate, control and evaluate operations” (46). Given recent trends in the widespread use of information technologies by industries of all types, these trends will likely continue into the foreseeable future until the march to ubiquitous computing is achieved. Even then, though, software engineers will be working on “the next big thing” in information and communications technology.

Just a few years ago, computers were prohibitively expensive, cumbersome, difficult to use and required a significant amount of training to use effectively. By sharp contrast, the situation is much different today and even computer novices can become proficient in the use of sophisticated customer relationship marketing packages quickly thanks to intuitive graphic-user interfaces and user-friendly software applications. As Jafari points out:

Automated information system design and implementation is one of the fastest changing aspects of the industry. Future technological developments will be more intuitive, object-oriented, global and portable. The traditional approach of cultivating an appropriate level of computer literacy in order to render a more effective utilization of technology is rapidly changing. (Jafari 2000, 46).

A study by Piccoli, O’Connor and others (2003) examined the risks and benefits of customer relationship management in the hospitality industry. According to O’Connor and Murphy (2005), the CRM approach “can lower marketing expenditures and increase sales through closer relationships and increased satisfaction. For this to occur, the entire hotel chain must cooperate in the collection, management and dissemination of customer information — an expensive and complicated process” (p. 10). In their study, Picolli et al. point out that a potential data-ownership problem exists that is related to the structure of the lodging industry in the United States in which owners, management companies, and brands are required to collaborate to effectively operate their properties but the structure makes it particularly difficult for all three of these segments to effectively share customer data. Because these three entities are in competition as often as they are cooperating, implementing CRM initiatives could be constrained or entirely unsuccessful in achieving their corporate goals. In this regard, Piccoli and his associates (2003) maintain that in order to overcome these constraints, it is important to identify situations that are amenable to the use of CRM. Consequently, Picolli and his associates (2003) suggest that within the hospitality industry, CRM applications have the best chance of success when they are implemented at the brand level and cite the results of two case studies of brands with strong CRM programs (i.e., Wyndam International and Harrah’s Hotels and Casinos); the latter example also highlights the value of data mining techniques when using CRM applications. According to O’Connor and Murphy (2005), “This procedure applies artificial intelligence and sophisticated statistical techniques to customer data to perform five tasks: classification, clustering, deviation detection, associations and forecasting, and can be a valuable tool for hotels seeking to better understand and predict guest behavior” (p. 10). Other factors that must be taken into account when implementing a CRM initiative include how customers will be interfacing with the hospitality company’s Web-based services. In this regard, O’Connor and Murphy (2005) emphasize that, “Consumers increasingly use a variety of devices (for example cell phones, Interactive television and kiosks) to access the Web, and need different types of interactions, information and procedures depending on the relationship stage” (p. 11). As a result, any type of “one-size-fits-all” approach for operating a CRM approach will likely fail to provide the desired results (O’Connor & Murphy, 2005). The research to date indicates that in order to successfully integrate a CRM application in the hospitality industry, the specific characteristics of XML that use content-specific tags instead of stylistic ones could assist hotel companies in their implementation of the needed device specific and loyalty level personalization that are needed (O’Connor & Murphy 2005).

In order to use these technologies to their best effect in achieving a competitive advantage, though, there must be some overarching vision or plan to guide the process, which naturally begins with the company’s top leadership. According to Taylor, “No number of operational or computerized systems can provide good customer service without good leaders to learn and teach the processes. The hotel, resort, or restaurant must have a vision about where it is heading, must have strategies in place for meeting that vision, and must have inspired and motivated employees to meet the challenges associated with the vision and strategies” (36). Likewise, in their study of the effects of information technology on the hospitality industry, Bassoppo-Moyo, Bassoppo-Moyo and Dube (2002) emphasize that, “For information technology to be applied in any given entity, there must be managers assigned to running the affairs of that environment. Management can be defined as the person or persons that manage an organization” (289). Although many larger organizations in the hospitality industry enjoy economies of scale in their marketing efforts, smaller organizations can use ICT to overcome to these competitive disadvantages. In this regard, Domke-Damonte and Levsen point out that, “One significant advantage to Internet usage for small business falls in the marketing realm. Almost 9% of all Internet users made travel reservations through the Internet in 1998. By having an interactive Web site online, small hotels and other small businesses are offering their services to a global market at an inexpensive rate” (2002, 31).

As noted above, access to timely information about the market, current trends and the initiatives being taken by competitors represent the foundation of an effective marketing plan for hospitality organizations and this same information can be used to help achieve a competitive advantage. For example, Domke-Damonte and Levsen report that, “[Hospitality organizations] can emphasize their individual services and competencies, a capability not available within a cooperative marketing plan. This could increase competitive moves by offering niche services the industry does not usually provide. Access to competitors’ sites also provides timely information, but increases the turbulence of the task environment, resulting in higher levels of competition within the industry” (2002, 31).

A fundamental constraint to successful imitation that is capable of preventing or at least delaying the loss of sustainable competitive advantage that result from IT-enabled strategic initiatives is the preemption barrier which is shown in Figure 1 below.

Figure 1. Preemption Barrier

Source: Luftman, 2003 at p. 124

A number of the classic examples of IT-enabled strategic initiatives that have emerged in recent years have provided first-movers with a competitive advantage as well as the capacity to prevent preemptive retaliation by competitors (Luftman 2003). According to Luftman, “Initiatives such as Merrill Lynch’s Cash Management Account, American Airlines’ SABRE, American Hospital Supply Corporation’s ASAP, and Pacific Pride System’s Cardlock seem to owe much of their success to their ability to leverage their pioneering efforts” (p. 125). Because they were the “first-est with the most-est,” these early IT-enabled strategic movers were able to forge lasting relationships with their customers and other players in the value system in ways that created significant barriers to imitation that also protected their competitive advantage (Luftman 2003). Yet another way in which early movers enjoy a competitive advantage is the ability to make the costs associated with switching prohibitively expensive or difficult for competitors. In this regard, Luftman advises, “IT-enabled strategic initiatives, heavily relying on the collection, storage, manipulation, and distribution of information, are particularly suited to the creation and exploitation of switching costs” (p. 125). Here, Luftman defines switching costs as “the total costs, including psychological, physical, and economic costs, borne by the parties of an exchange when one of them leaves the exchange. Switching costs stem from investments that are specific to the IT-enabled strategic initiative, where the term ‘specific’ indicates that the value of these complementary investments is significantly lower in any alternative use” (2003, 126). A useful instance of switching costs that are commonplace are the entire costs associated with a change from one type of computer platform to another such as takes place when companies switch from Microsoft to Macintosh (Luftman 2003). While some switching costs are relatively minimal, others can add up, making the transition more time-consuming and costly; some switching costs that may not be readily discernible during such transitions include the costs of the platform- specific training, software, peripherals, data conversion costs, any data loss experienced, and so forth (Luftman 2003).

Finally, Luftman points out that the foregoing costs may not be all of the expenses involved during an IT transition initiative. According to Luftman, “Switching costs are not only associated with the tangible and intangible investments needed to obtain and operate the necessary IT infrastructure; they also include opportunity costs associated with abandoning the initiative to adopt competitors’ offers” (2003, p. 126). As an example, Luftman cites the case of firms such as Avendra in the hospitality industry that have used an electronic procurement marketplace for a significant amount of time. These types of companies might be reluctant to switch to a competitor since it would involve the loss of the historical transaction data that had been acquired over time that might be not readily transferable in an integrated fashion (Luftman, 2003).

Conclusion

The research showed that like virtually every other type of industry, the hospitality industry has been profoundly affected by the introduction of information and communication technologies. Because of the global focus of the industry, the importance of ICT was shown to be especially pronounced for the hospitality industry. Besides the off-the-shelf software applications and integrated customer relationship marketing programs that are being developed specifically for the hospitality industry, the research showed that companies competing in this industry can benefit from information and communication technologies in a wide range of ways, including market research, collaboration with customers and suppliers — and even competitors — to their mutual advantage. For companies competing for a bigger share of a global consumer base, it is reasonable to conclude that hospitality organizations that use information technology in the ways described above will enjoy a competitive advantage over those that do not. Given the enormous size of the hospitality industry and the rocky economic environment that exists today, even a slight competitive advantage may spell the difference between success and failure for many hospitality organizations.

References

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Domke-Damonte, D. & Levsen, V.B., 2002. “The Effect of Internet Usage on Cooperation and Performance in Small Hotels.” SAM Advanced Management Journal 67(3): 31-32.

Eger, J.M., 2006, March-April. “Building Creative Communities: The Role of Art and Culture;

A Leading Authority on Information Technology Argues That Cities Must Nurture the Creative Potential and Community Engagement of Their Citizens.” The Futurist 40: 18-

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The Competitive Advantage of Organizations history assignment help online: history assignment help online

IT Strategies to Maximize the Competitive Advantage of Organizations

This paper will examine how IT strategies, also referred to e-business or e-commerce strategies, are utilized by an organization to maximize the competitive advantage of the organization within the market place. This will include analyzing IT strategy in terms of global strategy and this will touch upon how an organization handles marketing. Basically strategy requires leadership and it is interesting how it interacts with all aspects of the organization in order to succeed. Specifically this paper will use four models: SWOT, Porters Five Forces, 7s model and Value Chain to analyze IT strategy within the Chinese nutrition market. This includes health food and vitamins. Specifically these four models will analyze the IT Strategy (or lack there of) being used at a Chinese vitamin company called Waseta International Trading Company. As a result of the findings, this paper will also explore implications of IT strategy and provide recommendations for implementation of one.

Abstract i

Acknowledgements ii

Declaration iii

Table of Contents iv

List of Figures vi

List of Tables vii

Chapter 1

Introduction

1.1 Background

1.2.Statement of the Problem

1.2.1.Purpose of the Study

Chapter 2

Review of Related Literature

2.1 Introduction

2.1.1. Definition of Strategy

2.2. China and IT Strategy

2.2.1. China’s Health Food Industry 10

2.3. Executive Summary: Waseta 11

2.4. Four Models 12

2.4.1. SWOT Analysis

2.4.2. Porter’s Five Forces 13

2.4.3. 7s Model 14

2.4.4. Value Chain 15

2.5. IT Strategy and the Organization 16

Chapter 3

Methodology

3.1.Introduction

3.2 Procedure

3.2.Plan for Data

Chapter 4

Analysis, Discussions and Conclusion

4.1 Introduction

4.2.Strategic Analysis of Waseta 20

4.2.1. SWOT 21

4.2.2. Porter’s Five Forces 22

4.2.3. 7s Model 26

4.2.4. Value Chain 27

4.3.Shortcomings of the Research

4.4. Implications of IT Strategy

4.4.1. Risk Prevention 31

4.4.2. Brand Identity 31

4.4.3. From the Technical View 32

4.4.3.1. E-Supply Chain Management 33

4.4.3.2. Procurement 34

4.4.3.3. Enterprise Resource Planning 35

4.4.4. From the Managerial View 36

4.4.5. Internet Infrastructure 37

4.4.6. Online Security 39

4.4.7. Implementation of IT Strategy

4.5. Reasons for IT Strategy

4.5.1. Implementation Schedule 41

4.6 Recommendations

4.7 Conclusion

References

Appendices 1-7 49

List of Figures

Figure 1. European Online Shoppers 49

Figure 2. SWOT Analysis

Figure 3. Porter’s Five Forces Illustration 51

Figure 4. 7s Model 52

Table 1. 7s Model Table 53

Table 2. Implementation of E-Business Strategy Budget Costs (Estimated) for 2005

Use of IT Strategies to Maximize the Competitive Advantage of Organizations

Chapter 1: Introduction

1.1. Background

Today’s market place continues to shrink due to computer technologies and communication being at the speed of light. This makes the act of doing business on a large scale not only possible but expected. An organization needs implementation of strategy to happen on every level within the company structure in order to function.

Many factors contribute to a company’s success or failure. Company is defined by more than just its product or service and the price at which this product or service is sold in the market place. An effective organization has much strength in its favor to remain competitive. Factors such as: flexibility, creativity, openness to use of technology and innovations, communication across the organization and talented employees are a must for competitive advantage. It is an organization’s ability to adjust to changing times that creates a foundation for the public to admire. How an organization continues to reflect such a persona is entirely contingent on so many factors but really it comes down to vision and action. Integrity is crucial. Upholding the company’s value system and word to the public remains a key facet for success. Building any strategy or campaign on this premise presents the best possible and true corporate image to the public and allows for a great amount of trust to form. Building character and trust is very important within the financial world but also the retail forum of health products because there has been a backlash due to corporate lack of governance and scandal but also telecommunications is much like a double-edged sword. With the wrong image, comes poor press and lack of a first impression. It can make or break the situation. In this respect, strategy and strategic marketing can be a complex game. In order to better understand customers, it is important one understands how marketing works. This means not only having knowledge of traditional methods but also knowing the fundamentals of e-marketing and e-commerce.

Today’s Internet is a triumph for human ingenuity and spontaneous order. In some parts it embodies leading edge technology like Asynchronous Transfer Mode but really it is the use of new technologies combined with older ones that makes the Internet so fascinating and vital to business. Specifically the Internet ends distance limitations and it empowers individuals in important new ways to create new enterprise (Gasman 2005, p. 2). The Internet is relatively vast in its freedom. Unlike the traditional telephone, the Internet is not charged by the mile or any distance. This brings people together. Retailers see the Internet as a marketing tool they can use to target a smaller, regional niche market.

One must understand it is in the best interests of companies to make the e-retailing transitions because of the fact that most shopping now happens online. This is due to the increase in e-commerce and instant need for convenience. E-commerce makes purchasing easier and faster. It fits into the lifestyle of today’s 24/7 world where people do not have the time to shop at the mall or pay bills by writing out checks.

1.2.1.Statement of the Problem

The subject of IT strategy or e-business strategy in China’s nutrition industry, its frameworks, convenience and also problems or implications were assessed in this research to correlate with actual phone interviews and surveys found in the literature used as methodology.

As a result of this study, this research presented preliminary findings related to IT strategy in China. This leads us to looking at how e-strategy and use of the Internet to facilitate e-commerce has created a whole industry of service for the consumer or in other words, e-services. This required a look at different models to assess strategy and analysis a company’s role in the market. The models chosen are: SWOT, Porter’s Five Forces, 7s model and Value Chain. The study examined the use of IT strategy at Waseta International Trading Company as a tool of optimization.

1.2.1. Purpose of the Study

The overall purpose of this paper and study is to investigate the role of IT strategy within a Chinese nutrition company. This lead to further study of its use within the health food industry in China. In addition to examining exactly what strategy is and what it entails, this study also required an in-depth study of marketing, its techniques and different applications depending on the climate in which the marketing takes places. This allows us to better understand the nature of the market place and therefore, allowed us to understand strategy better. As growing importance in an organization’s competitive advantage and globalization makes an Internet presence an expectation, the right marketing strategy becomes all the more important in a company overall strategy but it also equals power.

An organization needs careful research prior to investment but also needs to strategize and ponder if the consumer is worth the profit. This paper will look at how a proactive strategic analysis allows an organization knowledge of the market in order to build a lasting presence and customer relationships. This paper will also explore the implications of IT strategy and how different degrees of brand presence within the market can create different concerns regarding risk and too much exposure. This would include any threat to protection of intellectual property as well as the organization’s image and customer relations.

This paper asks one to consider the scenario of the Waseta International Trading Company in regards to IT strategy. Does the company have one in place and if so how effective is it? If the company does have an effective IT strategy, what can be done to make improvements? This can be an especially daunting task as many elements warrant analysis in order to construct a feasible plan. Still the benefits of such an investment are endless. The possibilities for growth and optimal performance by creating a seamless system make work easier, faster and more competitive for even a small company.

Chapter 2: Review of Related Literature

2.1. Introduction

Information Technology is a powerful means that helps organizations meet the challenges of a competitive market environment and enable the firms to stay ahead of the competition. The information revolution is exerting substantial effects on the structure and functions of organizations. From the beginning of the computing era various studies have been made that predicted several positive effects ensuing from the implementation of information technology (IT) (Cash & Konsynski, 1986). Many cases have been published, as well as articles in the professional press, which predicted a net increase in business results of companies that invested more in IT (Buday, 1986). However, during the little more than 10 years of this research line, contradictory results have been found (Brynjolfsson, Hitt, & Yang, 2002). From the 1970s to 1980s, those companies that invested more in IT suffered a relative setback in the work factor productivity indexes. This paper will discuss the relationship between IT and competitive advantage in following content. We believe that IT is necessary to improve competitive position of the organization.

Many business professionals point to the use and deployment of IT as a point of weakness, not a point of strength in their organizations. They think that the reason for this is often that IT is being driven from a technical perspective, not from a business perspective (Orlikowski & Iacono, 2000). This phenomenon exists because many businesspeople think that the IT is too complicated, too expensive, too risky and too changeable. They would not like to spend time on understanding the complex information technology management. Most businesspeople only understand how specific technologies affect their ability to do their specific jobs. Poorly understand IT initiatives often end in failure.

The previous literatures reveal that IT brings huge impact on careers and information technology has impacted many jobs such as IT has replaced human labor and many organizations no longer pay people to simply oversee others and pass along information. The business benefits that are derived from the strategic use of technology are significant, but they are accompanied by risks that must be addressed. The failure to address IT vulnerabilities within their own organizations and throughout the supply chain can have devastating consequences for business operations n (Brynjolfsson, 1993).

2.1.1. Definition of Strategy

According to the Oxford English Dictionary or OED, the modern word “strategy” is derived from the words strategus and strategian with the earliest known use of the word starting in 1562 Armenia. The word at that time referred to someone “in office or command of a general, generalship (OED 2003).” Pliny accounts for “120 Strategies Governments or particular Jurisdictions of every Province (OED 2003) but also defines “strategy” as “the art of projecting and directing the larger military movements and operations of a campaign (OED 2003).”

Having a working definition helps create a strategy for management to use across the board when it comes to implementing changes to increase productivity and efficiency while reducing overall costs. This may mean changing the corporate strategy on many levels to better reflect a company’s core values and to add new ones. This may mean incorporating different management styles and embracing new innovations and technologies to gain competitive advantage within the marketplace. With this in mind, it is important to remember that not only does every corporation have different vision but also different goals. A strategy is not a cookie cutter or one size fits all. It is important to understand in essence that many factors contribute to successful IT strategy.

The best way to utilize strategy when it comes to marketing to an organization’s best benefit is to simply know the market in which business is done. It is imperative a company know its target and be flexible to new targets. An organization can remain at the forefront by having a cutting edge attitude toward change within the target audience. Gordon writes, “The mood of the marketplace profoundly affects a campaign’s success. It is important to respond correctly” (2003, p. 1). Also to remain competitive, an active pace is needed. Instead of allowing the market to define the marketing strategy, the organization should strive to define the marketplace. This can be done through incorporating innovative ideas across the board. This starts with the organization valuing innovation to begin with. By having innovation as a core value, one can create marketing and promotions plan to encompass many different audiences utilizing different methods. This may require branching out into new medias like the Internet or World Wide Web as a way of reaching new audiences. This all adds value to the strategy and by having a multi-faceted strategy; an organization will have more than one plan in which to rely upon during uncertain times.

2.2. China and IT Strategy

To this day, the country of China remains an enigma, isolated from the Western world and shrouded in mystery conceptualized by the Communist Red. Its culture both ancient and modern fascinates one on many levels mainly because it is so completely foreign. Aspects of their way of life, customs and lifestyle elements mirror the Communist doctrines and the absence of pure freedom seems sad to Westerners. Still slowly China is opening its doors to the West. There is a changing tide, a force at work. It is the advent of globalization, mass communication and new technologies that changed the atmosphere of China. The world is forever shrinking due to the marketplace is growing at the speed of light and commerce taking place over new mediums. This makes possibility happen. People from every nation have yearned to participate in this explosion.

The Chinese have been no exception. They have reached a point in their history where they must not only hold on to their cultural identity but also embrace change from outside. This has been the only way to take advantage of globalization and create a new persona for China. Still the seed of change had to grow from somewhere. This transformation did not happen over night. It can be difficult and frustrating for one to understand yet try to respect. It is out of understanding what one fears that one can be a catalyst for change. Only then can the barriers come down.

Much of the emergence of globalization can be attributed to the world economy. China has made steps of change within recent years and as a result found itself at the forefront of economic explosion. At this time the Chinese economy is growing at the rate of ten percent a year, faster than any other country in the world (Richardson, 2005, p. 1). As a result, the region of the Pacific Rim and more specifically South East Asia is considered an emerging market, one that many international corporations are focused on gaining a competitive advantage. This industry of health food and vitamins is no exception. Due to vast changes in available technologies, it is expected and imperative that all companies have an Internet presence or utilize a global e-strategy that involves their business practices to evolve into e-commerce.

2.2.1.China’s Health Food Industry

As addressed above, China’s economy is exploding at a tremendous rate. Its industries are growing because of exposure to the west and new opportunities available due to not only the country entering the World Trade Organization but also telecommunications technologies that make doing business easier. This trend does not apply to any one industry in China, in fact, they are all on the move. In fact, “statistics show that there are 1,027 enterprise specializing in 1,509 varieties of health food and products in China” (‘Chinese heath market matures’, 2005). It is estimated for the year 2000, this meant 18.15 billion yuan in sales at a growth of three percent. One of the reasons for health food taking off and profits on the increase is managements focus on quality management and new marketing strategies using the Internet. These enterprises have seen a change in shopping habits and have adjusted their strategy to meet demand (‘Chinese heath market matures’, 2005).

China represents to companies “relatively low manufacturing costs” (‘China’s Hunger’, 2005) and cheap labor. This is the main reason why the Chinese economy has seen such amazing growth because of foreign direct investment. Multi-national corporations have seen the advantage of setting up shop in China and as a result, local companies have had to make themselves stand apart to remain competitive. Regardless of who is doing what, China represents an enormous market for health food and vitamin consumption. It is estimated that “450,800 metric tons of vitamins were produced in 2004, of which, only 127,943 was exported” (‘China’s Hunger’, 2005). This is 17.9% annum over the last ten years and this rate is expected to hold steady until 2009. The market locally is so strapped for supply due to high demand, local enterprise cannot keep up with expansion. This has lead the larger companies like DSM to form join ventures with Chinese vitamin producers in order to continue a presence. This remains a conflicting issue for wholly owned Chinese companies; the question of rather or not to let the outside partner to gain strength. This is where strategy and now more than ever IT strategy become very important to the Chinese business person’s future.

2.3.Executive Summary

Waseta International Trading Company is a small yet leading supplier of high quality nutritional supplements, herbals, food additives and vitamin products. The company is located in Shanghai and is a relatively new and up-start venture founded in 1998. It is staffed with highly talented and experienced executives, scientists and associates. It is the company’s powerful value that sincerity comes first that makes the sales force dynamic and strong. For the past several years, the company has formed partnerships and exclusive agency agreements with many industry leading manufactures and suppliers local to China. Due to the nature of their product, they also have close working relationships with professional research institutes, colleges and factories. These alliances allow the company to bring to the market place the best product for the price but also educational information on the product. They are proud of this fact and encourage excellence in customer service while remaining innovative in new products and better public health.

2.4.Four Models

This project utilizes four models to analyze IT strategy. The models are as follows: (1) SWOT, (2)Porter’s Five Forces, (3) 7s model and (4) Value Chain. These four models and other like them assist management and strategists in understanding a company’s standing within the market place. By assessing a company’s strengths and weaknesses, one can have a better idea of which areas need attention.

2.4.1. SWOT Assessment

It is important to determine the impact a strategy will have on the operations and activities of an organization. The objective is to utilize present technologies and future innovations to plan the future of a company. It is important to allow a flexible framework for strategy to interact within the environment. Further the objective is to gain understanding of the surroundings and behaviors under which they are operating. The key is to create an excellent strategy in which to include within the organizational culture. It is best management remains informed of potential challenges and SWOT allows for clarity. See Figure 2.

2.4.2. Porter’s Five Forces

Michael Porter is a leading authority on competitive strategy and the competitiveness and economic development. His two seminal books Competitive Strategy: Techniques for Analyzing Industries and Competitors, and Competitive Advantage: Creating and Sustaining Superior Performance have been hugely influential. In them, he describes a concept that has become known as the ‘Five Forces Model’. This concept involves a relationship between competitors within an industry, potential competitors, suppliers, buyers and alternative solutions to the products or problem being addressed. Two things determine a company’s profitability – the industry in which it competes and its strategic position in the industry. Some industries have inherently low profit potential while others are highly profitable. The most profitable companies have a strong competitive position in a highly profitable industry. The poorest companies have weak positions in weak industries. See Figure 3 as an illustration of the Forces below.

Porter’s Five Forces are:

Buyers’/customers’ power

Suppliers’ power

Rivalry among competitors

Threat of new entrants

Threat of substitute products

The use Porter Five Forces model in understanding the e-commerce facet of the Chinese health food industry to gather conclusions about the influence e-business has on strategy is warranted. A market place can be an unstable environment. An organization’s ability to turn a profit is determined by Porter’s Five Forces of competition. These forces include: (1) the intensity of rivalry among existing competitors, (2) the barriers to entry for new competitors, (3) the threat of substitute products or services, (4) the bargaining power of suppliers and (5) the bargaining power of buyers. To compare and contrast side by side, these forces establish value for the product or service. It represents customers, suppliers, distributors, substitutes, and potential new entrants. By looking at the forces in detail, allows one to have insight into the factors that motivate an industry, its current profit levels and future successes. Porter’s five forces allow for probable changes in future such as different suppliers, channels, substitutes, or competitors.

2.4.3. 7s Model

Waterman, Peters and Phillips developed the 7s model approach. This model suggests that there are seven aspects of an organization that are needed to harmonize with each other, to point in the same direction like the needles of Figure 4 in the appendices illustrate. It is hypothesized than if all aspects support each other, then the organization can be considered organized. Each aspect that the organization must mindful of start with an “s” and hence the name of the model. The parts consist of: Strategy, Structure, Systems, Staff, Style, Shared Values and Skills.

The 7s models can be used in two main ways. First the strengths and weaknesses of an organization are identified by considering the links between each of the Ss. No S. is stronger or weaker than the other; no S. is more important than the other. In other words, each is equal and must work together in order for the company to work right. See Table 1 in appendices as it can be used to undertake a cross analysis. Secondly, the model highlights how change made in any one of the Ss will have an impact on all the others. So for the purpose of this study, of course, one will look ate how strategy used for IT at Waseta influences all other Ss. In management circles, this model is important because it focuses on both soft and hard components of the organizational.

2.4.4. Value Chain model

Value chain activities are not isolated from one another. Rather, one value chain activity often affects the cost or performance of other ones. Linkages may exist between primary activities and also between primary and support activities. Sometimes, however, the firm may be able to reduce cost in one activity and consequently enjoy a cost reduction in another, such as when a design change simultaneously reduces manufacturing costs and improves reliability so that the service costs also are reduced. Through such improvements the firm has the potential to develop a competitive advantage. Such structure creates efficiency in the employee and high customer satisfaction in the buying experience (Burn, p. 3).

By restructuring value chain activities as a means to prioritize importance, this opens the door to many business relationships, changes values and sets the stage for new propositions and recreates the business models.

Choosing the Four Models

We chose these four models to gather information for analysis to assist in the development of the e-Business strategy to better the existing strategy at Waseta. This allows for better understanding of the company’s potential for growth upon using the strategy. By understanding the company’s needs, time and money can be saved and a policy of consistency can be introduced. By using SWOT analysis, Porter’s 5, 7s model and the Value Chain model, one can better evaluate the needs of the company and which areas of e-strategy to focus upon. Using the models offers in-depth analysis of the market and consumer spending trends. It allows a company like Waseta to get a feel of not only what others are doing in the market but to also to gain a competitive advantage.

2.5. IT Strategy and the Organization

Introducing an IT or e-strategy to an organization somewhat familiar with such a concept or unwillingly flexible to change can be a challenge and take some time to implement. This process is not a transformation overnight but more of an evolutionary process. The implementation will need to be done on a step-by-step basis at a detailed level as to save money and time. There is not much room for a mistake or misunderstanding of the plan put in place as they can be costly and create resistance to change. Therefore it must be decided by management what the exact goals are for this strategy. Are they long-term or short-term? What are the expectations for the organization? What do they hope to gain?

Chapter 3: Methodology

3.1. Introduction

This research was conducted to study IT strategy and if its usage would optimize an organization. Specifically this research focused on the nutrition industry in China and looked at the IT strategy used by a company called Waseta. A qualitative descriptive methodology of analyzing different strategy models acted as framework for analysis. This study offered data to act as a basis of analysis when looking at the nutrition industry in China. These collections of data were used for research purposes only. The qualitative descriptive methodology was used to evaluate the data, which, was collected during this study. Part of the study included conducting a case study of Waseta International Trading Company. The case study looked at both strengths and weaknesses the company represents in the market.

3.2.Procedure

As part of any scientific study, it is important to achieve a baseline of study. In other words, it is important that the cases selected be assessed before continuing the study. In a more perfect world or setting where my own survey of subjects could be done with the chosen segment of health food companies and their IT strategists in China with the ability to determine their expectations, I would hope to conduct the following to better the data consistency and purity.

3.3.Plan for Data

Task 1: Literature review of strategy and IT strategy or e-strategy, its definitions and applications in general will be researched. More specifically an analysis of strategy was carried on the company Waseta and its present IT strategy. Articles, research reports, journal papers will be collected for that purpose. The literature will be comprehensive by covering both local and international experience.

Task 2: Selecting the Subjects

For the purpose of this paper, the subjects for this study ranged within the applicable criteria set forth by each individual case investigated. Due to the available studies internationally and local and each individual focus, the subjects varied but had many attributes in common to facilitate the completion of the data collection. Otherwise all data assessed included subjects over the age of eighteen years ranging as old as sixty-five depending on the category in which they fell. These subjects represent a cross section of American, European and Asian populations of health and vitamin employees. Originally, the intent of this project was to focus on IT strategists working in the health food industry in China.

Task 3: Analyzing the results

The last step on this research will be analyzing the data results. To do so, all data and accompanying studies will be analyzed. To achieve such analysis, four models were used to deconstruct IT strategy. After such analysis is achieved, a section of this project will be dedicated to the implications and solutions found regarding IT strategy and possible recommendations for future technology in the relatively new field of study.

Task 4: Final report and defense

At the end of this research, a better understanding of IT strategy and its impacts will be achieved. The final report will be ready and will be presented upon completion.

Chapter 4: Analysis, Discussions and Conclusion

4.1. Introduction

In both academic and professional performance management of strategies and the employees that use them, weight on building and maintaining market share and competitive advantage continues to increase with a central focus on customer retention. As it has been addressed during this work, a successful IT strategy begins with understanding the many elements of the organization and the business. It is our belief that in this day and age, such a strategy is warranted in order to survive. Many business people would argue with the power of technology and this information age but it is important to consider what the ramifications would be if technology was dismissed and change remained stagnant. This is what the non-believers want the believers to think that Brick and Mortar, a typical store front is the only way to do business. Believers who have seen IT strategy at work beg to differ. The truth, the non-believers are running scared.

4.2.Strategic Analysis of Chinese Health Food Industry and Waseta

After analyzing the facts from use of the four tools above, it is clear Waseta has many challenges and factors to consider before implementing a better e-business strategy. On the part of consultants, it is their job to bring attention to areas that need improvement. It is clear the group from tracking complications with their current system and has no policies and procedures in place to accurately use telecommunications effectively. It should be understood that use of such technologies would drastically reduce overhead operating costs and put into place a more efficient way of doing business. Companies in China should focus on the return on investment or ROI in order to prioritize its goals and the benefits of these goals.

4.2.1. SWOT

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are considered internal factors while Opportunities and Threats are external to company. It is important to note the analysis using this tool is very subjective in nature. In general SWOT analysis should be used as a guide for generation of new ideas for strategy and as a concrete plan.

Waseta

Strengths: The company has innovative science and cutting edge products that serve the gamete of the health/vitamin industry. The company also has a prominent sales force in house. The company has partnered itself with key manufacturers and suppliers in China. Other strengths include its strong value system of integrity that puts the customer and their satisfaction first. They are constantly introducing new product and improving old product. The company has a web site in both English and Chinese.

Weaknesses: The company is struggling to keep up with the demand the health food industry in China represents. It has not taken advantage of joint partnerships with outside companies nor has it campaigned for a global image. It appears that they do not produce the product but rely on outside vendors and researchers to produce the product.

Opportunities: The company has created alliances and joint ventures with other Chinese companies in the industry. This includes relationships with researchers that create innovative product lines for production. These researchers are also intend on improving existing products. The company has a sales force of 100 people who are actively communicating with other businesses in their industry.

Threats: Because the company does not have any alliance with outside industry leaders, it can be assumed that this element within the industry in their home country presents a threat. Maybe because they are small in nature, they worry that such partnership will cause problems within the organization. Maybe management wants complete control of the company’s decisions and therefore, have not ventured into outside foreign investment like other nutrition companies. Of course, there is the threat of other local companies, bigger that may be able to meet the demand for product better, cheaper and faster. The demand for product in itself while it can be motivator can also be threatening.

4.2.2. Porter’s Five Forces

The Five Forces framework gives the researchers a better idea of the forces at work within an industry. Change is inevitable and with the indication of the arrows flows through to affect such elements as consumer spending, rival companies, product availability and current retail designs in the market. It is important to recognize change, as flexibility to change will predict how well a company adjusts and succeeds with these forces present.

Customer Bargaining Power – High

Today’s Internet savvy consumer is educated when it comes to their health and how to actively treat their health situation. This gives the consumer power over retailers to match their need for a web site that will understand their intelligence. They know what they want and at what price they want it. It is that simple. Today’s consumer is constantly bombarded with options due to different types of media. Retail design as a concept for enticing new consumers is a constant in the market. This aids in driving the competition to find an advantage. The consumer knows it has a wide range of choices. They understand health care better and use this to shop around for the best product. As a result, the ability for a retailer to switch cost is very low. Everything depends on the quality of product which Waseta is focused on. There is a sense that today’s consumer is undecided when it comes to loyalty. They are willing to try anything. The truth is that they shop at multiple places before making a final decision. Online research has lead to an emergence in having multiple choices. It is up to the company how they choose to remain competitive and this begins with the type of Internet presence and infrastructure existing or that they can install.

Threat of Substitute Products and Services – Emerging

The health food industry in China is facing many changes due to a changing market and changing consumer needs. Never before has there been such demand. These changes could be seen as threats. Only diversification product which Waseta has will lead to success at this point. No longer are health food and vitamin companies a brick and mortar, mom and pop operation. The future of these companies depends on presentation of different formats and product specialty to keep the customer’s attention. These niche stores will meet consumer demand of specific needs. Instead of having all products under one mega-web site, there will be multiple “stores” and mini-web sites for each unique consumer need much like the design of the web site. Waseta would benefit for a partnership with a store like this in order to present its line of products to the public. Better yet, it should have its own online store.

Supplier Bargaining Power — low

The bargaining power of Waseta is relatively low because of the nature of the product. The company is legally bound by government guidelines to uphold the lawful sale of vitamins. Still this puts them in a role of great influence. Because today’s consumer is well educated in their health matters, in many ways the health specialist is seen as an expert and the consumer respects the role. This affects how the consumer spends their money on additional products from the web site. As a result, the companies like Waseta have had to adopt and aggressive attitude with suppliers or partners so they can provide diverse products to the consumer. The supplier or partner really has no room to bargain either due to increased competition on the wholesale market and media behavior being emotional in nature. One’s health is a serious matter. This tension creates stress, making it easier for the company to switch suppliers to meet the needs of the customer. They are also educated and looking for a company that can go the extra mile to please them. In this respect, Waseta holds the power to name the price according to their current partnerships with suppliers. They have this power because they do respect their clients and are willing to go the extra distance. In this industry, companies are constantly bargaining for the best price and suppliers are willing to yield to meet this demand for fear of losing a client.

Threat of New Entrants – Emerging

New entries into the market, one would think should be low because of the government guidelines health food companies must follow. Times are changing as expressed earlier. With the advent of e-business the explosion of Internet or direct to customer sales via telephone are rapidly impinging upon the traditional retail storefront. Also the emergence of dynamic search engines like Google and yahoo brings information to the fingertips of the customer and the fact this information may not allow them to find a web site for Waseta has impacted traffic into the online store. It is up to the company to have an ongoing static presence on such search engines to maintain a competitive edge in multiple languages. Still the popularity of such options remains a viable threat especially among the younger generations growing older and who have a fear of growing older and therefore need health care product like vitamins..

The Overall Level of Rivalry – Moderate

There is a perception that the more densely populated an area becomes the higher the competition with the company struggling for market participation. This is an incorrect assumption because most of the nutrition companies are operating online mainly suppliers to manufacturers or to the public. This results in less advertising and an environment where the competitive spirit is unvoiced. So it can be assumed that the competition is actually low. What determines the success of a vitamin company online has to do with the Internet presence not just as a web site but also to the customer via email or other sites as secured banners. Because of this, many other companies (like Waseta should) are looking into more flexible packages or are partnering with better IT providers in order to have greater Internet presence.

4.2.3. 7s Model

The 7s model asks that all seven S-word elements have equal influence on the organization. When all seven reach an equilibrium, then the organization is able to be stable and flourish in the market place. In this respect all seven feed off it each other and remain equally important to the organization. The moment one becomes a greater issue than the others is when an agent of change enters the situation. For the purpose of this analysis, we are looking at the impact of focusing on IT strategy has on the other six elements with regard to the company named Waseta. Clearly focusing on strategy takes attention away from the other six, which stresses out areas of the organization. Sometimes however, in order for the organization to focus on one area, the others must for the time suffer. Focusing on strategy influences areas like structure and staff because people’s roles in the organization change or shift because their expertise is needed to make the IT strategy work. Therefore, they are unable to work on their everyday responsibilities. Extra work to make the strategy fly and get buy in at different levels of the organization may cause changes in style of management as different people become involved in the process. Extra work may cause stress levels to increase and communication to become difficult (Waterman et al., 1980). For the time that it takes to get the strategy off the ground may be a period of time called “growing pains” where not only are people skills used differently than before but loss of the company’s main core values may result. Sometimes it is truly difficult to focus on the overall picture when so many parts of the picture are crucial. Once the focus is taken off of core values then all seven Ss fall out of balance according to this model.

Clearly at this time Waseta’s seven S’s are not in alignment. The company is much more focused on skills, staff, style and shared values than anything else. This may be why the organization has no clear structure or strategy for the future in place. As much as their motto is concrete and powerful; they lack the systems to keep the process of their everyday business together. Style is only important when it comes to their motto but it does not seem to be shared value as their partnerships keep many people isolated within the group. This can work for the short-run but in order for the company to succeed, its 7s must become more equal. This can happen as they establish more processes with the advent of IT strategy. Once their systems are more streamlined and more of the processes fall under one roof, then the Ss will fall into balance.

4.2.4. Value Chain Management

The notion behind value chain management is how value is added to the process of every day business. Will improved IT strategy better the environment of Waseta. It is believed that through new technologies they can focus less on outside distribution and production of product and instead have it all under one roof. From formulating the new vitamin in the test tube to physical shipping of the product out to the customer, every step would be at Waseta. Movement toward such a set-up would begin with implementing a new computer system that has the capability of networking all members of the company together so everyone is on the same page. All aspects of the process would be online and automated to make jobs easier for researcher or the sales person. The possibilities are endless on how value can be added at each step with just a change in IT equipment and training.

It is believed that by introducing a new company wide computer system, this will reduce inefficiency for customer orders, automate tracking of inventory and encourage communications across the company. These are positive outcomes that have a direct relationship with operating costs. By having the tools to promote these activities within the store, creates a uniform way of doing business and maintains the company’s image and identity to the public. By promoting these functions, will aid in reducing overall costs of operation, therefore, allowing the company to invest those funds back into the project or later when the project is completed into other company interests such as acquisition of new stores. By introducing a new computer system and an integrated tracking format for customer orders both in store and online, makes the management of supple easier for the employees. This type of automation may require outside sourcing to an independent IT company as to avoid continued cost involved with maintaining such a system. This reduces costs of hiring new employees and training of existing staff.

4.3. Shortcomings of the Research

There are many shortcomings to this study. One such shortcoming is the fact the data is immense. This specifically pertains to IT strategy data not just worldwide but specifically to Asian countries. Other shortcomings include specific factors in which some studies focused upon making it extremely difficult to disseminate data. The greatest shortcoming or barrier to the quality of the study, however was lack of a participatory survey done for the specific group participating in IT strategy activities across mainland China. In a more perfect situation, such surveys would have been constructed and performed.

4.4. Implications of IT Strategy

The implications of doing business in such a reality means constantly being open-minded and remaining comfortable knowing that not every day is same. Some people cannot work in such conditions. They are so overly programmed in the modernist view; it is difficult to open their point-of-view. It is realizing that the modernist view still exists that will aid the postmodernists in success. As Stephen Robbins’ comments, “As humans, we are creatures of habit. Changes substitute ambiguity and uncertainty for the known” (2001 p. 546). People, by human nature, inherently resist change. Management may find older employees are more loyal but have a harder time embracing new ideas like the Internet because they remember the old days. They remember when life was less complicated and doing business differently was not an issue for competition. Older employees remember that doing one thing and doing it well was all that mattered. This resistance to change can result in conflict but it also creates opportunities for innovation. The practice of innovation also begins with embracing or adopting the unexpected. Peter Drucker describes, “unexpected successes and failures are such productive sources of innovation opportunities because most business dismiss them, disregard them, and even resent them” (1998 p. 3) and this type of behavior represents people’s resistance to change but at the same time creates recognition of new opportunities within the market. Change in the global market, including multicultural demographics and new technologies, has required perceptions to change. The attitude toward knowledge has evolved because more than one type is needed in order to implement a new idea. This changes the needs of workers and organizations as diffusion of innovation takes place as many different points-of-view are considered. This adds value as it spawns creative thinking but it must also fall within economic reality. It is important to carry out a detailed implementation but also to remain on budget and schedule.

The concept of innovation brings up other implications, however. It produces a whole new reality that employees may not be prepared to handle. Product diversification could mean failure. Technology, while it is wondrous and makes jobs easier, can also be dangerous. With telecommunications, a new breed of crime has been created with identity theft and corporate brand protection becoming important. Technology can be disastrous if put in the wrong hands. Antibiotics used to cure infections have saved numerous lives while there is a continued threat of biological weapon of mass destruction. With innovations come new inventions that make our lives easier but also have a higher risk when used. This is the nature of the realm of possibility. The postmodernist movement has given permission to anyone to create and discover. This can backfire as it can also destroy and impose new rules of conduct upon communities. As much as many like the idea of innovation, for those scared of change, it is difficult to embrace fully. This leads to counter movements to conserve what is left of the modernist ideals. This means as change rapidly flourishes out of control, those resistant aim to gain control of laws and rules to make change more difficult.

4.4.1. Risk Prevention in E-Strategy

As with any company incorporating change, it is important to consider factors that may encourage risk. By introducing such technology, what kind of risks is the company opening itself to and what can be done to alleviate risk? In addressing this problem, the traditional business continuity methodology is still valid. There is a need for organizations to re-assess their organization’s risk procedures and damage control methods in order to assess better avenues of containment. It is advised that during implementation that an alternative site for data storage be created. By doing this, the company protects itself from any type of harm done to the administrative offices. This would include but is not limited to: fire, earthquake, flood or electrical outages. For each individual site, there is a need to consider these particular threats and put into place an action plan that details how to handle such threats. Still companies like Waseta should remain consistent in its policies toward risk, meaning that each store should carry out the same protocol during a risk situation.

4.4.2. Brand Identity company’s intellectual property begins with its name. Because the business of health and eating is greatly service oriented, it is of utmost importance that the company’s name must have integrity. I am not at all certain if Waseta’s name represents integrity but its motto does. With time as the company further establishes itself, the two will become interchangeable. The company has a reputation to uphold where market share remains wide-open and competitive advantage strong. Recently the company’s name and intellectual property in the forms of trademarks and brand has been at the forefront, in constant view thanks to e-business. The Internet has opened a whole new area of protection issues for companies and individuals especially when electronic crime seems on the rise. By having this arena of trade open, makes it possible for even the worst thief to take advantage of the situation. Using e-business can be a win situation for a company if they know how to protect these properties online similar to the way a company might set-up a security team to patrol its office buildings.

For a company like Waseta whose success is linked to its name in China, protecting these intellectual properties is extremely important for its internal and outside influences. Still a company of its size implements its own procedures and laws in a sense. The industry of health is regulated by government organizations on federal levels. Even so, it is important the company as a whole work very closely with a team of attorneys on every detail.

4.4.3 From the Technical View

In this Information Age, where the speed of transmission and the contents of communication make the world a smaller place, e-business can expose a company to new risks. The World Wide Web is a haven for predators, where skill is not a factor but knowledge of opportunity is indeed. Millions of people cruise the web daily and some with cruel intent. While the Internet is a competitive avenue to take advantage of, a company must proceed with caution. In this time of terror and war, it is not surprising for one to feel vulnerable. With a website, this is the threat of corporate espionage, data corruption and slander. It is important that a company put into place precautions to avoid such dangers. These precautions would include encryption programs, firewalls and other forms of online security. It is also imperative that China’s companies take measures to protect its name, employees and customers. This would involve proper data storage with a location that changes frequently. A company knows its name is its image and should secure the government trademarks to guard that name and update them regularly. Security measures must be built into the infrastructure to reduce the vulnerability for the sake of the company image.

4.4.4. E-Supply Chain Management

The typical SCM is one that is broadly linear in terms of supply and processing of raw materials and services into the final product for the customer. There are three main parts to the supply chain process. These parts are planning, procurement and fulfillment. The SCM solution would provide many benefits to bank’s day-to-day operations. The B2B relationship that they have to their suppliers would function more effectively. Immediate feedback can be given to know the effects of delivery date changes or increases in quantity parts ordered. This immediate feedback will allow a bank to manage their inventory and the expectations of their customers better. The immediate feedback is due to the real time connectivity the SCM system provides. The master planning allows one to manage the inventory by project or on an individual job bases. Minimizing the amount of headcount and space required for warehousing and managing inventory increases savings. The primary management of inventory is turned over to the suppliers. Purchasing is made simpler through the use of an electronic form that gets sent directly to the supplier after receiving the proper financial approvals within the bank. The electronic form eliminates the tedious drawn out paperwork process of the past. The fulfillment aspect of supply management is made easier by the ability to track your purchases and delivery times. Contingency planning is a part of the supply chain process that becomes a part of the fulfillment process. Reports can be printed to identify when a product has shipped, when it will arrive and how it will arrive. Based on this information it can assist in determining if contingency plans need to be implemented (SCM 2005).

There are SCM solutions available today that will also integrate into your pricing and discount models. These available modules or options can add additional value to the SCM package Waseta may purchase. The integration of these technologies often spill over into the other ERP, CRM and EDI solutions making the evaluation of these system much more important.

Still the model is evolving to include new innovations being used as tools. The Amorphous type of chain changes as the company introduces new strategies. This type of model best reflects the continuous flow of ideas and possibilities within the e-commerce construct or Internet medium specifically. It helps anticipate future occurrences. This aids a company’s tracking of Internet use especially when applied to advertising and promotions, as it is known “the number of businesses utilizing the Internet for e-business purposes was significantly low at 28% though a further 33% were actively considering the implementation” (Ritchie 2002, par. 5).

4.4.5. Procurement

Sometimes organizations look to outsourcing inventory as a way to cut costs and speed up the process. Waseta will find that by using the Internet as e-strategy that they can achieve multitasking on new levels, allowing for many lines of communication as once. The Internet will allow a Chinese companies to tap into a bigger supply base to ensure dependable supply and backup sources. This in turn will reduce the amount it takes to secure shipment of new products. Enterprise Resource Planning (ERP) systems are particularly valuable in new product introduction because it acts as a means of sharing information.

4.4.6. Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) systems are software packages that attempt to integrate the information flow within a company, solving the problem of incompatibility between systems and operating practices. The ERP system will streamline the company’s data flows and provide management with direct access to a wealth of real-time information. This is facilitated by the used of database technologies which will link applications together and pass relevant data between them as necessary. Any new information added to one of the system updates the other systems automatically, thus creating complete integration between them. Directory services and middle ware are used in order to connect the applications and provide an infrastructure for users to communicate with each other and connect to the sources of information.

There are many benefits and drawbacks to using this method of data transportation. It is important to analyze rather not this will be good fit for a company. “A key difficulty is that departments distrust the information provided by another department, be it via an information system or some other mechanism. Therefore checking and cleaning the data should be made an integral part of the implementation” (Bonner, par. 6). If ERP is integrated with the organization’s decision-making structure, ERP can begin to deliver business benefits, impacting data delivery levels. Still its success can only be measured by the attitude of the user.

4.4.7. From the Managerial View

In today’s company, the role of management also involves leadership within a team structure. Managers have the responsibility to set goals, maintain moral, aid in training and communicating corporate objectives. However, this does not mean a leader cannot be a subordinate. If a company is smart, it will encourage leadership by example across the board. This instills in the employee a sense of pride and motivates them to achieve goals. A good leader provides vision and clarity for the employee. Such a leader will be able to communicate and create a rapport with their team. This establishes their role.

This connection begins at a fundamental level of human sociology where the use of story is central. Howard Gardner reflects, “The ultimate impact of the leader depends most significantly on the particular story that he or she relates or embodies, and the receptions to that story on the part of the audiences” (1995 p. 14). By telling stories, allows for a certain level of openness or vulnerability on the part of the leader and makes them human. By opening the line of communication, gives the employee knowledge of their environment and develops trust. The leader’s role is to sell the idea of commitment within a culture. Odiorne suggests, “If employees know what is expected, and what help and resources are available, they can then be relied upon to govern their actions to achieve the commitments they have made” (1987 p. 138). This sets the stage for goals and achieving high performance. The culture in turn feeds off this energy and excitement. Bennis writes:

There are three reasons why leaders are important. First they are responsible for the effectiveness of organizations. Second, the change and upheaval of past years has left us with no place to hide. We need anchors in our lives as a guiding purpose. Third, there is a national concern about integrity of our institutions. Being mindful of own context is difficult for us. (1989 p. 15-16)

Managers with a keen understanding of leading represent these three key attributes and create a foundation from which to act. A leader must also display curiosity and have the guts to be daring. They must be a dominant force within the team. Bennis reflects, there are two kinds of people “those who are paralyzed by fear, and those who are afraid but go ahead away. Life is not about limitation but options (1989 p. 185). A healthy culture inspires options and the innovations that grow out of creativity.

4.4.8. Internet Infrastructure

China has seen the need to invest in new technologies as an infrastructure for its future on the world arena. However, it has paid attention to other infrastructures that need improvements along side of technology. For instance, the country’s transportation system and delivery system are behind and this has a direct influence on how quickly the new technologies can be used. Companies like FedEx and UPS have been unable to enter the market due to government regulations and other cultural barriers. As a result, while the Internet infrastructure gets closer to western standard, the rest of the country’s communication systems remain in the dark ages.

Much of the problem is that infrastructure remains this elusive concept. Much like when the Chinese built the Great Wall, there is an understanding of this need for protection against crime and mainly fraud but it is not well understood how it works by many in the country. In fact, many Chinese have grown to resent the Internet as it is redefining the culture and putting the many people on the fact track. Unlike many western countries, China has a well defined class structure that was put into to place by Communism and accents distinctions between the farming class and the working class. These distinctions still exist today as the working class is highly concentrated in the cities and this population has exploded. On the other hand, the farming class still lives in the rural areas of China still untouched by western culture but not for long. The farming class is struggling to hold onto what notion of culture they still have as farming opportunities become scarce. Part of the issue is that the Chinese government has seen to it that much of the land has been taken away from the farmers in exchange for zero compensation but for the betterment of the infrastructure. Part of the problem with the infrastructure aside for the expense incurred for its continued investment has been the government’s need for space to continue economic growth and this has meant many farmers losing their land. In this respect, the infrastructure is not just an invisible machine that maintains the technology but also physical evil for that many do not understand as life quickly changes to make room for new ideas. It is believed that because of these conflicts of interest, that is a major reason why Internet usage is not rocketing out of proportion as many people do not want anything to do with technology. The other factor is government regulations of such a device. It is almost as if the Chinese government has put the working class at an unfair advantage.

4.4.9. Online Security

Research suggests that the first reason for not using IT is the concern about security of the IT services in China. The second reason for not using IT is the benefits of Internet commerce services. Customers do not see benefits of using Internet services, at least not yet. Thus, the companies need to promote or educate customers about tangible and intangible benefits they may receive from using IT services. The third reason is the trust on Internet services provided by both companies and Internet Services Providers (ISPs) in China. This finding suggest that both companies and Internet Service Providers (ISP) need to create trust or have certificate authority (CA) seal on their web to ensure security and create trust for customers. In addition, the first three reasons for not using IT together are accountable for sixty-one percent (61%) of customer reasons not to use services on the Internet. The remaining ten reasons together are accountable for thirty-nine percent (39%) of reasons for not to use IT (Gasman, 2005). The findings suggests that both companies and Internet Services Providers (ISPs) should put more effort in educating, training, promoting and supporting the security, trust, benefits and ease of use of the Internet in order to attract more customers to use the Internet services.

4.4.10. Implementation of IT Strategy

Implementation can be a very detailed process that requires due diligence over a long period of time. With respect to entering the environment of e-commerce using the medium of the Internet, many questions come to mind. First, what kind of presence will be formed and over what time frame? What kind of image does Waseta want to portray to the public? What kind of competitive edge will the web site present? Is it a good idea to introduce a promotion at the same time or should the company take its time? What is the best approach to information storage and should an outside outsource company be used? Will such an approach really save money for the company and be a solid investment for the future?

4.5. Reasons for IT Strategy

Reasons why the company should adopt the strategy are numerous. For one, the overall investment will in the long run cut operation costs and increase efficiency for many levels within the organization. By adding the new sales channel of the Internet offers the customer another mean of interaction with the company. A web site creates a whole new level of advertising exposure to the public not just on a local scale but globally as well. Automation and tracking of inventory makes the store less cluttered and allows the sales staff to focus on customer service skills. This use of automation is very prominent in larger corporate business models. Wal-Mart practically invented the concept of data playing a very big in role in monitoring inventory on the shelves by what has left the store that day and what needs to be replaced. This anticipates the needs of the customer and allows the popular products to remain on the floor while older stock can be removed. Also having fewer inventories on the floor reduces risk of accidents for the customer and employee. This may reduce the amount of insurance needed for the store to operate.

E-business allows a company to offer cutting-edge options to the customer on a weekly or monthly basis. This means additional promotions or flyers sent to the customer via mail or email. These promotions can also be posted on the web site. The customer can also be told about special options only Waseta offers. These programs will need to be considered before implementation but could be and not limited to special delivery, 24-hour service, special seminars on health for customer of different ages and benefits for preferred customers. Automation of stock allows the company to better track inventory and can alert the employee when a certain product needs replenishing. It can also set-up a customer preferences database within each customer’s profile that provides information to the company about the customer. This information will not shared with any third party but used for marketing purposes only. Knowing the customer’s preferences can allow the store to alert them when their favorite product is on sale.

The consultants have presented a preliminary budget for management perusal. Please refer to Appendices 6 for the implementation budget.

4.5.1. Implementation Schedule

As expressed earlier, this implementation cannot happen overnight as an instant transformation but will need to take an evolutionary approach. It needs to rollout over a period of 6-9 months. Please see Appendices 7, the Project Timeline for Implementation of the IT Strategy. Such a timeframe allows Waseta adequate preparation time of the changes involved. It allows the company to examine the plan for any flaws or problems as each step occurs. A monitoring procedure can be set into place to ensure the project remains on schedule and under budget. What is monitoring system does is keep track of time and money management using a Quicken program. This program interweaves both elements of time and money to allow a seamless method for management use. As tasks are achieved, they are checked off a list of implementation goals. A tabulation of expenditures is watched in the same way. This program will send an email to the decision maker if time gets too short or goals have not been achieved in the time allotted. The same goes for if the budget for a particular item is close or over the limit.

4.6. Recommendations

It can be argued that multi-national corporations are change agents, which bring new technology and new management techniques to all corners of the world. This may be seen as a negative for those that desire to preserve cultural identity. It is believed that with understanding a new global culture can be adopted by organizations and people worldwide. To respond effectively to the demanding global environment and remain competitive, firms need to develop a range of capabilities in the areas of technology, marketing, management, human resources and finance and continuously create innovation over time. This allows an organization to not only have a global presence but to also survive.

4.7. Conclusion

IT strategy delivers opportunities to generate greater non-interest-based revenues, opens up new markets and reduces costs as transaction costs are lowered. Integrating back-end systems is also the key to effective services and vendors must work with nutrition companies to ensure high performance integration of legacy systems to exploit existing systems. Ease of integration, scalability and extendibility mean the bank is now ready to handle massive increases in Web site traffic, and offer new services as they are developed. Companies will also utilize the most complete, up-to-date activity behavior statistics for better customer relationship management or CRM and greater cross-selling opportunities.

As the region approaches a more complete e-commerce phase, companies like Waseta need to develop customer-centric online services to maintain competitive advantages and develop new business opportunities. Waseta will also need to create a tailored “virtual portal” for every customer, every time they log in. Services on these portals should be targeted at them based on enhanced data collection and analysis. In addition, customers should be able to review all accounts conveniently. The companies that embrace the Internet to deliver a real customer-centric approach will emerge as winners in the Chinese health food industry They will win on the bottom line and win by expanding market share and retaining customers.

For centuries China’s culture was at the forefront of discovery and innovation. Many western inventions can be attributed to discovery in the Far East. Such inventions range from spaghetti to the abacus. Many systems of math, language and war come from the Chinese culture. This was before the Cultural Revolution. For decades China has remained an elusive world power due its socio-political associations with Communistic doctrine. This choice of framework in which to run a country left China closed off from the western world and therefore, it functioned in a vacuum only doing business and having ties with other Communistic countries such as the former Soviet Union and Cuba. The world began to change as Communism fell to ideals of freedom. As a result, China’s role has changed, slowly but nonetheless. Recently within the last twenty-five years, China has been shifting to a new functioning role within the global economy due to globalization. As new western ideals and commercialism were introduced into the mainstream Chinese society, so did the country and its attitudes toward commerce and technology shift.

The advent of telecommunication technology has changed the way the world does business. Tools like the Internet and the World Wide Web have brought about a whole new world of business avenues to explore. It seems anyone and everyone in the business world is on the Web with some sort of presence and commerce operations. This presence on the Web contributes to a new form of commerce or e-commerce that spans the globe within the split seconds of time. Without an Internet presence, a company could not define its competitive edge well and will probably miss out on competitive advantage. The new technology has invented a whole new level of service and customer relations. Today’s customer expectations are vastly different from twenty years ago. Today they expect a Web Site; they expect customer service 24/7 on the Web and on the phone in return for loyalty and repeat brand purchase with confidence. They expect e-services. The world of health food and vitamins has been no exception to this trend. No longer is the traditional brick and mortar or classic retailing set in stone. It is no longer the old days of a store being a physical place but more of a presence within a community. Over the last twenty-five years not only has China opened its doors to changing commerce but also to changing its technology. Due to China’s economy quickly emerging because of seamless, wireless commerce, the country has had to keep up with demand for similar western services. The people of China have seen technology and service as a means of embracing the new world order and creating a competitive advantage for the country. As a result, China has slowly adopted e-services into its commerce framework with new service to come in the near future.

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Appendix 1

Figure 1. European Online Shoppers. (http://www.economist.com/surveys/showsurvey.cfm?issue=20040515,2004)

Appendix 2

Figure 2. SWOT Analysis (SWOT Analysis, 2005)

Appendix 3

Figure 3. Porter’s Five Forces (Porter, 1999)

Appendix 4

Figure 4. 7’s Model (Waterman, R.H. Jr., et al., 1980)

Appendix 5

Table 1. 7s Table (Waterman, R.H. Jr., et al., 1980)

Appendix 6

Table 2. Implementation of e-business Strategy Budget Costs for 2005

Revenues and Costs

E-commerce Establishment Costs

Money Spent ($)

Dollars ($)

Web Development

Registration of domain name

Advertising

System design (outside sourcing)

Staff Time and Training

Telecommunications

Software

New Data Storage System

Consultant Fees

Total Establishment Costs

Operating Benefit from E-commerce

Gross Profit from E-commerce

Add: E-commerce Cost Savings

Postage & Freight

Printing

Staff time: Communication

Staff time: Marketing

Telecommunications

Total E-commerce Cost Savings

Gross Benefit from E-commerce

Less: Ongoing E-commerce Costs

Amortization of capital over 4 years

Authentication services

Website hosting

System maintenance

System administration

DSL connection

Telephone Dial-up expenses

Total Ongoing E-commerce Costs

Operating Benefit for E-commerce

Budgetary Requirements for Implementation

Term Paper on Market Driven Management a level history essay help

Pharmaceutical industries have to operate in an environment that is highly competitive and subject to a wide variety of internal and external constraints. In recent times, there has been an increasing trend to reduce the cost of operation while competing with other companies that manufacture products that treat similar afflictions and ailments. The complexities in drug research and development and regulations have created an industry that is subject to intense pressure to perform. The amount of capital investment investments required to get a drug from conception, through clinical trials and into the market is enormous. The already high-strung pharmaceutical industry is increasingly investing greater amounts of resources in search of the next “blockbuster” drug that can help them gain market position and profits. Laws, regulations and patents are important to the industry while spending billions of dollars in ensuring the copyright of their products.

It is the intention of this thesis to study the ability of Sanofi-Synthelabo-Dubai, an affiliate of Sanofi-Synthelabo a French multinational pharmaceutical company, in creating an effective and productive market for the products of the company in the Persian Gulf region. The company first desires to concentrate its efforts in the United Arab Emirates (U.A.E.) is first desired and then spread out to the rest of the Middle Eastern region. Drugs are neither manufactured not produced in this region. And as such, the company desires only to improve its market presence for the sale of the company’s drugs in the region. In essence, this is a marketing project and not a research and development one. At present, the company has a vast portfolio of products in the area. The company is however, unable to differentiate and distinguish its products from those of its other competitors to truly enable the company to enjoy an overwhelming market monopoly. This thesis will identify some of the salient macro and microenvironments that the company faces in achieving this endeavor. The objective of the research is to introduce a more sophisticated marketing function to the marketing department of the company. Redefining the marketing responsibility within the company to emphasize the concept that every one in the company is required to perform to attain the company’s goals.

CHAPTER 1: INTRODUCTION

OVERVIEW OF THE THESIS

The aim of this introductory chapter is to give the reader an overview of the work that was undertaken in this thesis. The concept of “how to maintain a competitive advantage in the pharmaceutical business, based upon a market driven strategy?” is analyzed using tools whose results have been well established by management, economics and financial experts for the Persian Gulf pharmaceutical market. The company considered for this project is Sanofi-Synthelabo-Dubai. Sanofi-Synthelabo is a well-established multinational pharmaceutical company that has operations and markets all over the world. The company already has a market presence in the region. The purpose of this paper is to study the marketing requirements that the needed for the company to be truly successful.

To make the study comprehensive, it is necessary to analysis the entire pharmaceutical industry at a macro level. There are many external constraints that have a tremendous influence of the marketability and success of any product in a given market. Many of these external factors may be common to all markets while a few may be very specific to a local or regional market. The ability of any company to understand these external factors and use the information distilled to attain success of a product is very important in the current market. Inter-relationships between different external factors also exist. The environment can become more complicated as these factors blend and integrate within (and without) the organization.

There are also many internal factors — the microenvironment of the organization that also needed to be analyzed. Often, organizations can control these factors and modify them to best serve the market and the customer. In the age of globalization and multinational corporations, local cultures, beliefs and norms play an important role in establishing the image of the company. While there are many benefits to globalization, cross boundary corporations are often faced with creating polices and regulations that are in compliance with the laws and requirements of the state in which they operate.

A preliminary S.W.O.T analysis will help identify the current performance of the marketing department and the current business strategy. This analysis will serve as a benchmark for the company in implementing a practical application of this thesis. Factors such as strategic brand management and product differentiation become important factors in the success of the organization. The market integration understanding will be undertaken in three arenas: dimensional, strategic and operational. The thesis will address marketing function not only as an action-oriented process, but equally important as a business philosophy, that emphasizes the strategic choices upon which market driven management is based.

The key theories that going to be covered in this thesis are:

Environmental analysis using the PESTLE analysis for the macro environment and the 7Ss method for the internal environment affect the organization.

Competitive analysis of the industry using Porters Five-force analysis to comprehend the importance of product differentiation and threats

Marketing philosophies — passive marketing, operational marketing and strategic marketing that the company can utilize in attaining the desired results

Understanding the need for market driven strategies in the company

Market-driven strategy development. Setting the specific tasks to be performed by strategic marketing that identify potential product segments on the basis of analysis of the customer’s needs which need to be met, evaluating the attractiveness of the market, then evaluating the competitiveness level of Sanofi-Synthelabo

Change management theories that are commonly used

PROPOSED METHODOLOGY FOR THE THESIS

Two types of data will be analyzed for the purpose of this thesis: primary data and secondary data. Primary data will be gained through qualitative research that will be conducted as individual in-depth interviews (questionnaire-based interviews), with medical representatives, sales managers and the product managers working for Sanofi-Synthelabo-Dubai. Individual in-depth interviews are interviews that are conducted face-to-face with the respondent. Here the subject matter of the interview is explored in detail. There are two basic types of in-depth interviews. They are nondirective and semi-structured; and, their differences lie in the amount of guidance the interviewer provides. In nondirective interviews, the respondent is given maximum freedom to respond, within the bounds of topics of interest to the interviewer. The success of this type of an interview depends on:

Establishing a relaxed and empathetic relationship with the interviewee

Being able to probe in order to clarify and elaborate on interesting responses, without biasing the content of the responses given The skill of the interviewer in guiding the discussion back to the topic outline when digressions are unfruitful and always pursuing reasons behind the comments and answers qualitative method for interviewing was chosen since qualitative data is collected to know more about things that cannot be directly observed and measured like feelings, thoughts and intentions. Understanding the aspect of the topic from the interviewee’s point-of-view is important without confusing the thoughts and opinions of the interviewer in the process. This task may sound very simple. But in reality, the process can become very complicated and views and opinions that are not directly related to the topic may get intertwined in the answers.

This method of research will address the efficacy of the marketing function within the organization.

Some of the questions that may be asked may be perceived as an invasion of privacy or extensive probing into issues best left untouched. Other questions might be embarrassing and may generate a sense of resentment therefore affecting the quality of the responses, which may not be truthful. If however, in the course of this process, the marketing department can identify the areas where improvements can result in the growth of the market, the process may be worth the effort.

Approximately, 15-20 individuals will be interviewed for this purpose. The individuals will be selected randomly and without any prejudice. The aim of the interviews will be to identify the individual perception of different staff tasks and responsibilities within the company regarding the marketing function used by the organization. Determining the effectiveness and the application of the marketing function will also be analyzed.

Secondary data was obtained through research of published literature such as books, journals, papers and the Internet. There is a normal assumption that personal opinions and viewpoints are an integral part of any printed and published opinions. Sufficient collaborative information was verified for any given point-of-view prior to introducing the concept in the thesis. The variables discussed in this thesis are not completely exhaustive. In addition to the variables that affect the marketing department, and Sanofi-Synthelabo-Dubai as a whole, there are other external and global variables that may have an indirect effect on the organization and the image of the company. The environments that organizations work in are also very dynamic and constantly changing — making decision-making and implementation of new ideas more intricate.

LIMITATIONS OF STUDY

Organizations have their own individuality and style — just like people. There is no blue print that can be considered a universal fit for all organizations. The data that was evaluated was a combination from book, journal articles, review papers and the Internet. The information reviewed pertained to a wide variety of situations and industries. There were some common trends observed in all the material. The commitment of the management and the involvement of the worker are critical no matter what the condition of the external and internal environment the company faces. Integrating the core function — marketing and sale of products along with the goals and the objectives of the organization is the new route the organization has to now follow.

A distillation of the interviews will be provided in Chapter 2.

CHAPTER 2: LITERATURE SURVEY — ANALYSIS OF FACTORS AFFECTING THE PHARMACEUTICAL COMPANY AND THE INTERVIEWS

Understanding the main driving factors for marketing a commodity in the market is very important. The ideals and concepts supporting the growth and prosperity of firms generate considerable interest and debates within the academic and the business community. The impact of social science, economic, strategy, public and government policies all are considered to play a significant role in the success or failure of an organization. In the modern market place, no fixed and definite strategy is identified as being the most effective. What may be appropriate for one company in the same industry may not exactly work for another company. The key components that result in the success or failure of an organization are the organizational goals and objectives. (Morgan, 1997) Without aims (for an organization) there is no logical reason for bringing people, money, and other resources together. The ideal utilization of material resources required; maximizing the performance and the productivity of the organization, while at the same time reducing cost, are the important guidelines. External and internal variables also play a very important role in the success of the organization. Contemporary management theories place great emphasis on these variables, consequently marketing strategies also uses many of these theories to understand and evaluate the market for the product and services of the organization.

HISTORY OF SANOFI-SYNTHELABO

The history of Sanofi-Synthelabo is filled with many mergers and acquisitions over the years. Over the year Sanofi has relied on external mergers and acquisitions for its growth in the market. (O’Sullivan, 2001) Sanofi was established in 1973. Pierre Guillaumat, chairperson of the Societe Nationale des Petroles d’Elf Aquitaine, in France appointed Rene Sautier to develop and create new channels of business for the company. Sautier selected Jean Francois Dehecq to help him with this project. The idea at the start of this new process was developing a commercial business that would be both global in nature and generate profits for the company.

There were different business segments that the two business planners Sautier and Dehecq investigated in the course of their selection many business that they thought might be profitable and innovated. The sector that they finally selected was one of personal care and healthcare. The official name of the company was “Omnium Financier Aquitaine pour L’Hygiene et la Sante” but the name Sanofi for the company was better used. Very soon, the company had portfolios that ranged from healthcare products, cosmetics and animal nutritional products. Sanofi, in a very short time, became very well established in the market and symbolized quality and reliable healthcare to its clients. The company selected for its logo inverted blue and green retorts. Labaz and Yves Rocher became the first two companies that merged into the Sanofi portfolios and their colors, blue and green respectively, became the colors of the new company. The retorts in the logo symbolizes that the main goals and mission of the company which is research and development. The main business strategy of the company was to develop pharmaceuticals and beauty products for the commercial market. The strategy that the company used was to develop a market base for its products and encourage the growth of the company in intensive research and development programs.

The history of the pharmaceutical division of the company can be traced to the initial acquiring of Labaz Group, the pharmaceutical subsidiary of the renowned “Belge de l’Azote” with sales of 370 million francs.

This company already had a global presence and was heavily invested in the research and development of two products: the antiarrhythmic Cordarone (amiodarine) and the anti-epileptic agent Depakine (sodium valproate.) The second division of the company was the beauty and personal care company of Yves Rocher. This company was very famous for its herbal and natural-based beauty products. It was also famous for the marketing plan of using mail order to sell its products in addition to the traditional methods of marketing. In 1979, ELF Aquitane, the nationally owned French petroleum-based organization that initially speared on the creation of Sanofi, spun the unit off as an independent division to manage and regulate its own growth while still under the main umbrella of ELF Aquitane. In 1988, Sanofi acquired the cosmetic portfolio of Nina Ricci; and, in 1993, the perfume portfolio of Yves St. Laurent. In the 1990s, Sanofi divested its animal nutritional products and veterinarian portfolios that it had acquired due to the series of acquisitions of smaller companies. It also began to separate the biotech operations from the research and development units of the pharmaceutical division and the biotech operation were also divested in due time. By the mid 1990s, the beauty and cosmetics divisions of the company were also incurring losses and were not performing as desired. Nina Ricci was the first to be sold in 1996; this was followed by the sale of other product lines and business units of the beauty portfolio.

Towards the latter part of the 1990s, many pharmaceutical companies all over the world were consolidating their portfolios and divesting units that were not a part of the core competencies of the organization. The formation of the European Union and the constant economic growth spurt in the mid-1990 created organizations that had divisions and business units that were not considered core competencies of the companies that they were a part of. Natural growth within an organization involves the investment of resources for extensive planning, development and the implementation a new project. This concept is called internal growth. An acquisition or merger can however, help an organization achieve growth quickly by acquiring trained personnel, systems, technology and expertise. In the 1990s, mergers and acquisitions also introduced deregulation and market-globalization. The shrinking of the procedural (process) life cycles from raw material to final product and to the customer has made competition even more aggressive.

In 1996, Ciba-Geigy and Sandoz merged to create Novartis. Industries in many European countries and the U.S. were deregulated and made independent from government control. ELF Aquitane was deregulated and now called TotalFinaElf. TotalFinaElf realized that it wished to identify itself as an energy-based company with a portfolio of energy generation, scouting and development. Sanofi, as a result, was not considered to be part of the core competencies of the new company. With this in mind, the company decided to divest this unit. L’Oreal was undergoing similar transformations in its business portfolio and chose to identify itself as beauty and pharmaceutical organization. Thus, the merger of the pharmaceutical divisions of Elf Aquitaine — Sanofi with the L’Oreal division occurred in 1999. The new company formed was called Sanofi-Synthelabo. (Mirasol, 1999) Sanofi-Synthelabo is headquartered in Paris, France. It has also identified four core segments for itself in the pharmaceutical industry for drug research and manufacturing:

Cardiovascular drugs

Central nervous system

Oncology

Internal medicine formulations

At present, Sanofi-Synthelabo has a portfolio of around 50 compounds in development programs. Around half of these are in phase II or III clinical trials.

At the time of the merger, Sanofi was the second largest drug company in France and Synthelabo was the third. Synthelabo was founded in 1970, from the merger of Laboratoires Dausse and Laboratoires Robert et Carriere. In 1973, L’Oreal bought a 53% interest in the company. In 1980, the company bought the drug firm Metabio-Jouillie. Other acquisitions followed throughout the 1980s. There were also several joint ventures established, including those with Mitsubishi Chemical Industries and Tanabe Seiyaku. In the early 1990s, the company acquired several smaller French companies; and later, in 1997, the Sanorania Pharma division from Pharmacia & Upjohn. This helped Synthelabo become a major player in the drug industry around the world.

The histories of the two companies were fairly similar both in age and in culture. Both companies, at the time of the merger, had strong portfolios with no overlap of product families. Most change is generally accompanied by problems. The adoption of new management methods, their implementation, changing past routines to suit the new methods of management is often a long and tedious process.

The management, during this stage, must practice what it preaches. It is obliged to do what it saya (and say what it does) to gain the confidence of both parties involved in the merger. The ability to find and solve problems quickly that may arise during the initial period shortens the adjustment time for the implementation of change.

The period following the merger Sanofi-Synthelabo began to reorganize itself into a pharmaceutical specialist. In the following years, Sanofi-Synthelabo began to target the U.S. And the global market and strove to increase its sales and marketing strategies in these new areas. Understanding the constant need to have new drugs in the pipeline and effective market drugs that have patents is important for any pharmaceutical company around the world.

At the end of 2003, the company had a global presence in approximately 100 countries all over the world. The sales for the company for 2003 were established to be 3903 million euros, with 621 million euros being spent on the research and development of new drugs. At present, the company is ranked among the first 20 worldwide pharmaceutical companies in terms of profits and sales. It is sixth best in Europe and the second in France. (Sanofi-Synthelabo, 2003) The company is publicly traded on the European stock exchange and supports 14 research centers all over the world. (Sanofi-Synthelabo, 2004a) The company trading and stock market performance is as shown below.

(Sanofi-Synthelabo, 2004b)

The company has also proved to be headed on the right path in the past few years. In 2002, the company enhanced its capabilities with an alliance with Immuno-Designed Molecules, a biotechnology firm that developed cancer drugs. In the U.S., the Food and Drug Administration (FDA) approved Eligard for the treatment of advanced prostate cancer, and obtained supplementary U.S. patents for the Eloxatin and Elitek active ingredients. The FDA also gave marketing approval in major indication extensions for Plavix in acute coronary syndrome and for Aprovel in diabetic nephropathy (kidney disease) in patients with high blood pressure and type 2 diabetes. In March 2003, the FDA granted ARIXTRA (fondaparinux sodium) a six-month priority review for the new indication prophylaxis of deep venous thrombosis, which may lead to pulmonary embolism, in patients undergoing hip fracture surgery, including extended prophylaxis.

NEED FOR MERGERS AND DIVERSIFICATIONS IN ORGANIZATIONS

Alfred Chandler was the first to identify the motive and strategy of diversification in industry. His work on strategy and structure laid the foundation for all subsequent studies that were conducted to understand the impact of markets and products. (Chandler, 1962) He was also the first to note the movement of organization from simple, single business firms to functional to multi-dimensional. In this situation the organizations were controlled either by one office or by independent freestanding control areas that followed directives from a central office. In most situations, the directives and management principles were from the top. Directives were followed exactly. Chandler drew this conclusion based on historical reviews of companies such as Sears, GM and Dupont, which were very well established large corporation at the time. In his study, Chandler viewed diversity in terms of product lines that an organization manufactured or supported. Products and service production and sales is the main driver for the organization to be in business

In the journal article, “What is strategy?” The author, Porter, states that the current environment in which organizations operates are very dynamic and highly volatile. Every organization has a unique and individual business structure in the market place. As a consequence, the structure resembles a puzzle that needs to be solved from within the organization. Modern organizations are challenged constantly by a combination of technology changes, market changes, logistic challenges, customer demands and human resource challenges. (Kotler, 2000) Physical markets are referred to as market places where goods are physically available for customers to evaluate and identify with. Virtual markets are those that have been created by the Internet and the web.

Markets and the nature of markets are important for organization. “An increase in the heterogeneity of markets served by an individual firm” can also help an organization to diversify their products further in the market. (Rumelt, 1974)

Rumelt studied the effect of diversification and profitability in an organization. (Penrose, 1959) This was very clearly observed in the case of Sanofi during the initial growth of the company in the 70s and 80s. Initial high marketing, and research and development costs are some of the major reasons for poor performance on profits for organizations that are still growing. Extensive research has been carried out in this field by obtaining consensus. This has however, has been very difficult. For a new entrant into the market, identifying the critical niches of the other competitors in the field is the singular factor that will ensure success or failure of the organization.

Diversification of product lines and/or services over a wider base can help organizations manage their business risks and reduce the quantifiable likelihood of loss or less-than-expected returns. Diversification reduces the downside potential and allows for more consistent business performance under a wide range of economic conditions. Of Porter’s four types of diversification: Portfolio, Restructuring, Sharing activities and Transferring Know-how, Sanofi-Synthelabo appears to have chosen the Restructuring model.

Firms diversify either proactively or as a defense mechanism. (Samuels, 1971) The impact can be in the form of fear, distrust, ‘identification crisis’ and disharmony within the organization. (Levinson, 1970) merger process and the volatility of the share can create an environment not conducive to trading. This erodes market confidence. (Dev, 1970) The merger and takeover process very often is financially beneficial for the shareholders, employees, the location of operation of the industries and the organization as a whole. (Jensen, 1988)

As companies begin prospering, they grow and expand by diversifying into closely related businesses. If success is quickly and easily attained, the firm may try their hand at more related businesses. Doing the right thing for customers, associates, communities and shareholders often drives mergers that are performed for the vertical economies reasons. By getting the economies to scale at manufacturing plants, companies involved in the mergers/acquisition can save manufacturing and selling costs. Possessing greater geographical market coverage and acquiring businesses making different, but complementary types of product are also key factors for diversification. The customer is increasingly becoming the driver behind all changes undertaken by an organization. In addition, there has been a growing demand for specialized products with shorter lead times. Supply-chain management is becoming increasingly complex; and dependency on suppliers often drives manufacturing and production schedules. Performance targets and bottom line profit realization are forcing supply chains to integrate either forwards or backwards or both ways to improve their levels of control over quality and service and to increase the added value retained by them.

THE SWOT ANALYSIS FOR SANOFI-SYNTHELABO-DUBAI

SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of the organization is also an important part of understanding the organization. SWOT analysis should be done at the corporate level, the department level and the various product-departments of Sanofi-Synthelabo-Dubai. At the corporate level, all the departments and business units should work together to present the best and most accurate portrait of the organization. Carrying out an analysis using the SWOT framework will reveal changes that can be accomplished; as opposed to those changes that appear to be optimal solutions initially but would not be as effective in the long run. Being realistic when evaluating variables affecting the organization’s function and its future is very important in order to make the SWOT analysis exercise effective. Areas of improvements, problems faced, badly executed decisions and avoidable choices made have to be evaluated. The opportunities and the areas where the company can grow and improve should also be evaluated along with real and perceived threats that face the company. Identifying methods for creating an effective team performance across job-function strata in the organization; analyzing the methods for assigning responsibilities and duties is important.

STRENGTHS OF SANOFI-SYNTHELABO-DUBAI

Highly trained and skilled employees in the marketing and sales department: Labor and employee requirement is an important intrinsic factor that affects the internal environment in an organization. Having a trained and experienced workforce can help Sanofi-Synthelabo-Dubai achieve the best output in a very competitive market.

Ability to satisfy the customer’s requirements: Sanofi-Synthelabo, from its very inception, has kept its finger on the pulse of the market and creates products that are well received in the market. It has reacted quickly enough to all the trends and changes in the pharmaceutical market.

Constant use of new and innovate technology to achieve the desired results: This requires long-term commitment to the achieving the mission and goal of the organization.

The company has constantly sought to broaden its markets and its R & D. program internationally. Attracting and retaining the talent required for any task can only be done if understanding of the market is also done simultaneously wide range of products and services that support a range of products, which meet the needs of its clientele

The organization has dedicated and committed leaders who are willing to analyze the market they face critically and change the organization to make it competitive in new and changing markets.

Knowing when to divest a division or department of the company has helped the organization cut its losses over the years.

Keeping true to the core business of R&D has helped the company stay focused globally

The presence of research centers and production facilities all over the world

WEAKNESSES OF SANOFI-SYNTHELABO-DUBAI

The company is a multinational corporation having branches worldwide. Controlling and monitoring the company can become a problem.

Extensive regulation and organizational structure control

Centralized control structure where worker input is not expected or desired.

High dependency of very skilled and talented labor and trends in the Persian Gulf labor market may not support the requirements for the skill levels without importing skills.

Low morale and motivation among the marketing and sales department in the company

Not many new products and services are generated for marketing and sales

Cultures and norms differences between the parent company and the subsidiary also affecting the motivation of the workers.

The constant changes in the organization produced by mergers and acquisitions has created a disillusion workforce

For a long time, Sanofi was a part of a government entity and true import of management styles and decisions were felt when the company was spun off The extent of employee buy-in and participation in the company is not very high; this creates dissonance at different levels of the company

OPPORTUNITY FOR SANOFI-SYNTHELABO-DUBAI

The main focus for the subsidiary was in introducing new products into the market and maintaining the sales of existing products. The products over the period of time have also lived up to the market expectations.

The need for quality of life drugs and emergency medicine drugs will increase as the population ages and the region becomes more established

Growth of hospitals and healthcare facilities in the region is predicted

The company also has a very good reputation as a premier pharmaceutical organization in the region. Its market image is one of reliability and dependability. It is known to strive to achieve the best for all the stakeholders.

The staff in the region is well trained. This expertise can be used to constantly launch new products and maintain market share.

The company has procedures and documentation for most tasks. This historical data can be used for predicting trends and shifts in the market for both top management and department heads. These can be used in planning strategies and goals for the organization.

THREATS FACED BY SANOFI-SYNTHELABO-DUBAI

Instability in the region.

Strong competitors for the same market

Inability to differentiate product line in the market

Threat from generic producers and illegal imports

The brand loyalty and customer loyalty of the past is not as assured for the future

No new drugs for launching in the market

EXTERNAL FACTORS AFFECTING THE PHARMACEUTICAL INDUSTRY IN U.A.E.– MACRO-ENVIRONMENTAL ANALYSIS:

To strategize and plan an effective and practical marketing plan for any product it is important to understand and evaluate the various internal and external factors that help or harm the manufacturing, production and sales of the product in any region. These factors may not always appear to have a direct correlation to sales and marketing of any product but hidden and unclear intertwining of local beliefs, cultures, laws and regulations may all have a profound effect on the final sales. The pharmaceutical industry is very competitive and the drive to excel and gain market control is very important for all organizations. In the past century, the mantel of number one pharmaceutical company in the world has changed so many times and so frequently that no company can rest on the laurels of past achievements. Patents for drugs and the regulation of the sales of drugs also affect the sales and marketing of any product from a pharmaceutical setting. At present, Pfizer is the leading company in the industry with great amounts of the profits being diverted back into research and development. In addition, many companies are also evaluating specific markets and the requirements that the markets may have that might be unique and representative of the region or country. Constant self-assessment within a company helps in the implementation of improvements in market-share and profitability. (Evans, 2001) Organizational learning is generally a four-stage “learning cycle” that includes planning, execution of plans, assessment of progress, and revision of plans.

For an organization that has undergone a change, this learning cycle can help the company rally more efficiently and generate a more stable environment for the company to flourish.

Two different tools for analyzing the macro environment are utilized in this paper — the PESTLE analysis and the 7S methods. The objective is to capture as much of the essence of the factors in a comprehensive manner so as to be able to look at as many variables as possible. Many of these variables may not always impact the marketing plan, but being aware of them can help avoid mistakes and error. Marketing mistakes are often very costly. They are time consuming to rectify. It is easier and more sensible to understand the situation early on and work towards the final goal. For example, Gerber, manufacturers of baby food had a very harrowing marketing experience when it attempted to sell its products in Africa. The company traditionally has a picture of a baby on the label with the ingredients of the contents of the bottle listed on the label. In Africa however, the labels on any product give pictorial description of the contents of the product inside the package. The labeling therefore sent the wrong impression to the customers who refused to purchase the product. It was only after considerable analysis that the company realized the errors of its ways and rectified the problem sustaining loss of customers and revenue in the process.

Very often, organizations find it practically impossible to change the macro environment in which they operate. Rather organizations have to be flexible and adaptable to change when faced with new circumstances and situations. Change management within the organization becomes an important part of the process and will be discussed in depth in the “Change Management” section of this study.

P.E.S.T.L.E. ANALYSIS OF THE PHARMACEUTICAL INDUSTRY IN U.A.E.:

POLITICAL ANALYSIS OF U.A.E.

Political stability: The United Arab Emirates (U.A.E.) is a federation of seven Emirates located on the Arabian Peninsula and is approximately 30,000 sq mi. The city of Abu Dhabi is the capital. U.A.E.’s coastline covers both the entrance to the Persian Gulf and the Strait of Hormuz. The other neighboring states are Oman to the south, Saudi Arabia to the south and the west, and Qatar to the northwest. The seven Emirates are Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Qaiwain, Fujairah, and Ras Al Khaimah. A sheikh rules each individual Emirate. Every sheikh enjoys a great amount of political power to rule and make his own decisions for his Emirate. All emirates are not equally wealthy as the distribution of petroleum is not uniform in the region. Abu Dhabi is the richest of the seven and is approximately 80% of the country, followed by Dubai. The Sunni Muslim Arabs are the indigenous population of the region and the official language is Arabic. A very comprehensive and extensive welfare system is in effect in the U.A.E. To care for the U.A.E. nationals. These include loans, grants and free medical visits to hospitals. The government that oversees the ruling of the region employs most nationals. The estimated population of the country was 2,925,000 in 1995. Approximately 80% of the population is foreigners who can also avail of many subsidized services and benefits such as health, water and electricity. U.A.E. is run on the traditional concepts of a feudal society with absolute power in the hands of the sheikh and his ministers. Overall, governmental authority is invested in the Supreme Council, which consists of the seven sheikhs. A majority of five (including both Abu Dhabi and Dubai) must agree to any action if it has to take effect in the region. All emirates have secular and Islamic law for civil, criminal, and high courts. During the initial formation of the country in 1971, there were tensions between the different emirates. The oil boom brought overall prosperity to the region and opened the country to foreign trade relationships. U.A.E. per capita income is comparable with any of the industrialized nations of the world. Compared to the rest of the Middle Eastern countries the U.A.E. has a more moderate foreign and domestic policy. Zayid bin Sultan Al Nuhayyan, ruler of Abu Dhabi is the President of the country and Maktum bin Rashid al-Maktum, ruler of Dubai is the Vice President. MAKTUM bin Rashid al-Maktum also serves as the Prime Minister for the country. The president of the country appoints the council of ministers. The Federal Supreme Council (FSC) comprising of all seven emirates is the highest constitutional authority in the U.A.E.. The FSC establishes the rules and regulations for the country with the rulers of Abu Dhabi and Dubai having veto powers. The FSC meets four times a year. The president and the vice president are elected by the FSC for a period of five-year terms. The President of the U.A.E. elects the Prime minister and the Deputy prime minister. There are no political parties or elections in the region. The President appoints all members of the judicial branch.

Risk of military invasion: The Middle East has traditionally always been a region of high political and military instability. In the 1960’s many of the Persian Gulf countries got their independence from the colonial rule — however, they have never really accepted many of the boundaries and limits of other neighboring country. Locations of boundary with Saudi Arabia and Oman have been constantly debated over the years. Disagreements on claim to two islands in the Persian Gulf are also disputed with Iran. In the U.A.E., for example, Abu Dhabi and Dubai were not exactly cooperative with each other during the initial formative years of the country. There is also a very high risk of military invasion from foreign countries in the neighborhood. The invasion of Kuwait by Iraq as late as 1991 is testament to this fact. Many countries in this region have the military support of many Western countries and the United States; this does not however, always guarantee safety in the region. In recent times, especially in the Post 9/11 political environments support from western countries may only harm the situation. MNC are increasing weighing the risks of operating in politically unstable regions of the world.

Trade regulations & tariff: The sheikh has the authority to regulate all natural resources in his territory. This includes oil and natural gas. This power makes the sheikh extremely powerful. He has the ability to change and modify production and distribution of the petroleum reserves in his emirate. The political system in the gulf countries allows international organization to exist inside their countries. International organizations however, have to be under an umbrella of a native pharmaceutical agency. A part of the company revenue goes to the agency, and in return this agency is expected to provide the company with strong level of connection within the country. This connectivity is required to ensure ideal distribution of goods and services of the company in the region. Having a local pharmaceutical agency therefore becomes critical for the company operating in any of the U.A.E. emirates.

Developing trust and working relationships are also of utmost importance when dealing with corporations that span international boundaries. Trust plays an important role in Multinational Corporations (MNC). And, organizations have to spend a lot of time and effort in developing trust. (Child, 2001) In the business sense, trust is having confidence in the partner or workers to conduct and perform their task in a manner agreed on. Organizations are faced with two types of uncertainties when undertaking collaborations — the uncertainties of the future contingencies and the reaction of the business partner to the future contingencies that may occur. In recent times, the U.A.E. has limited free medication and hospital use for its native citizens only. This new policy has reduced the sales and distribution of drugs in the region affects the profits and revenues of the pharmaceutical companies. The country is also encouraging local indigenous drug manufacturer like Gulphar & Global to produce and sell generic brands of the drugs that have completed their patent cycle. The reduction of sales in the public and government hospitals has force MNCs in the pharmaceutical industry to target the private sectors. These include pay-for-services medical facilities and private health insurance hospitals that are increasingly appearing in the U.A.E. For expatriates and foreign workers in the country. U.A.E. is encouraging many foreign countries to establish operation in the region. Business organizations can be established in the following forms and are governed by Federal Law No. 8: 1) Public Shareholding Companies; 2) Private Shareholding Companies; 3) Limited Liability Companies; 4) General Partnerships; 5) Limited Partnerships; 6) Partnerships Limited by Shares; and 7) Shareholding Companies. All companies have to be licensed and registered with the U.A.E. Federal Ministry of Economy and Commerce. In addition, all companies have to be authorized to operate in any emirate by the appropriate local authority in the Emirate in which its office will be located. If citizen of the U.A.E. participate in any organization, their holding has to be 51% of the company. Foreigners and foreign companies can posses only 49% of the company. For public shareholding companies, the chairperson of the board of directors and a majority of the members of the board has to be U.A.E. citizens. (Infoprod.co.il, 2004) Only U.A.E. nationals can form partnerships agreements.

Favored trading partners: The total export in 2000 was approximately $46 billion in crude oil, natural gas, re-exported products and fish. The major export markets for U.A.E. are Japan, India, Singapore, South Korea and Oman. The import for 2000 was $34 billion: basic manufactures, food and animals, chemicals, machinery, transport equipment. The major suppliers were Japan, U.S., UK, Italy, Germany and South Korea. (MeSteel.com, 2004) On the pharmaceutical trade, U.A.E. imports 95% of all the medication and drugs used for treatment of patients from Europe. In 2000, it was estimated that U.A.E. imported U.S. $190 million of pharmaceutical products.

Internationally, pharmaceutical sales increased by 12% from U.S. $321.8 billion in 2000 to U.S. $364.2 billion. At present, the Middle East is seen as a potential pharmaceutical market for approximately U.S. $4 billion. U.A.E. does not have any internal expertise for manufacturing pharmaceutical drugs and is very dependent on imports to satisfy the demands. This market is seen as a potential for generating tremendous rewards and profits for global pharmaceutical industries. If U.A.E. decides to become self-reliant in the pharmaceutical arena, it will have to procure expertise in labor, knowledge and equipment requirements. U.A.E. has imposed policies that restrict the drugs and medication that expatriates can get into the country thereby increasing the revenues that the local-based pharmaceutical companies can generate. Per capita drug consumption in the U.A.E. is approximately U.S. $77.7 for the expatriate population who has to pay for medication received.

(OEROnline.com, 2004)

Labor and expertise growth: It is expected that the U.A.E. economy will constantly grow. U.A.E. citizens are guaranteed employment; and the government is ensuring that the illegal workforce in the country is reduced. It is hoped that in the future unemployment levels will not increase. The wealth of the workers is extensively based on the oil and gas industry and production. In little over 30 years since the discovery of oil, the country has gone from a small impoverish desert population that was extensively scattered and living off the land to a modern country with a high quality and standard of living. The government, in a farsighted mission, is developing the country and infrastructure to reduce sustenance on revenues form oil and gas only. (Focus, 2004) The U.A.E. is also investing and encouraging businesses to make investment in local-based pharmaceutical companies that can manufacture and distribute commonly used drugs more effectively in the region. The main objective of the recently created Dubai Technology Park is to attract bio-medical, pharmaceutical and research companies to the U.A.E.. The country has also slated many other initiatives to increase the role of the healthcare industry in the region. The Dubai Healthcare City and the Palm Islands in the U.A.E. are being set up with the idea of creating a regional hub for medical services in the Middle East and increase “medical tourism” in the region.

Professional regulation: U.A.E. has requirements and laws in place for professionals working within the country. Architects, engineers, business consultants, doctors, legal and accounting firms and other professionals and consultants are required to have a license to operate in the country. Trade licenses are also required to conduct business — to import, sell, export and conduct general business with regard to certain identified goods or product lines.

Intellectual property protection: Trade Related Aspects of Intellectual Property Rights (TRIPS) intellectual property includes: Copyright and Related Rights, Trademarks, Geographical Indications, Industrial Designs, Patents, Layout-Designs (Topographies) of Integrated Circuits, Protection of Undisclosed Information and Control of Anti-Competitive Practices in Contractual Licenses. (Ashour, Obeidat, Barakat, & Tamimi, 2004) U.A.E. does not have very robust and foolproof pharmaceutical patent protection like those in place in Europe and the U.S. The only protection that pharmaceuticals enjoy at this point in the U.A.E. is process patents and not actual complete product patents. This seriously impacts the rapidly growing pharmaceutical industry, which is unable to obtain the manufacturing and R & D. incentives from the parent pharmaceutical companies. (Tamimi, 2001)

Pricing policies and product labeling: all products and services sold in U.A.E. are required to have the information printed on the packaging in either Arabic or English. It is observed that the government in the Persian Gulf has been able to restrict the price increase of the drugs sold to them by the pharmaceutical companies and many of these countries boast some of the lowest prices for medication in the world. This low price benefit is however not passed on to the customer of the product. Rather, the product is sufficiently marked up to support the local drug manufacturers in the region. U.A.E. however, has the highest price for medication in the region. U.A.E. reduced the buying price by 15% from the drug companies in 2001. This seriously affected the revenues of 17 international pharmaceutical companies. Recently, there was an intensive crack down in the pharmacy distribution chain when it was observed that expired medication was being sold in packaging that provided wrong information. (Fananews.com, 2003) There have been new laws and regulation put into effect to help reduce similar incidents from recurring in the industry.

Industrial safety regulations: Workplace health and safety committees to ensure the health and safety of the workers. It is estimated that U.A.E. has 1.4 million workers between the ages of 15 and 64. There is no clear and well-defined legal requirement for documenting accidents and deaths in the pharmaceutical industry in U.A.E..

Government budgeting: U.A.E. does not get any external aid and supports internal growth and development from surpluses of its own budget. The inflation rate in 2000 was estimated to be 4.5%. In the past prior to the discovery of oil, the region did not have any sustainable economic industries. The U.A.E. government is presently working very hard to ensure that after the oil reserves are depleted the country sill has a sustainable economy to support the population used to the new life styles.

ECONOMIC ANALYSIS OF U.A.E.

Type of economic system: U.A.E. has traditionally been a sustenance-based economy where people were primarily engaged in fishing, data farming, camel husbandry, trading, and pearl gathering from the seas surrounding the region. The terrain of the country is sandy deserts and salt plain. This did not support large-scale agriculture. The nomadic population that inhabited the region was well versed in handling the harsh climatic conditions and frequent dust storms. The identification of oil reserves in the region drastically changed the economy of the region. Petroleum products are main drivers of the industrialized era of today and the transportation sector is very dependent of the supply of crude petroleum. Tourism and trade are increasingly becoming important service sector in the region. Supporting infrastructure is also being rapidly built to keep pace with the economic expansion in the region. With increase in population health and medical service requirements will also increase.

1997*

1990-1994**

GDP (DH millions)

Real GDP Growth (percent)

Consumer Prices (percent average change)

Fiscal Balance (percent of GDP)

Current Account (U.S.$ billions)

Government intervention in the free market of the region: The Dubai port and other seaports in the region are becoming increasing areas of trade and transportation through the region. The U.A.E. government has also implemented an open and trade friendly economic policy for the country. Capital can be easily moved and financial stability is promoted. The U.A.E. is one of the few countries in the Middle East that is not borrowing from international commercial banks to support growth and development in the region. The government however control and can use funds from the local banks in the country. The true extent of the borrowing patter from within will only be realized over longer periods of time.

Free trade policies: Free Trade is theoretically defined as: “open trade between countries with no government regulation or restraint.” By this definition, trade between nations is not restricted by quotas, licenses, taxes, safety concerns, inspections, or limits of any kind. In the modern world, government creates markets. To keep the market healthy, information is required about different products. Money, laws and regulations are all needed. The government plays an important role in these variables. The U.A.E. government is still very protective of its local and regional industries. Laws to keep control over the businesses in the region have promoted polices where 51% of the business has to be owned by a native. It is unclear if the government will truly allow free trade in the pharmaceutical industry without attempting to subsidize raw materials and impose tariffs on foreign imports. The country showed strong growth of over the past two years; however, this is considerably lower than the growth observed in the late 1970s. The fluctuating economic growth pattern seen in the gulf countries reflects mainly movement in the oil market on which mainly it strongly depends. The aggressive price monitoring system followed by the Gulf countries has not instilled a lot of confidence in the MNC in the pharmaceutical industry that may want to set up operations in the region. The presence of a free trade zone in Jebel Ali has also created an environment for free flow of goods through the country.

Comparative disadvantages of U.A.E. For the pharmaceutical industry: Although other countries like Oman and Egypt have the internal expertise and knowledge to manufacture and produce generic products, U.A.E. has not built sufficient capabilities to produce research and development centers that support scientist and researchers. The knowledge base is also lacking in other areas of marketing and sales and the country has to rely heavily on expatriates and foreign citizens to perform many of the services required for a healthy economy. The pharmaceutical industry requires more than just manufacturing and production facilities. Marking and sales work involves educating doctors, nurses and health care professionals about the advantages and benefits of the drugs available. In addition, it is also important to encourage the general population about new drugs and treatments for diseases. All marking requirement need the setting up of sufficient infrastructure to deal with the logistics, planning and distribution of drugs. In addition, training and continuous education are very important. U.A.E. has still not addressed the need for constantly educating and keeping its citizens informed about invention of new drugs and procedures.

Efficiency of financial markets: For a region to become economically prosperous the financial industry plays a very major role. Banking and finance are the backbones needed to support any growth. At present finance and insurance sectors in the country constitute only 5.6% of the Gross National product (GNP) of the country. The government-banking sector includes the accounts of the federal government as well as accounts of the seven individual Emirate governments. The federal budget is not made public to the citizens of the region. Although there are public stock companies in the U.A.E., there is no official stock exchange in the country. Trade and sales of stock is undertaken personally; public company stocks are traded through private agencies. There is no formal share-price information and the cost of the share of the last transaction is generally held as the cost of the share.

Infrastructure quality: U.A.E. is constantly involved with improving communication and transportation infrastructure in the country.

Pharmaceutical companies rely very heavily on these infrastructures to educate the population and move the products throughout any region where the company operates. The building of hospitals and medical facilities is also required if the use of medicine has to become more wide spread in the region.

Skill level of workforce and labor cost: U.A.E. has to depend on imported skilled labor for any business in the region. The same is also true for the pharmaceutical industry. The social climate is also one in which workers are not expected to provide a lot of input and work tasks and duties are generally defined by executives of the organization. The controlling factors at the executive level (51% owned by natives) can also make decision-making slow and sluggish and reduce the effectiveness of the decisions made.

Unemployment rate: All U.A.E. citizens are employed in government agencies. Employment of female native population is not generally done.

SOCIAL ANALYSIS OF U.A.E.

Demographics: The 2001 census estimated that the population was approximately 2,407,460 of which 1,576,472 were non-native population. The population growth was approximately 1.59%. 29% of the population was below the age of 14, 69% was between the ages of 15 and 64 and the rest of the population was over 65. The life expectency of the population was 71.84 years for males and 76.86 years for females. 96% of the population were Muslims with 16% of this populationbeing shia muslims. The remaining 4% were a combination of other religions. Arabic is the official language of the population. (MeSteel.com, 2004) The age structure in the gulf countries is significantly younger than the global average, with about 26% of the population under the age of 15. The dependency ratio (the ratio of economically inactive to the working age population, defined as those 15 to 64 years of age) are lower in the gulf countries than else where in the Arab world, owing to the presence of a large numbers of foreign workers. Further more, it is estimated that the proportion of the population age 65 or older will increase in the gulf countries to up to 9% in 2020, according to the United Nations Developmental Program.

Education: 79.2% of the total population can read and write. Arabic and English are the spoken. 78.9% of the male population and 79.8% of the female population is literate. The population is constantly becoming aware of the improvement in the quality of life that can be offered by use of drugs and medication. In addition, elective surgery and emergency medicine is also being increasing relied upon by the population. This projects a long and steady growth of demand for pharmaceutical drugs and services in the region.

Class structure & Culture: The Arab culture has very well defined cultural norms and behavior patters for its population. While the society has changed and embraced modernism, man is still considered the head of the household and the women assumes the role of caregiver. With the enormous influx of foreign labor, some of the social structures of the general population are more homogeneous and not well defined. The native of U.A.E. are generally richer and can avail of free medical services at any of the countries hospitals. They can also avail of free or price controlled drugs when needed. The most commonly used and more popular drugs in the U.A.E. include Augmentin, Panadol, Brufen, Xenical, Viagra, Voltaren, Claritine, Ponstan and Zantac. Anti-infective drugs and gastro-intestinal problems drugs are the two with the highest market share. The majority of the population in these countries is expatriates, with a high percentage among them being low-income level Asians. These individuals cannot avail of the same medical benefits as the citizens of the country in recent times as medical benefits have been revoked. As such, overall demand for drugs and medication for brand name product have dropped due to the inability of the customer to pay the premium prices. Social class structure therefore has no impact on the population of the expatriates.

Attitudes (health, environmental consciousness & beliefs): The native population is very proud of their heritage and observes rituals and routines that may appear complex and intimidating to an outsider. People are also very superstitious and religious observing all religious obligations when needed. In this environment, if the public losses trust in the effectiveness of any medication serious overall failure of the product in the region may be experienced.

Leisure interests: The U.A.E. is becoming increasingly a destination for shopping and social activities. The growth of the hotel and the tourism industry in recent times and the government sponsorship of conferences, symposiums and trade shows in a variety of fields has drawn foreigner to the country. The government hopes that a good medical infrastructure can help boost the confidence of travelers into the country

TECHNOLOGICAL ANALYSIS OF U.A.E.

Recent technological developments: U.A.E. is using all the latest and modern technology in the medical industry. The use of modern technology for treatments and blood transfusions are also increasingly being used. (Middleeastmedical.com, 2004) The country has not as yet investing heavily on the R & D. departments, but with more manufacturing and production, the country will soon have to invest in these supporting infrastructures. The country being primarily a sustenance-based economy is investing in modernizing and providing innovations to develop a farming industry. Pharmaceutical technology is not developed extensively in the U.A.E.; rather the country depends on foreign companies to provide them with the necessary requirements. Arab countries have some of the lowest level of research funding in the world, according to the 1998 world science report of the United Nations educational, scientific and cultural organization (UNESCO). R & D. expenditure as a percentage of GDP was a mere 0.4% for the Arab world in 1996 compared to 2.35% in 1994 for Israel, according to the United Nations developmental programme. Technological changes are not expected to take place swiftly in the region. As such, local companies will not be a threat or possess the necessary competencies to compete against an international and very intensive R & D. based companies like Sanofi-Synthelabo. There is however, the threat that once the patents on many of the commercial profitable drugs expire, local companies will cut into the market share of the MNC. In addition, they will not have to invest in R & D. required for new pipeline drugs making the profit generating risk free. They will also be able to provide cheaper drugs to the public as compared to larger corporations that may have higher overhead costs.

LEGAL ENVIRONMENT OF U.A.E.

The government of U.A.E. has a set of regulations in order to control the behavior of the pharmaceutical industry. Julphar – a Gulf-based pharmaceutical company has currently created an image that can cause the long-term negative effects in the U.A.E. pharmaceutical industry. Julphar claims that the “U.A.E.’s commitments and adherence to international obligations are not yet due” and as such they can be free to reverse engineer drugs and sell them in the U.A.E. (Ashour et al., 2004) Intellectual property right issues can create a high level of distrust among countries. In addition, MNC having facilities at many locations around the world may have reservations in dealing with their colleagues in these locations creating a work place that is not comfortable and worker friendly. Laws and regulations of the country may also harm the organizations ability to develop trust. Child (the author) states that trust has to be first built on some basic calculation (expectations) that both parties have of each other. Mutual understanding and respect for the individual and the organization should also exist. The third stage in this trust building is establishing psychological bonding between partners. The last two stages take time and effort. Quick conflict resolution and communication flow is important in maintaining trust and respect between partners. The legislative arm of the government in U.A.E. also plays a role in pricing medicines and assuring the rights for the patients receive an honest data about the medicine from the company of manufacture in case he or she requests to have them. The government also mandates standards of quality control that have to be maintained for the production and sales of any medication.

Any MNC doing business in U.A.E. has to ensure that it is aware of rules and regulations that are required from them in order to do business in the region. The company’s success depends on the level of mutual accountability of its workers, contribution and shared values that the members feel towards achieving the goals of the company while always following the letter of the law.

ENVIRONMENTAL ANALYSIS OF U.A.E.

Urbanization and modernization in the 20th century has put enormous strain on the ecology of the areas where large-scale development has occurred. Cases of asthma and other lung related ailments are on the rise in many cities and towns due to high levels of pollution and contamination. They put a huge stain on the medical facilities in these regions. More industrialized nations often consume and utilize more of the natural resources than the remaining nations. Resources are constantly shrinking; and, nations that control these scare resources may face hostilities from countries facing a shortage in these resources. (Darvill, 1997) Fresh water is one good example. An economy will be sustainable only if there is long-term viability of the prevalent culture. When the culture can show a close relation between a thriving economy and maintaining the environment, only then will the people ‘buy’ this new idea. If the community feels no tangible effects where these new ideas and thoughts are being developed, they will not show long-term success.

The transport, industrial and energy sectors have had substantial effect on the environment (United Nations developmental programme2002.P, 45). Sanofi-Synthelabo is giving a great deal of attention to the environmental and safety issues that the company faces at all its locations around the world. The HSE (health, safety and environmental) department within the company is devoted to insure the higher environmental standards for the country to observe. Contamination problems will also be on the rise due to the increase in the factories and industries and the increasing dependencies on chemicals to provide substitutes for maintaining the quality of life.

Ethical issues arise in organizations due to different social, cultural and economic factors. What may be acceptable and legal in one society may not hold true for another. Cultural values are important for any society. These are portrayed in the morals, laws, customs, and practices of that society. Individualism (self-interest)-collectivism (group interest) behavior can also impact the effectiveness of groups and teams that an organization set up in any country. Multinational organizations are faced with the task of understanding the cultures in which they operate and ensure that these foreign cultures do not offend the sensibilities of the society in which they are incorporated. While no simple and universal ethical solution is possible in all situations, a compromise should not appear one sided or biased. The three main factors in selecting the strategy were stated to be moral significance, power and influence the organization wielded and urgency of the situation. (Buller, Kohls, & Anderson, 2000)

Companies, like people, are bound by ethical requirements — a responsibility to consumers and customers. Companies are expected to do follow up on the promises of their advertisers. All companies make ethical declarations as part of their vision and operational philosophy, but quite a few to do little to live up these declarations. Most companies define their ethical principles as: honesty, integrity, responsibility, trust, and respecting of the laws in the country where they operate. The ethical manifest of Sanofi-Synthelabo states that it will comply with all the laws and regulations of the state or country in which it operates and also hold the company to a higher standard in case the environmental and ethical laws are not as well defined in the country. Every product that the company launches will be subjected to a safety, health and environmental risk assessment. All factors, scientific and technical, that are required for the creation of the drug will be investigated and evaluated to insure that complete compliance is achieved. In addition, optimizing the use of raw materials, reducing waste and controlling the emission of gaseous, liquid and solid waste as a part of the production are also mottos that the organization follows.

Globalization has brought to the doorstep of many organizations cultural and social issues that did not exist as recently as 20-30 years back. International isolation had not prepared individuals to understand and comprehend other cultures and norms that exist around the world. The number of macro-environmental factors is virtually unlimited. In practice, pharmaceutical companies must prioritize and monitor those factors that directly influence it. Even so, it may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, pharmaceutical companies may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.

INTERNAL FACTORS AFFECTING THE SANOFI-SYNTHELABO CORPORATION-MICRO ENVIRONMENT ANALYSIS

While the PESTLE analysis of the external environment helped identify many of the variables that the company could not control and had to be aware of in order to conduct business in the U.A.E., there are additional internal factors that also play a very significant role in the success or failure of the organization. Often, companies can control these internal factors very effectively if they follow and implement good planning and control in the organization. Recognizing the role of an organization in the environment both internal and external is important. The environment is not a separate entity — a world out there; rather, it is an amalgamation of all the factors affecting an organization (Morgan, 1997) The traditional definition of an environment is: “All the elements that lie beyond the boundary of the organization and have the potential to affect all or a part of the organization. (Daft 1997, p. 82)”

THE 7S ANALYIS

The 7S analysis is used to identify the critical internal factors in the organization. The factors analyzed are strategy, structure, systems, style, staff, skills and shared values of the organization.

STRATEGY OF SANOFI-SYNTHELABO

Strategies for any organization have to be employed based on the type of product, the life cycle of the product and the process involved in marketing of the product. Strategy for an organization is the determination of basic long-term goals and objectives of the organization and adoption of a course or courses of action and the allocation of resources necessary for carrying out the goals and objectives.

The strategy in the Gulf subsidiary of Sanofi-Synthelabo for marketing purposes is to devise strategic initiatives and approaches to manage the geographical area where the company hopes to do business. The important start of any marketing plan is to identify the geographical area and the target market in this area to which the product is being marketed. In this case five small countries (UAE, Kuwait, Oman, Qatar and Bahraini) in the Persian Gulf area is the defined and selected marketing area. After defining the overall area of marketing identifying the day-to-day operational requirements for creating an effective network for marking and selling the product is important. Operating strategy for marketing has to include the entire supply chain operational function in the organization. It is of no significance if the marketing department and sales persons bring in orders for U.S. $100,000 worth of products but the company is unable to deliver the products to the customer at the desired time due to lack of inventory at either the local marketing office or the company warehouse in the region.

The marketing plan will also have to include the nature of customers to be targeted. Identifying if the company wants to target the members of the medical profession such as doctors and nurses, or hospitals and healthcare providers or the general public or all of the three is also important. Advertising campaigns will have to be suitably designed for each segment of the population and these campaigns may differ radically in the intensity of marketing or the information that is required to be provided in the campaign. The medium of advertisement also becomes important. In regions of low literacy levels, radio and television campaigns may be more effective than fliers and printed material. Doctors may require additional information about drug interactions and side effects while all details may not be considered necessary in a television ad campaign. Identifying and creating a chart that identifies the market segmentation with the information needs can help marketing personnel carry out their task effectively. Strategies associated with market segmentation will have to be refined over time to ensure maximum benefits of the plan. When conducting one-on-one marketing campaigns, building interpersonal relationships with the customer may also help boost the image of the organization. This is especially effective when marketing of high cost quality of life drugs that require prescription for use.

Allocating appropriate manpower for territory coverage optimization is also important. Time management skills become especially important when the sales force have to cover large areas of the country personally. Training and educating the sales force is very important — training ultimately determine the performance of the employees in the organization. It is always very difficult for an organization to quantify the improvements made by training in very clear and definite terms. Organizations often use training strategies to keep their best talent. Training needs have to be evaluated in the context of the company’s strategic objectives. Every employee contributes to the organization’s adaptability to change, overall success and survivability over the years. The employees generally come into an organization either because they possess special skills and advantages or fresh entry-level candidates who have to be given special training in the field where they will be employed. The success of a company lies in its ability to adapt and evaluate new strategies based on the type of employees hired and the type of jobs that they will be handling. All employees, irrespective of their education and experience, require periodic refresher courses and training. These refresher courses can bring previously unknown ideas and inventions to employees. When companies invest in training their workforce, the benefits are observed in increased productivity and a more confident and knowledgeable workforce.

Motivating and mentoring subordinates and new members of the sales force is also important. The task of finding, hiring, and keeping employees who show pride in their work and loyalty toward the company is becoming very difficult. Organizations very often fail to reward hard workers for their good performance and often lose them to other companies who will reward their efforts. The loss of good and valuable marketing personnel can set a marketing plan back for months. In the marketing field trust and familiarity with a customer are more important that any other asset that the sales person can have. An individual can only develop trust and familiarity over a period of time.

Imparting this knowledge to new recruits and constantly evaluating the performance of current employees can help marketing managers gain an objective view of the environment that they are dealing with.

Understanding products and their application to the society is also important. The marketing force is the company’s eyes and ears in determining the most effective product. Marketing staff is in constant contact with the end user of the product and can obtain feedback, questions and grievances if any from the user. Communicating this to the company and analyzing the actual realistic needs of the customer can help the company serve the population better. Sanofi-Synthelabo had already identified the areas of drug research that they would concentrate on in its R & D. strategy. By using customer feedback, they can make the drug more effective and appropriate for use. It may be a simple suggestion such as modification of a package for the medication to facilitate easy opening or providing the medication in convenient multiples so as to prevent waste of unused medication. These modifications do not change the product but they do help in pleasing the customer.

Documentation and records by the marketing department can also help the organization identify the most profitable product and the least profitable product for any given region in the target market area. In this manner, the marketing personnel can identify the products that are the most desired and concentrate maximum effort of these products. All strategies at any level are dependent on the individual planning the strategies. When all involved in the process are invited to share their views and opinions the planning process can be made more accurate and relevant. No two marketing plans are ever the same and even if similar plans are used the outcomes can be radically different depending on the environment and the type of product marketed.

Life cycles of drugs are becoming increasingly short and the sales force has to be constantly trained to handle new products being launched. Creating a constant learning environment within the workforce can help make the process easier on the workforce. Knowledge about the rules and regulations of the area along with in depth understanding of the culture and norms of the region can help create a marketing team that is truly effective in the region.

At present, the marketing team of Sanofi-Synthelabo follows a growth strategy aimed at communicating the uniqueness of the company’s product to the customer. By differentiating the product from other products of similar nature, the company hopes to create a customer base that is faithful and brand loyal. Thus, the company can continue to grow both in market share and revenue.

STRUCTURE OF SANOFI-SYNTHELABO

Structure is an entity (such as an organization) made up of elements or parts (such as people, resources, aspirations, market trends, levels of competence, reward systems, departmental mandates, and so on) that impact each other by the relationship they form. A structural relationship is one in which the various parts act upon each other, and consequently generate particular types of behavior. (Ferrell & Hirt, 2002)

Acquisition and/or mergers helped Sanofi-Synthelabo achieve growth quickly by acquiring trained personnel, systems, technology and expertise. Sanofi-Synthelabo has a vertical functional structure (Daft.P,316) with a clear and well-defined chain of command and reporting structure. It is observed that the organization has a very detailed and hierarchical type of organizational structure. Medical representatives of each country report to and are held accountable by one national manager. The national manager reports to the area manager about the progress of the work. Members of the medical marketing department also report directly to the area manager.

Organizational structures are generally traditional, bureaucratic, system-oriented, project-oriented, networked, market-oriented or matrix in nature. Any position in an organization, from the CEO to the production-line worker, plays a unique role in the smooth and efficient in an organization’s operation. Everyone has to work to his or her full potential in order for the organization to be successful. In Sanofi-Synthelabo, authority and decisions flows down the hierarchy from the position of the area manager, down to the supervisors and finally to the medical representatives. The medico-marketing department has both staff and functional authority over the national managers and the medical representatives.

The market-oriented organizational structure is identified as one where most tasks are increasingly being considered as individual projects mainly driven by the market or a specific customer need. This type of situation generally occurs in various decentralized locations using the expertise and knowledge of a few key individuals who help shape and determine the success or failure of the project. The earnings and profits from the success of the task or project determine the longevity of the group and organization as a whole. Here, the important binding component between the team and group of people is the individual economic success of the individual entities in the operation. Analysis of the marketing and sales team of Sanofi-Synthelabo appears to utilize this form of organizational structure.

One national manager is responsible for the medical representatives in Oman, Qatar and Bahrain. The national managers enjoy a wide span of control with their medical representatives within each country (average 5 reps / country.) The organizational structure is based on a feudalistic concept. Authority and power rested in the hand of the corporation’s President or CEO. Most decisions were top down. No input or feedback was expected from the employee, who was not expected to “think.” Upward vertical communication has little or no significance in this structure and regional and national managers follow an autocratic style of leadership. Autocratic (authoritarian) leaders are leaders who make most of the decisions themselves instead of allowing their followers to participate in them. An individual who displays leadership by viewing job performance as a series of transactions with subordinates’ uses the “transactional” form of leadership. Such leaders and are also classified as autocratic leaders. Leadership in any organization is also seen as a power relation between two or more people. Raven and French define leadership in terms of differential power relationships among members of a group. (Raven & French, 1960) They identify five types of power: legitimate, reward, coercive, expert and referent.

Gender, race, culture and cognition play a major role in forming the style of management preferred by individuals. It is assumed that the marketing team generally is male dominated in the U.A.E. Men practice a power and knowledge-based form of leadership in most situations. The status and hierarchical position in the organizational structure is important for a man and he will try and maintain the status in the organization. In addition, he will also be constantly trying to advance his position up the organizational structure in a very focused and aggressive manner. Leaders are individuals who are aware that a mission needs to be accomplished or a change needs to be undertaken. They can inspire and motivate others using any of the personality, leadership and cognitive styles they are most comfortable with to achieve the goal.

Napoleon Hill, the author of “Think and Grow Rich” states: “The most powerful instrument we have in our hand is the power of our mind.” Mr. Hill further elaborated that man could create nothing if he did not have first conceive it as a thought. If an individual cannot believe that he or she can succeed, then that person will most likely not succeed in achieving set goals. The individual should however, have realistic goals and ambitions. These goals should be attainable, though it may take effort and determination. The ability to recognize, relate, assimilate and apply principals to achieve any goal whatsoever that doesn’t violate the Universal Law — the Law of God and the rights of fellowman is acceptable. Honesty and integrity is also important; it should be pursued in all ventures undertaken. (Hill, 2001) It is important that managers and decision makers at Sanofi-Synthelabo understand the important of effective leadership in the organization.

Kreps identifies two basic types of communication within organizations — formal communications and informal communications. (Kreps, 1986) Kreps and Hellweg identified two types of formal communications within organizations: vertical and horizontal communications. (Byers, 1997) Two further subdivisions within the vertical communication format: Downward communication and upward communication are observed.

In downward communication, all information transfer is sent from the management to the workers. The employees lower down the hierarchal chain are constantly provided information with regards to what needs to get done, how it should get done and the time frame within which it has to get done. Little or no feedback is expected from the employee who receives the message. In reality, it is observed that very often the message can get complicated and distorted as the level of complexity of the job increase or the levels through which the information flows. Most organizations traditionally followed this form of communication. The role of managers and supervisors in this setup is that of the thinker for the organization. The employees are encouraged not to think but only to follow the directives. In the “bottom up” form of communication, thinking is expected from all employees in the organization and interaction is considered.

In horizontal communication, individuals at different levels of the organization interact to share information, tactics and discuss options. The silo effect of organizational work can create extremely limited focus in workers. Horizontal communication at equal levels helps the worker or manager or department head understand how decisions and task undertaken by them affect the organization as a whole. While downward communications are still important, organizations are realizing that this type of information flow can only be completely effective if the other two, upward and horizontal communication flow also exist simultaneously and are given equal importance. In the past upward and horizontal communication flow was limited. Workers were nervous about losing their jobs or being discriminated against if they tried to obtain clarifications for the tasks handed to them or if they offered suggestions that could do the task more efficiently. Identifying the direction of communication flow, the nodes and the gatekeepers can help companies stay informed of all the changes taking place within the organization.

The grapevine is the informal internal communication that organizations posses.

It is only since organizations have begun to value the opinions and ideas of their workers have the grapevine become a new tool for organizational communication by the management. The validity of the information through the grapevine is never doubted as constant and periodic confirmation of the information is obtained at every transfer point. The strength of this type of communication is that anyone, at any level or department within the organization can start the communication and this type of communication is not restricted by vertical or horizontal direction of communication flow when compared to formal communications within the organization. Long-term vision and foresight from managers at all levels of the organization is required to promote alternative methods of communication.

After visionary and dynamic leadership, most organizational goals and objectives are key components that either result in the success or failure of an organization. Managers and change agents should also realize that all employees are not the same. This human variance in any industry can result in either the success or failure of the change. In the article “Change for the better,” Mittler used an example where an employee was not happy with the new freedom and accountability attitude practiced by the new CEO of the company. The employee was happier with the old rules of being told what to do and when to do the task and how to do the task. He wanted no part of personal accountability in the workings of the company. Mittler went on to state that the employee left within a few months. (Mittler, 2003)

Leadership accounts for the greatest variance in the organizational structure. No matter what the type of structure a leader, with a clear vision of the final goal will be able to motive and take his team to the goal. Emotional intelligence and involvement by the leader or managers of the team, group of department can greatly help the morale and productivity of the department. Externally oriented leaders may typically have short-range views and may appear to be successful in the immediate future. Good leaders have to go one-step further. They make decisions that are long-term and these decisions should be made after proper evaluation of all material available. (Hunsicker, n.d.) No matter what the type of company organizational structure, it should eventually help make the workplace a comfortable and safe environment for all the employees.

SYSTEMS AT SANOFI-SYNTHELABO

Reporting and documentation of tasks is an important way of reviewing and understanding operations in any organization. Sanofi-Synthelabo in the gulf has implemented a formal system of reporting that is done on a daily basis. The market for any industry is very dynamic; and organizations have to improve their products and services constantly to satisfy the market. Good management of assets can help any organization accumulate and retain the revenue that sales of the product or services generate. In addition, sound financial management of a publicly traded company helps generate trust in the shareholders and the market. The reliability and trust that Sanofi-Synthelabo can generate in Europe has helped it move to international market with little difficulties. The company provides all the financial information required as per law in any state or country that it operates.

The financial system records all expenses regularly and identifies expenses to its related activity and related products. This allows the company to have a general overview of resource allocation and utilization based on product family, location and market segment.

These trend analyses can help Sanofi-Synthelabo make calculated decisions about the amounts and limits of resource adjustments and product life cycle planning that may be required to generate profits for the organization. Budget planning and fund allocation is an important management task in any organization. At the time of budget planning and forecasting, past historical records can serve as good benchmarks for the company. Forecasting and setting realistic sales targets can help organization determine the funds and labor resources needed to achieve the final goals of the company.

With organizations becoming more global in nature organizations are realizing the important of creating standard operating procedures (SOP) for similar tasks performed at different regions around the world. The idea of doing this is to maintain some form of standardization and quality performance at all locations. By providing procedures and guidelines to the workers the company can maintain control over the operational system in the organization. SOPs are not static entities but rather change and evolve based on the environment, the culture and norms and the type of product marketed in the region. Sufficient latitude should be offered to the worker performing the task to gain worker involvement. The human element in any organization is the most valuable and self-assessment encourages organizational learning.

Organizations use various methods to compensate and reward their employees. They play a major role in the performance of an employee. In the past, many organizations were hierarchical in nature. Often, punishment — threat methods were used to ensure that the workers performance was maintained. In the past century, organizations shifted from this form of performance generation tactic to one of positive reinforcement where rewards, bonuses and praise are used together to ensure that the worker performs. Rewards for a task well done may have different values depending on the person receiving the reward and the manner in which the reward is offered. A pay-raise may please one employee and much as a public acknowledgement of a task well done may please another. Often, companies use the annual job review technique that has main pitfalls. Some of the factors that are evaluated at the employee review stage are — knowledge of work, quality of work, quantity of work performed, cooperation and team involvement, problem solving, communication, problem solving and attendance and punctuality. The goal of conducting a review is to judge in an un-biased manner if the performance of the employee matches the goals and objectives of the organization. (Heathfield, 2003)

Rewards are generally classified into formal and informal rewards. A formal reward generally is offered in monetary form. Informal rewards can be any type of acknowledgement offered by management to the worker and this can include praise by management and coworkers, recognition awards and client acknowledgement. Informal rewards are very often tied to formal rewards making them more meaningful for not only the moment but also long-term as the worker generally enjoys the benefits of better training and educational support, eligibility for upward mobility and higher wages. Organizational salary slabs are becoming more rigid due to a stagnating and slow economy. And salaries and increments are not as widely offered as in the past decade. This has prompted organization and the human resources department to come up with new and innovate ways in which they can raise the morale of the workers and therefore improve the overall productivity of the organizations. The age of long-term employment and organizational loyalty no longer exist. The enthusiasm displayed by workers generally wanes over extended periods of time if they are not offered sufficient incentive. Offering rewards should be done solely on the basis of merit; only then will the rewards whether formal or informal really be valued by the employees. Rewards should be tailored towards an individual. (Daniels, 2003)

STYLE OF Management AT SANOFI-SYNTHELABO

Historically, successful decision makers have been characterized as decisive, analytical, individualistic, powerful, and willing to make the hard decisions when required. People opinions and perspectives have changed over the last few decades and society now prefers leaders who help build ‘learning organizations.’ In this new organizational setup, the decision maker will have to help people expand and increase their own individual capabilities with the belief that an individual who is constantly growing and developing is an asset both for the company and for the society as a whole. Management concepts are not new theories developed in just the past two centuries.

Archeological and historical remains from the time ancient world like the Coliseum, the Pyramids, the Great Wall of China are all testament to the fact that large groups of individuals had to be managed and directed by a few to achieve the results desired. Management theories however became more defined and structured with the onset of the industrial revolution. The scientific management theory proposed by Taylor was instrumental in launching the mass production era in the U.S. He was among the first to introduce the concepts of specialization of labor and breaking down of tasks into discrete and independent functions that could be taught and performed repeatedly by the individual performing the task. Many of these concepts helped revolutionize the manufacturing industry and improve production. There were many down sides to this method of management as well; the worker involvement was reduced in the entire process and the skill set requirement was also equalized. The constant repetitive nature of the task also introduced boredom and resentment towards the work process. As worker time and not skill became the driving factor for compensation, highly skilled workers were not happy with this method of management. Little or no worker input made workers resent the people who forced or expected them to behave or perform in a certain manner.

There were many good things that the scientific management theory introduced. The standardization of tasks and the quantifiable time requirement (standard time) for any task brought a level of control in the organization.

These tools helped companies and managers determine the approximate time and labor requirement for any tasks. Records and documentation introduced as a result of the process provided historical data for review at later stages. Benchmarking helped companies identify the competition and areas where they could improve. Concentration on the workflow and material flow through the system became important. Scientific management required a lot of support staff, which was not present in the past. The increase in mid-level managers, record keepers and office staff was observed in companies that employed Taylor’s ideas. Management functions of control, planning and strategizing became more defined and were separated from the other tasks of production and manufacturing. Many of the concepts that Taylor introduced are still used in a modified form and with a more humane approach in work places today. Companies still set standard times for production, managers are still involved with the strategizing and planning process and workers are still often reviewed for performance based on the quantity and not quality of the work performed.

Elton Mayo was the first to bring the human element into the equation of management. While Maslow and McGregor would later identify and postulate the motivational theories for individuals, Mayo believed that worker satisfaction and performance were interdependent. The working conditions, the management attitudes and the quality of life within the organization were all important factors. Where “Taylorism” appeared to be beneficial for the business owner, Mayo’s theories looked into the welfare and well-being of the workers as well. Negative effects of coercion and power control were easy to identify. It was observed that management could achieve a lot more if they were sympathetic to the worker needs and the work environment. The influence of peer pressure and group conformity was also identified as important in managing people and situations. At this point, management theories began to place equal emphasis on the quality of work for the worker and ways that could be used to improve it.

In the 1960s, management using numbers became more common. Statistics was effectively used by the Japanese to ensure the quality of their products. Till then the U.S. manufacturers relied on the concepts of Acceptable Quality Levels (AQL), however once the Japanese were able to use the concepts of Statistical Process Control (SPC) to eliminate defects in the manufacturing process the American companies has to change their management styles to include these new ideas.

Performance or product perception. It is very clear that defining quality is difficult; even more difficult however, is maintaining quality levels within an organization.

All the contemporary management theories place high emphasis on employee training and skill development. Since the 1990s, there has been an emerging approach to manage organizations using an “engaged learning system” coupled with a continuous learning environment through all ranks of the organization. Globalization and the Internet have made the trade and commerce across geographical distances possible. Transportation and logistics capabilities have also improved and advanced in recent time. The set up of decentralized and independent work centers and factories divisions of multinational corporations all over the world are becoming increasingly familiar. In this environment, it is important that all employee of the organization at different locations around the world performing the same task do so in a manner that is consistent and of the same quality.

Leadership style is taken to mean a particular behavior emphasized by the leader to motivate his or her group to accomplish eventual ends (Hanson, 1979). Most types of leadership styles elucidated are based on two broad dimensions: people-oriented and task-oriented. The people-oriented style emphasizes the human aspects and is more concerned with interpersonal relationships. Leaders who are people-oriented have strong concern for the human relations approach and try to maintain friendly supportive relations with their followers. They are expressive and tend to establish social and emotional ties. They view people as the best asset the organization, schools and society may have and constantly work towards developing this asset. The task-oriented style emphasizes the technical or task aspects of the job and is concerned mainly with the accomplishment of tasks. Leaders who are task-oriented have strong concern for the group’s goals and the means to achieve the goals. Their behaviors reflect their interest in completing assignments and getting the work done. They concentrate on methods for assigning and organizing work, making decisions, and evaluating performance. These types of leaders may not always demonstrate concern and look for the success and individual development of others if this is not always tied in with the task at hand.

The important variable affecting the leadership style practiced is the maturity and working knowledge expertise of the people the leader is directing. Members of an organization that are more experienced and ready need less directive and control from a leader. (Ubben & Hughes, 1992) Rewards such as praise, recognition, and attention are sources of personal power possessed by the leader as an individual. In addition, a leader also usually controls certain organizational rewards, such as pay rises and promotions. These are sources of power that depend upon the leader’s position in the organization.

STAFF AT SANOFI-SYNTHELABO

Motivation is very important; individuals will work to their full potential only if their very basic needs are satisfied. Abraham H. Maslow and Douglas M. McGregor both believed that in order for people to work to their full potential, theirre basic needs had to be satisfied. (Maslow, 1954) In recent times, with the workforce more knowledgeable about their rights, and an increasing focus by management in keeping their workers happy, the balance of power has shifted. All changes have to be beneficial to both the management and the worker.

The journal article “Maslow revisited: building the employee commitment pyramid” evaluates motivation from the perspective of the employee/employer dynamic and not just the individual’s relation to the environment. (Stum, 2001) Many of these factors of motivations change over the period of employment. It is easy to observe and comprehend that the Workforce Commitment Index (WCI) will change. The WCI identifies five different workforce needs: Safety/security (safe environment for the worker to work in physically and psychologically), Rewards (Compensation and benefits — an extrinsic factor), Affiliation (a sense of belonging to the organization), Growth (the growth of both the individual and the organization) and Work/life harmony (balancing of personal life and work responsibility) It is true that as workers move up the hierarchical ladder of the organization the needs they expect also tend to change and move for the next level. Balancing the need for providing these services with the organization’s needs can be difficult. Allowing managers and supervisors to understand the WCI and the role of the needs in improving the motivation of the employees is also important.

Understanding Maslow’s hierarchy of needs in different cultures is important. (Vires & Florent-Treacy, 2002)

During the inception of the establishment of a formal work-setting (1500-1700), the laborer was not well respected. Factory owners believed that wages should be intentionally kept low, so that the worker was forced to come back to work the next day to maintain even his basic needs. It was believed that higher wages would increase idleness and irresponsible behavior in the worker. It was generally assumed that the worker would spend more if he earned more and that it was better for the worker not to have extra money to spend more. The view that a lot of social problems would be avoided if the laborer were constantly occupied was the norm of the time. Adam Smith postulated that self-interest can help individuals and nations accumulate wealth and prosperity. Adam Smith and Thomas Robert Malthus’ ideas helped in the foundation of the school of thought of wages. Thus, the Wages Fund Theory was developed. John Stuart Mill reasoned that wages would depend on the supply and demand of the labor workforce in the region and the skill set that was required for any period of time for a specific task. For example, in the horse and carriage days, blacksmiths and ironsmiths were important. After the automobile came along, the demand for this type of labor decreased significantly. (Groat, 2003)

Research in the socialization field indicates that interpersonal communication of both the formal and informal nature can help teach new employees in an organization their tasks and duties. (Robinson, Kraatz, & Rousseau, 1994) An individual also has the same expectations of wealth and personal success that any organization has.

No matter where the location or the type of organization some of the listed below tools can be used to help the organization. Information should be collected about cultures and norm of the region where the organization is planning to do business. Workers should be encouraged to empathizing with the conditions that exist at the various locations rather than just reviewing the existing conditions. Leaders and managers should talk to workers at locations to evaluate the style of leadership that will be the most appropriate for the local culture and work towards developing the skill set needed. The organization should also look for metrics that measure the evaluation of the core competencies of the organization and align it with the values of the worker. Knowing and understand the requirements needed to succeed in the mission no matter where the location is also important.

As decision-making and risk levels change depending on the position of the manager in the organizational structure, understanding basis concepts of chain of command and power and expert knowledge is very relevant to the manager. For example, in a very strict and rigid power structured organization, reporting and tasks-transfer protocols may be very important to ensure that no feelings are hurt. When dealing with a global environment, it is important that managers and leaders be able to identify the best form of leadership style for the organization based on the location. For example, an organization performing the same tasks may place different emphasis on employee behavior. In China, the UAE or Russia, for example, a leader may choose the transactional style of leadership where the culture of region emphasis the need for tasks to be dictated and spelt out to the workers. (Vires & Florent-Treacy, 2002) Worker in these countries if given the tool of empowerment may not understand how to use it effectively; in a more drastic situation, the worker may perceive the empowerment tool as scary and even resent the implications that it may have on the performance. The culture of the region may be more suited to follow directions rather than creating an individual though process. Transplanting leaders that may have performed exceptionally well at the company’s head office in Paris to a foreign office in UAE may defeat the purpose and not generate the same results. For example, some countries around the world may refuse to do business with women — not for any thing lacking in the female leader but more due to the local culture that does not give women the appropriate positions of power.

SKILL REQUIREMENTS AT SANOFI-SYNTHELABO

Understanding the importance of skill development in an industry like the pharmaceutical one is very important. Knowledge management and labor management are one of the defining assets for any organizations in the modern world. Knowledge management is especially gaining importance due to the fact that mheany midlevel management jobs have become redundant; consequently, the worker is being made more accountable. In the current market place, employers have expectations of the type and nature of work that they expect their employees to perform. Depending on the type of job, skill requirements may differ. For example, workers in a research and development department may benefit extensively from more training and education.

Knowledge is a dynamic blend of structured expertise, values, contextual information and insight. It provides a framework for evaluating and integrating experiences and information. Knowledge defines the intellectual assets of an organization. The four knowledge transfer channels identified are: externalization, combination, internalization, and socialization. Various facets, levels and types of knowledge have been identified in management theory literature. In any organization, knowledge, over a period of time gets absorbed into the routines and operations of the organization. Over time, this knowledge may get so infused that it is difficult to separate it from the organization. For example, when one refers to Intel as a company, the first thing that comes to mind is computer chips and processors.

Knowledge can be classified as “Explicit” and “Tacit” knowledge. Explicit knowledge is the knowledge that is objective and rational and can be expressed in formal and systematic language. Tacit knowledge is subjective, experiential and hard to formalize and communicate. Knowledge transfer occurs in one of four forms: from tacit to tacit; from explicit to explicit; from tacit to explicit; or from explicit to tacit. Knowledge transfer is a two-part process, sending and receiving. Knowledge transfer can only take place when knowledge is transmitted by the sender and received by the receiver. The concept of “intellectual capital” is attributed to the economist John Kenneth Galbraith who coined the term in 1969 (Svelby, 2001). Intellectual capital is knowledge that is considered an asset to the organization. There are four types of intellectual capital: human capital, structural capital, customer capital, and social capital. Knowledge transfer channels and the exchange of intellectual capital by individuals within an organization play an important role in the success of the organization. The collective knowledge in the organization, the duties and function of harvesting the talent and managing that intellectual capital for the benefit of the shareholders, the employees and the management becomes an important for a company to succeed.

A pharmaceutical company places great emphasis on skills and knowledge of the worker in the organization at all levels. The marketing staff has to be very competent and knowledgeable of the products that the company markets. Often, pharmaceutical organizations may have very extensive product lines that are markets to different segments of population. Sales and marketing staff are generally product-based occupation, when complete understanding of one or two specific product may be provided to the medical representative. Medical representative claiming complete ignorance about the benefits of other products of the company may seriously harm the image and reputation of the organization in the long run.

SHARED VALUES AT SANOFI-SYNTHELABO

For an organization to work to its full potential, the values and goals of all the stakeholders in the organization should be the same. All organizations define their stakeholders as their employees, customers, shareholders, managers and the market in general. In addition, very often, the social and economic of the area are also impacted by the organization. A company may choose to invest in the region or area to help develop supporting business and industries. Culture had been defined not as the behavior of the people living in it; it is the “it” in which they live. The culture of an organization includes the language, dress codes, and habits of the operations, value systems, an ethics’ code, attitude and interactions between various strata of the organization and work principles. Norms-are the organized and shared ideas of what the members in the organization do and feel, and how these norms should be regulated. Many of the individual needs get infused from the individuals that work in the organization into the culture of the organization.h

In recent times, managements, by using the avenues of downsizing or reengineering, are also changing the image of many organizations in the eyes of their workers. Downsizing is often done in an attempt to increase the bottom line and the profits of the company. Downsizing involves decreasing the number of employees in the organization. Layoffs proceed from downsizing. In some cases, jobs and tasks formerly done in-house may be outsourced to subcontractors and smaller firms. This helps reduce the overhead for the organization. In some cases, however, downsizing may, in the long run, damage the capabilities of the organization and in turn the profits. Reengineering, if well implemented by the organization and the HR department, can help reorganize the human and equipment resources that the organization possesses in a manner such that the organization gets the best possible resource utilization. Often, organizational reengineering involves a radical redesign of core business processes to achieve dramatic improvements in productivity, cycle times, and quality. All these improvements are generally long-term. They can help an organization that is getting too sluggish. They aid in reevaluating and understanding core business — a return to first principles. As many of these re-engineering processes result in the loss of jobs, it is a very difficult and stressful time for both the workers and the HR department. If the HR department is sufficiently vigilant however, the officials in the department will know in advance where head count and overhead costs are excessive. This knowledge, if properly transmitted to the executive management, can help them make appropriate decisions at the right time. This thereby effectively reduces the problem of laying off excess staff.

When workers in the organization are explained the need for conducting any changes in the organization the change is better accepted and resentment or hurt against the management is not observed. Sanofi- Synthelabo has been able over the years to maintain the trust and respect of the workers in the organization constantly.

COMPETITIVE ANALYSIS OF THE INDUSTRY

MICHAEL PORTER’S FIVE-FORCE ANALYSIS

The ideals and concepts that support the growth and prosperity of firms generate considerable interest and debates within the academic and the business community. The impact of social science, economy, strategy, public and government policies all play a significant role in the success or failure of an organization. Continually published material on strategic management has resulted in an abundance of models that range from the structure-conduct-performance model to evolutionary economics, from ecological models of strategy to network models of strategy, and cognitive perspectives on strategy to learning models of strategy. (Greenwood & Carter, 1997) Structure-conduct performance paradigm (SCP) was used by Porter to design the five-force business strategy model that has become the foundation of business strategy studies. (Bain, 1954) Analysis of the worldwide pharmaceutical industry based on Porter’s framework reveals the following:

INTERNAL RIVALRY

The great emphasis on quality and longevity of the human life has spurred on tremendous investment in R & D. centers by all the global pharmaceutical companies. Positioning, which was once the core of strategic management does not work any longer. And pharmaceutical companies have to work harder at maintaining their status in the industry. It is estimated that it cost approximately $500 million U.S. To introduce a new product into the market. The current international patent laws provide a ten-year protection from the synthesis to the market sales of the product. (Chemsoc.org, 2002) Intense rivalry to launch new products first into the market exists in the pharmaceutical industry. It is estimated that any drug generates the highest revenue in the first three years of its market introduction. In the past 30 years, the pharmaceutical industry has experienced extensive mergers and acquisitions in both Europe and the U.S. The pharmaceutical industry was however in the past characterized as being a very fragmented industry. Mergers and acquisitions have creating a number of ‘mega-companies’ with tremendous capabilities and resources. An industry which in the past had never been subjected to take-over-bids in the stock markets is now being threatened by bigger competitors in the field. Examples of takeovers in the past 10 years are Pfizer with Warner-Lambert, Pharmacia & Upjohn with Monsanto and Glaxo Wellcome with SmithKline Beecham. If the industry continues to expand in this manner, extensive instability and demoralization will occur in the workforce. Some of the factors that are creating this behavior pattern in the over all industry are:

Slowing sales growth for products all over the world

Shareholders and management drives to contain costs

Few or very ineffective pipeline drugs in big pharmaceuticals

Shorter life cycles of drugs in the market. Extensive reverse engineering by countries not having robust patent laws and generic drug productions

Fewer “blockbuster” drugs developed in recent times

Higher costs of drug discovery technologies

Price wars and excessive marketing and advertisement costs

Illegal imports of drugs and no effective control of drugs movement worldwide

Stricter clinical trial regulations resulting in the drugs spending more time drug testing

Very few spin-offs from existing drugs after patents expire

Due to all the above factors investment in R&D is at a record high worldwide. In 2001 the industry spent over $30,000 million on R&D as compared with $2000m in 1980.

R&D investments by research-based pharmaceutical companies

Sources: PhRMA, 2002; U.S. FDA, 2000. *Estimated http://www.chemsoc.org/chembytes/ezine/2002/salvage_may02.htm

The competition between companies is generally on the bases of therapeutic category, for examples anti-hypertensive drugs, anti-thrombosis drugs. Some therapeutic categories have very few players in the field due to the high risks and uncertainties involved in the process. The Baycol experience of Bayer is one such example, where a potential blockbuster drug had to be recalled due to prescription errors and subsequent loss of life. Another example is the anti-cholesterol drug market which is an oligopolistic market where the number of competitors is low (Pfizer, Novartis, BMS and recently Astra Zeneca) and the degree of differentiation between the products is high. Environments and variable factors are easy to identify in these markets and all competitors are always poised to react in very short periods of time. The Internet and the growth of rouge industries has further complicated the market by introducing counterfeit drugs into an establish playing field. Small drug manufacturers also have the benefits of not investing in contemporary advertisement and marketing but use the free medium of the Internet to market the product.

BARRIERS TO ENTRY:

The barriers to entry of players in the pharmaceutical industry are very high. High capital requirement for R & D. And manufacturing and production is required. In addition, a very complex and well-defined system for marketing and sales during the initial introduction of the product is required to ensure acceptance in the market. However, many small drug companies with only one product line are slowly entering the market. This is forcing many of the large companies to buyout these small companies before they become a substantial threat to the organization. Introducing a single drug in the market can cost from $600 million to $1 billion from conception to launch. A concern of economies to scale in the production and manufacturing has also forced many organizations to consolidate their efforts. The patents and approvals required by licensing boards are also become more stringent and complex. Managing and creating knowledge in the pharmaceutical organizations are becoming critical to the long-term success of the organization. International regulation, tariffs and laws also make working across many geographical boundaries very difficult.

SUBSTITUTES AND COMPLEMENTS:

Substitute products are products that can perform the same function for the same customer groups, but are based on different technologies. Drugs that are unique and appropriate for specific illnesses generally have no substitutes. Key areas of research such as cardiology and oncology however, have many competitors who are constantly developing new products for the industry. For example heart beat irregularity diseases (Cardiac arrhythmias) are now treated with pharmaceutical products as a first line of therapy, before use of any equipment such as I.C.D (Intra cardiac defibrillators).

There is also however, the fear that advancement in medical equipment technology can pose a threat to pharmaceutical products in certain specialties of medicine. The cost of production and sales of the potential threats are also high. Drugs can however be also used as complements for improving the quality of life — Viagra marketed by Pfizer is one such example. It is not a life saving drug but it has managed to create a sufficient market for itself. In UAE, the government with various laws and regulations has managed to control the substitute drugs that are available to the public.

BUYER POWER IN THE UAE

Unforgiving health regulatory regimes have put an enormous pressure on pharmaceutical prices and have reduced the profit margin of firms within this industry. Brands with premium prices have to be endorsed by key opinion leader doctors, who influence the purchase of such products, and the practice of other doctors. Furthermore, medical associations, international or local can influence to great extent the prescription habit of physicians and consequently the sales of a given pharmaceutical product. Medical guidelines and recommendations have always been one of the major drivers of any pharmaceutical product. Recently, with the era of the Internet and the easiness of access to information regarding pharmaceutical products and pharmaceutical companies, has empowered end users i.e. patients role in choosing their medicine, and is becoming more and more important. A well-informed patient is increasingly becoming a decision maker regarding which drug to use.

The general population is very interested in obtaining a higher quality of life compared to the previous generation. Standard of living in the UAE is sufficiently high to allow the average person the capability to purchase the drugs desired. Although there is a sizable population that may not be able to afford drugs if they are not subsidized the impact of this segment of the market on the overall sales of the product is questionable.

BARGAINING POWER OF SUPPLIERS

Suppliers can exert bargaining power in the pharmaceutical industry either by rising prices of their raw materials or through reducing quality. This has lead to wide scale vertical integration within the pharmaceutical industry. For example, a big pharmaceutical company may acquire or collaborate with a biotech company to obtain enabling technologies or to enrich its own R&D pipeline or the company may buy out their raw material supplier to control the cost and maintain economies to scale. The pharmaceutical industry is very complex and requires a wide variety of resources and logistics to keep it running efficiently. There are tremendous demands on all the companies involved to maintain the logistics and supply chain efficiently. Labor, marketing and advertisement costs are important factors in this industry and the restricted supply of any of these commodities can seriously impact the industry.

MARKETING THEORIES:

Peter Drucker stated that markets are not passive entities beyond the control of the entrepreneur or organization; rather they are very interlinked and can be influenced. (Hesselbein, 1998).

A mission statement is required.

The mission statement of the company defines the company, and its aims and goals. The reasons for choosing a particular method of operation for the organization should be clear, to the point and easily understood by all.

CHANGE Management IN THE ORGANIZATION:

Any change that may be required to achieve the goals of the firm should again be clear — the reasons for the change should not focused and comprehensible. Changes, whose final aim is not tangible or clear to the people on whom this change is implemented, create distrust and a sense of uncertainty. This affects the productivity, and therefore the profitability of the organization.

Communicating the need for change and the speed at which this change will be implemented is important. The degree of agreement between the values, cultural norms, and attitudes that are required for implementation of the proposed change and the organization staff’s existing attitudes, values, philosophy, and operating style also determines the success of any change that can be implemented.

Change Agents” are required in any situation where a drastic change to the core areas of how an operation in an organization is being made.

These change agents make the transition smoother and with lesser bottlenecks and problems.

Change agents should be able to understand the needs and goals of both the participants (people who will be directly affected by the changes) and the management in the transition time frame and for the long-term. A first order or transactional change and a second order transformational change are required for any organization. Anchor-draggers” exist in all organizations and at all levels. Often at the initial stages overcoming the resistance of these individuals can be a major undertaking for the change agent. The ability of the agent to explain the processes that are being undertaken to the anchor draggers in a rational and easy to understand process is important. (Womack & Jones, 1996)

Changes in any organization must make the workplace a special place for all the employees from both companies involved in the merger. The core values of the organization should be communicated to all, often and clearly.

Communicating the need for a single unified company is important and the reasons for unifying should be made clear to all.

All communication should also be truthful, focused and meaningful and not just a ploy to deceive the employees. To make the process emotionally trouble free for all the employees, management should be able to indicate that they value and appreciate all the employees.

The ability to increase and/or sustain productivity despite change is important. Feedback from the employees, clients and vendors is important at the merger stage; it is generally easier to implement a change at the initial conception stage, than later. The new protocols take time to understand and implement; constantly expecting employees to learn and use skills that vary from day-to-day is a tall order.

When companies are forced to change to survive the changes are better accepted as everyone in the organization realizes that their job security depends on the changes implemented. (Compton, 1997) For example, the auto manufactures in the U.S. had to change their way of doing business when the Japanese car manufacturers especially Toyota was able to capture market share. External environments create an environment of uncertainty and have to be monitored regularly by individuals, who are well versed in relevant field. (Porter, 1998) When the organization is drastically changing the core competencies of the organization the change agent can help make the transition smoother and with lesser bottlenecks. The management and leadership of the organization should be committed to the change process and involve themselves in the process.

CHAPTER 3: DISCUSSION OF THE SANOFI-SYNTHELABO MARKETING

PRIMARY DATA ANALYSIS total of 21 interviews were conducted. The distribution of the interview is as follows:

Interviewed staff position

Number of interviews = 21

Location

General manager

Product managers

National managers

Medical representatives

UAE

Medical representatives

Kuwait

Medical representatives

Oman

Medical representatives

Qatar

Medical representatives

Bahrain

The general manager and product managers are for the entire geographical region. Kuwait and UAE have their own National managers and one manager is responsible for Oman, Qatar & Bahrain.

FIRST INTERVIEW QUESTION:

What is the main responsibility of marketing in the affiliate? The answers to this question differ based on the position of the interviewee:

The General Manager associated marketing with the following: new ideas generation, new opportunities, establishment of excellent relation with key opinion leaders in the field of medicine and supporting medical reps. In their duties.

The National Managers had almost similar replies. In addition they identified marketing as the responsibility of either supporting medical representatives in their duties through training sessions or organizing educational seminars and camps for the doctors. National managers also associated marketing with the launch of new products (Kuwait manger), and the designing of the promotional materials used by medical reps. (U.A.E-manager).

The Product Managers (PM) identified segmentation, targeting and positioning as the core functions of the marketing department. There was however a disconnect between their individual job functions and the core marketing functions that they espoused. The managers responded that most of their work was related to allocation of investments for educational events targeting customers (round table meetings, medical symposia and international medical conferences) and training sessions to medical representatives. They believed they contributed to the process of promoting the drugs when they joined the medical representatives on their individual sale trips. They felt the medical representatives were incompetent in communicating the needs of the customer effectively. Maintaining contact with key opinion leaders (KOL) was also considered an important part of their responsibility, so was pitching for investments and higher budget allocations. The PMs also felt responsible for analyzing market data regarding the size of the different therapeutic segments. This data is collected using questionnaires that are handed out to doctors by the medical reps. In addition, managerial function such as creating annual marketing plans to be sent to Paris, the company’s headquarters in September was considered important by one PM, whereas the other PM’s considered this task a pure administrative function. The PM’s were of the opinion that the executive managers in France did not consider feedback or suggestions by them important or relevant.

The Medical Representatives (MR) stressed on two roles for the marketing department. The first was need for training sessions for the product. PM, they felt had to provide them with the necessary medical knowledge required to explain the products to their customers — the doctors. The second was the round table activities for drug promotion and information that are conducted for doctors in the region. MRs in Kuwait and U.A.E (the two biggest countries among the five) highlighted the need for marketer to develop relationships with KOLs and other important non-medical staff such as the purchasing department in ministry of health and medical store personnel in the government. MRs in Qatar and Oman, indicated that the marketing department’s responsibility was to support them (with medical information and marketing procedures) to help them have a strong relationship with KOLs in the region.

SECOND INTERVIEW QUESTION

Address the effectiveness of the marketing function within the affiliate.

The General Manager responded to this question by saying that the marketing initiatives requested by the French office for implementation in the Gulf region have still not been initiated let alone accomplished. One of the initiatives was identifying the size of segments to be targeted for each product, which at the time of the interview was not still accomplished. He did however, appreciate the support given to the medical reps by the marketers in the affiliate. The GM addressed the need for creative ideas to be implemented by the product managers but did not provide details or suggestions to explain the comment.

The National Managers comments differed significantly from each other. The answers given by each manager are segregated by region.

The U.A.E National Manager: The manager appreciated the role played by the product managers in the educational activities conducted by the company. He however felt the questionnaires given to doctors for data gathering by the MRs were not very effective. The questionnaires are primarily used to survey an incidence or prevalence of diseases or in order to have key account database knowledge. The manager pointed out the fact that these questionnaires were in no way directly helpful to the marketing strategy of the affiliate. He also was candid in admitting that he never read (not even once) the marketing plans prepared annually by the PMs.

The Kuwait National Manager: This individual felt that the PM’s were of valuable importance to the company. He placed great value on the training and skills that they helped impart to the MRs. Since the regional office of Sanofi-Synthelabo in the Gulf countries is located in the UAE, he was of the opinion that KOLs management was mainly done by him and his team from Kuwait. He felt that the role played by the marketing department in this avenue was minimal and needed improvement.

The Oman, Qatar and Bahrain National Manager: He felt that the marketing department is very effective. He cited the good support given to his team in the training arena for product knowledge. The marketing department he felt was also very helpful in developing KOL relationships in the region. He however felts that the lines of communications and the intensity of communication could be improved.

The Product Managers (PM) all experienced frustration in dealing with administrative works that was required from them. They felt that there was not enough time for them to analyze their market or to plan for future activities. They all felt that they were constant dealing with problems that were not of any strategic importance. Dealing with questions from MRs about the market or the product or replying to queries from the marketing director at French office. He also was of the opinions that the marketing director at French office was not very keen on understanding the local markets and the conditions that existed in the market.

The Medical Representatives (MR) in UAE were recipients of a lot of the support given out by the marketing department. This support was given in helping MRs improve relationship with doctors in key accounts, supporting them in understanding their market and how to deliver a proper message to the target doctors. In Bahrain and Oman, MRs also appreciated the kind of support they received from the product mangers, especially in allocating investment to certain marketing functions in their countries. On the other hand both Kuwait and Qatar MRs complained about insufficient support from the marketing department. They felt that most investment decisions were made without their participation or opinions. As a consequence, they felt that most of investments that were made were irrelevant and misplaced. They attributed this to misunderstanding of the market department to the Kuwait market.

ANALYSIS OF PRIMARY DATA

It is very clear that communications between all levels of the marketing team in the organization are not effective and a very chaotic and disruptive environment exists. Interacting with employees by walking around and talking in order to develop a comfort level in communication is important. By encouraging worker participation and involvement, the management can give them a chance to experiment. Listening to employees is important. True listening skills involve avoiding the temptation to hear only what the management wants to hear. It is important that globally managed organizations make their employees feel valued and respected. This is a difficult task for an organization’s leader — understanding the cultures and values of workers at all locations around the world are required.

Although employment can be an exciting challenge for many individuals, it can also be a tremendous source of stress. Job stress is defined as harmful physical and emotional responses to job requirements that do not match the abilities, resources, or needs of the worker. Occupational stress is a perceived imbalance between occupational demands and the individual’s ability to perform when the consequences of failure are significant. Work makes more and more demands on time and energy, individuals are increasingly exposed to both the positive also negative aspects of employment. The relationship between work and mental and physical health may also contribute to career adjustment as well as to the productivity and economic viability of companies. Currently, all employees are expected to provide a high level of dedication. The privileges of job security or the high paycheck as compensation are not easily forthcoming. This often results in low morale, low self-esteem and job-dissatisfaction among lower or mid level employees. Either the manner in which evaluations and/or criticism delivered in periodic formal reports, or offhand comments may also impact the worker. If a supervisor is intimidating, disrespectful or demeaning under normal circumstance it is very difficult for the workers to remain calm and stress free or communicate to the manager.

The development of the human resource will by far be the most salient and tangible outcome of any organizational change — if implemented. Meeting the needs of the workforce is an important intrinsic factor that affects the internal environment in an organization.

When employers do not appreciate good quality of work that is done the employees can get disillusioned.

Efficient and effective two-way communication is necessary and one of the key elements in success for any organization. Alternative processes and plans are required — the “Plan B” approach for a situation.

Multiple alternatives demonstrate the ability of an organization to understand the problem at hand and evaluate it from different angles.

The changes that an organization wishes to implement can be multidimensional and across different structures of the company.

Simplistic and clear goals, if initially identified, can help all involved provide feedback about the success or failure of the implemented change.

The human element can certainly make the difference between organizational success and failure. Attacking the problems in the system, not the symptoms, in a systematic, planned and humane manner can help ensure a happy and satisfied employee.

SECONDARY DATA ANALYSIS

Analysis of the structure of Sanofi-Synthelabo reveals that the communication and coordination between the marketing and the sales department is very ineffective and poor. It is observed that lateral structures are more effective as management tools than vertical structures. The lateral (flatter) organization also is more flexible and can react more easily to change than a vertical organization. A flatter organization also provides opportunity and security to the individual especially in the modern day job market where multi-tasking and a broad skill set is important. (Harris, 2002) A lateral-type structure provides potential for professional growth and an opportunity for individuals that are more interested in building their careers and knowledge at the same time.

The survey conducted reveals that product managers are not allowed to view the daily reporting from the sales representatives. Any feedback gained by the sales representatives does not make its way back to the decision and policy makers. The department is gradually moving to create a more autonomous environment — however more autonomy also requires good and effect means of communication within the organization. While external communication such as advertisements and public relations play an important role in an organization, internal communication is the glue that helps the company stay together and achieve its objectives.

It is very clear from the analysis of the data that vertical and horizontal communication is not effective at Sanofi-Synthelabo. Managers who encourage greater autonomy should also be the communication link and inform all the relevant staff about the changes and new decisions made in the organization. It is observed that a lot of opportunities and avenues of growth are not undertaken due to poor communication of the facts through the ranks of the organization. Long-term inability to communicate effectively will deteriorate the flexibility and the responsiveness that the marketing team has in dealing with the customer demand. In turn this will reduce the overall competitiveness in the market eroding the company’s profits.

The medium or mediums that organizations utilize to promote and provide quality services are also important. Technology modernization and improvements have introduced a plethora of mediums that organizations can use for marketing their products. (Peter & Donnelly, 2004) Sanofi-Synthelabo realizes that it has a tremendous amount of knowledge and information of the market from customer and commercial information that it gathers as a part of doing business. Designing, creating and maintaining a database can help Sanofi-Synthelabo obtain all the relevant information that it requires for market and product analysis. In addition, Sanofi- Synthelabo has been very aggressive in improving the network infrastructure required to do business within the Persian Gulf and in other locations around the world.

At Sanofi-Synthelabo, the budget for any department is set annually. Resource allocation of funds, labor and equipment is made based on the projected and forecasted sales for any product in any given market. The forecasting should be based on the realistic goals and using historical trend data rather than on pure market speculation. Understanding and effectively using information gathered from macro analysis of the industry and the region of sales can also help marketing managers arrive at plans and strategies that are more likely to succeed.

Field medical representatives are require reporting daily visits and providing feedback of customer demands and needs to the company. These reports are very time consuming and places greater emphasis on performance rather than on difficultly of tasks. For example it may take longer for the sales of a new product in the market while an older well-established product may have steady demand. Medical representatives dealing with new product launches may be set up for performance appraisal based on data that may be less than ideal, harming the worker review process and therefore the motivation of the worker. The rewarding system used by Sanofi-Synthelabo is based on a financial incentive. Two main criteria’s are used for evaluating the worker — first achievement of individual targeted sales and second achievement of the whole country sales. Using this system the company hopes to motive the worker to perform well personally as well as encourage him to help the other workers in the region who may not be perform as well. This review and evaluation process is designed to encourage workers to work cohesively as a team to achieve excellent results for the entire department in the country.

Product managers and the national managers at Sanofi-Synthelabo are presented with a monthly report of the performance of the company and the proposed plan for the next month. At this time it is unclear of the input of the managers that is required for the planning process and if the plans are drawn up by individuals not directly in contact with the marketing team in any given region. All product managers are also kept informed for all marketing plans and strategies for any given area. The market for any industry is very dynamic; and organizations have to improve their products and services constantly to satisfy the market. Sanofi-Synthelabo in the past has always been able to keep track of the market trends and requirements and provides a full range of pharmaceutical drugs and services to meet the needs of both individuals and healthcare professions around the world.

The management style employed at Sanofi-Synthelabo Gulf is based on a command and control style. The management determines the action plan and strategies that will be employed by the organization at any given location. The staff at the location is expected to follow the plan and the guidelines exactly as prescribed by the management. Little or no participation from the supervisors or the medical marketing department is expected. The management however, attempts to convey the plans and instructions in a manner that is consulting and cooperative to reduce the severity of the command and control style used. This very task oriented aspect of management gives the impression of aloofness and impeachability of the decision makers. National managers and the marketing seniors at different locations around the U.A.E. however are more people oriented and cater to satisfying queries and questions of the staff.

Sanofi-Synthelabo management is of the firm belief that training and motivating the staff are important aspects of the employee development and should be a continuous process. The rewards and compensation systems offered to the workers should also help establish company loyalty and motivation to perform better in the organization. Leaders and managers have to follow consistent behavior in evaluating the workforce. The core value of the organization should be the main determining factors for the evaluation. In reality, the loyalty and the commitment present among the employees in the marketing department are at best estimated to be moderate. The company has to invest more time and effort into the workforce to maintain the knowledge and skill expertise of the marketing and sales department in the region. At present the appraisal system in the organization in UAE is very subjective depending on the personal feelings and opinions of the manager or supervisor performing the evaluation. The concept of conduction a 360-degree evaluation had still not caught on in the organization. A 360 degree feedback is one in which all individuals dealing with a worker are required to give a feed back. These individuals can range from clients to supervisor to employees working for the individual. This generates a complete picture of the worker and his performance rather than just a one-dimensional view of the worker through the eyes of the manager.

Sanofi-Synthelabo has paid great attention to developing the skills for marketing and sales of their products in the region. The emphasis of skill development in the staff is seen in all aspects of the organization from the managerial level to the field representatives. Product management and product life cycle management has also been very effectively done in the organizations. The skill and training needed to perform the duties are imparted to all individuals in any given product line that the company markets and sells in the region. There are three lines of products within the company and each line has a dedicated senior marketing manager. This senior marketing manager is responsible for all the marketing individuals under his control. The two main objects of any marketing plan is to increase the sales of the product and achieve the highest potential for the product and the instill confidence in the company and promote the company image through effective partnership relationships with doctors and healthcare providers.

Sanofi-Synthelabo management and staff interactions are unique. The company is not the best or highest paid pharmaceutical organization, rather the company over the years has created a sense of belongingness and family structure for all its employees at all locations around the world. The personal interaction of employees in the organization is highly valued and prized creating and emotional and social bonding that goes above and beyond any monetary relationship that can be developed by the company. In spite of the many mergers and acquisitions that the company has undertaken over the period of its existence, the management has ensured that excessive layoff and job losses did not occur in the organization; rather, management concentrated on reallocating staff within the organization.

Change management is a difficult and tedious undertaking for any department. The local-based departments being the conduit between the head office and the employees is always answerable to both the management and the employee for any variance from the normal that an organization undertakes. Often change requires foresight and vision along with long-term planning capabilities. The cost of change is also difficult to determine and while the financial and the accounting department may put a price on a change these numbers are not always accurate. By using a common platform for evaluation, departments can provide to the company the true cost of workforce and the implication.

The use of teams and groups in organizations is also increasing. In addition to maintaining records of personnel many organizations are also evaluating personal behavior patterns and traits of their employees. Information gathered is then analyzed and provided to management who can then make educated decision of partnering people in the required teams or groups. The compatibility of different people in the teams and the coordination of the employee life cycle along with the project life should also be evaluated. Ethical guidelines need to be set up by the department for the employees at all location in a fair and just manner keeping in mind the local variances and requirements. To have a company operating abroad, certain policies about the business operations and the agreements with the foreign contractor should be evaluated prior to manufacturing or production set up.

CHAPTER 4: SUMMARY, RECOMMENDATIONS AND CONCLUSIONS

SUMMARY

Based on the primary data and the secondary data gathered it can be inferred that all aspects of the marketing department are not operating effectively. The pharmaceutical industry has changed considerably in the last few decades. This change has affected the workplace and the lives of the organizations’ employees. The company has a good portfolio in the region. Macro and micro analyzes show that there is a great potential for the company to grow in this region. Creating effective departments with relation to the product and ensuring that all members in the department and team are working jointly to make the maximum profit that can be possible for the product. In addition teams and group also help in the brainstorming process required during the initial development and launch of a new product. The company prides itself in its ability to work across organizational boundaries/levels and break down internal barriers and deal with people and issues directly and avoid hidden agendas.

Change can be difficult and humans have a natural tendency to maintain and keep a routine with which they are comfortable and accustomed. A good leader can help make the transition easier and with fewer bottlenecks. Success in any mission also requires passion — in any endeavor, the leader must believe passionately in what is being done and should be able to motivate his followers to do the same. Covey emphasizes the need for trust and patience in leaders of all organizations. Covey believes that principles-trustworthiness, trust, empowerment, and alignment should be the guiding principal for interpersonal relationships. Trustworthiness at a personal level, trust at an interpersonal level, empowerment at a managerial level, and alignment at an organizational level are important. He believes that these factors can form the foundation for effective leadership in any situation. (Covey, 1990)

There have been varying and constantly changing styles of organizational structures. This has created a skeptical employee. The life cycles of most products have reduced drastically, with the consumer expecting constant improvements and innovations. These new factors dictate the type of strategy an organization has to follow to achieve the goals and ambitions of the company. Good strategy in the long run can however be the best tool for any organization.

RECOMMENDATIONS

The following recommendations can help the marketing department attain it set objectives

Convey a meeting of all representatives and managers from the marketing department in the region. At this meeting convey the goals and aims that need to be met

Request ideas and suggestions from the group to attain the goals and aim

By the process of group participation select the three most effective strategies that can be employed to achieve the goals

Designate training times to members for all product lines sold by the company in the region

Communicate these ideas to the head office in France and request necessary authorization for implementation

Designate PM and NM to work closely at identifying the overhauling needed to the data gathering questionnaires to make it more user friendly and relevant for the marketing department

Encourage communication from the MR and provide training in time management, process management and marketing communication

Identify better methods for archiving information gathered from the questionnaires

Maintain skill set record and training and educational data of the employee for easy of reference

Ensure that employees stay in the information loop, enhancing their job experience while making the company a desirable place to work

Performance reviews should be used as strategic tools. They directly affect employee satisfaction and turnover and provide a report of what employees have accomplished in the past and also a clear path for the future for the employee

Compensation management for all levels of the organization. Benchmarking and periodic evaluation of the data collected and then providing managers the information and suggestions of increase percentages based on an employee’s performance review score, competency score, length of service, quartile, and many other factors that may be critical to the organization

Motivational management and providing employee job satisfaction by implementation of new and innovated models of management. Understanding and evaluating employee morale at periodic intervals is important

Review external and internal variables affecting the organization and review the information with the other departments in the organization. Design models to predict the effect of variables on the organization

Periodically evaluating the organization culture and organizational structure. Proposing changes in the organizational structure and implementing the changes as required

Understand legal, political and social policies for the organization at various locations in the Gulf region. Determine the ethical requirements for operation at these locations

Implement effective time management strategies

Streamlining administrative processes, increasing productivity and improving service delivery by automatically routing tasks and managing the flow of information. Tracking and receiving information, charting and providing graphical representation of the data and redirecting the information to the relevant parties

CONCLUSIONS

No marketing plan is ever complete and organizations have to constantly modify and rectify the plans to reflect the change in the market. Creating constancy of purpose for improvement of marketing service, with the aim of becoming competitive and staying in business and providing job security for good workers is required. Aligning the marketing department with the strategy selected can prove more effective in increasing the profitability and the return on investment. The pharmaceutical industry is very dependent on the quality of the work generated by the employee. And the marketing force is the direct connection of the industry with the customer

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