Business Decision Making

Pearson BTEC Level 4/5 HNC/D Diploma Business - Unit 6 : Business Decision Making

Unit Description

Introduction

For a business organisation to succeed it is important to have its objective defined. Once the objectives and its goals are defined, then the organisation should use the available resources to achieve its objectives. The entire process which involves identification of business objectives, and the use of available resources to achieve them can be defined as business strategy. This Icon college business decision making assignment is focused on analysing various aspects related to a business strategy by focusing on example of Virgin Group UK.

P1: Strategic contexts and terminology

Following are the strategic context and terminology associated with Virgin Group.

Mission Statement: Mission statement of Virgin Group is focused entirely on its customer. It has views itself as a brand which is capable of delivering superior brand values which includes value for money, premium customer service, innovation and fun. Virgin sees its employees as the major factor in fulfilling this vision.

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Vision Statement: Vision of Virgin Group as established by Sir Richard Branson, is to establish itself as a brand which has global presence in various sectors such as travel, mobility, entertainment and music.

Objectives: In line to its vision and mission statement, Virgin’s objective is to be a market leader with specific focus on customer service in all the sectors it is operating in.

Goals: Goals can be defined as short term objectives which a business organisation strives to achieve (Campbell &Yeung, 1991: 145-147). Since Virgin group consists of various other businesses, hence every business has its own specific goals. However overall goal of Virgin Group over next few years is to integrate all these separate brands seamlessly with a common thought or philosophy of Virgin Group itself.

Core Competencies: Core competencies are the strength or expertise of a business organisation. In case of Virgin Group, its core expertise is its capability to recognize a potential field of business and scale up quickly to become a strong market player in that sector. Also throughout all other business which is controlled by the group, one major strength is to have a complete control on the operational cost and give a boost to the profitability of overall business (About us-Virgin.com, 2014).

P2: Issues involved in strategic planning

In order to prepare a business strategy, there has to be a proper and well-structured strategy planning process (Walker et al, 1999).There are various stages which are involved in a planning process are displayed below.

strategic-planning-cycle

Figure 1: Strategic Planning Process

Important point to highlight is the issues, which are involved in the entire planning process. Since implementation of a business strategy has impact on various stakeholders associated with the business, that the planning phase generally encounter various issues such as:

Convincing Stakeholders: this is one major issue, which a business organisation like Virgin Group has to face. With various business groups such as Virgin Atlantic, Virgin Entertainment etc. involved it becomes tricky for the business leaders to implement the business strategy in one go. Especially since effect of one strategy might be positive for certain group while negative for another.

Establishing a common strategy: Virgin Group consists of several businesses in different sectors such as media, communication, airline etc. Thus business dynamics of each of these group is completely different from another group. That is why at the parent group level developing a strategy which can bind all the varying groups under one common ideology is one major issue faced by Virgin Group.

Market conditions: marketing planning is a time taking process. It cannot be thought on the fly and implemented in few days. Huge business group such as Virgin has several micro as well as macro factors which are involved in such planning process. However with slight change in business environment, entire strategy might become irrelevant by the time it is implemented. Hence ensuring a time bound strategic planning process for the group is one major issue faced by strategist in Virgin Group.

P3: Strategic planning techniques

With increased focus on business strategies, business organisations have clearly understood its importance. That is why rather than following an Ad-Hoc approach towards preparing business strategy, organisations are using various planning techniques to ensure a perfect business strategy. Two of the techniques which can be used by Virgin Group is:

BCG Growth Share Matrix: This matrix is a widely used tool by business organisations. It consists of four quadrants which are based on two axis of Market Growth and Market Share (Hax&Majluf, 1983:46-60). A sample matrix is displayed below:

Sample BCG Matrix
Sample BCG Matrix
Thus as displayed in above diagram, four quadrants are:

Dogs: This represents that a business organisation lies in the situation where it has low market share as well as low market growth hence it will be difficult for the organisation to generate profit.

Cash Cows: This section represents high market share but low market growth for the business organisation. Virgin Group can be considered to be a Cash Cow, since it has already established itself in whatever sector it is operating such as airline, entertainment, communication etc. However all these sectors in which it exists are moving towards stagnation, hence for Virgin Group market growth is relatively less.

Stars: This is the section which every business organisation wants to fall in. It represents high market share with high market growth.

Question Marks: This is a section which represents that business organisation is having low market share, but is displaying high growth tendencies. Thus business organisation in this section have huge potential to grow further.

Another technique for strategy planning is PIMS or Profit Impact of Market Strategies. This technique was developed with an intention to provide empirical evidence of which business strategies are executed in a successful manner in a specific industry (Buzzell, & Gale, 1987). This study was helped in identifying various variables in a business which when implemented in the business strategy can impact he profitability of the business. Through PIMS technique, business group such as Virgin Corporation can address following questions:

What is profit rate of various businesses which Virgin Group owns?
What can be future operating result for Virgin Group based on analysis of its current existing strategies?
What new strategies can be implemented within group to improve future operating results for Virgin Group?
Hence the strategists in Virgin Group need to answer these question and through the answer they can accordingly formulate and tweak their future as well as current business strategies.

P4: Organisational audit for Virgin Group

Organisational Audit helps an organisation to analyse various factors which might be impacting at macro as well micro level of the business. These factors might be external or internal to the organisation but will have significant impact on the way business organisation performs. There are various methods through which organisational audit is conducted these days. One of the most popular and straightforward method popular these days is SWOT analysis (Dyson, 2004:631:640).It identifies Strength and weakness of an organisation along with highlighting various opportunities and threat an organisation might encounter.

Following is the SWOT analysis for Virgin Group:

Strength
Strong brand value and legacy
Strong reputation of Sir Richard Branson as an entrepreneur
Huge market share in various business sectors
Agility in creating partnerships
Weaknesses
High level of overall group revenue is generated from Virgin Atlantic alone, thus making the entire group highly dependent on the airline sector
Too many brand image due to cluster of products being launched in various business sectors.
Opportunities
New partnerships, Joint Ventures in emerging markets
Opening up of global markets at regulatory level
Threats
Tax and regulation related changes and variation in various countries where it has business.
Volatility in business environment since last 5 years.
Increasing competition at global level
P5: Environmental audit for Virgin Group

Unlike organisational audit, environmental audit helps a business organisation to discover various external factors which might not be associated with it, but still might impact the business. PEST analysis is one such tool used for environmental audit these days by various business organisations. PEST framework analyses factors such as Political, Economic, Social, and Technological. PEST analysis for Virgin Group is as follows:

Political Factors: Virgin Group’s is based in UK. However it needs to be careful about the political conditions of other countries in which operate. At times there is political unrest which might cause negative impact on Virgin Group’s business strategy, especially different legislation and varying government policies might create unnecessary issue for Virgin Group.

Economic Factors: In general market and economic condition of UK is considered to be stable and growth oriented. This has helped Virgin Group to focus on implementing number of long term strategic plans across its businesses. Although currency fluctuation at times impacts the overall profitability of the business, which the company compensates through volume from its international presence.

Social Factors: Virgin Brand represents aspiration for present generation. With Sir Richard Branson himself being highly motivated and aspiring, the same philosophy is represented by the brand as well. That is why current generation is able to connect itself with the brand philosophy hence proving to be beneficial for the brand.

Technological Factors: With huge development in technology, especially in telecom domain has proved to be a huge advantage for the group, as it has been able to extract that benefit through its telecom business.

P6: Significance of stakeholder analysis

Every business organisation has number of stakeholders who have various objectives associated with the business. However it is not necessary that all the stakeholder will have importance at the same priority level (Brugha&Varvasovszky, 2000: 239:246).That is why it is important to conduct stakeholder analysis. Through this activity an organisation can identify various stakeholders associated with it, priorities them on the basis of the importance and influence and ultimately take actions to fulfil those objective of the stakeholders. A typical matrix based on the interest and influence of stakeholders is displayed below:

stakeholder-analysis
Stakeholder Analysis
Various stakeholders which Virgin Group has currently are:

Suppliers
Customers
Board of various businesses it controls
Employees
Regulatory bodies
Competitors
Investors
Thus through stakeholder analysis these stakeholders can be prioritize and accordingly action can be taken to fulfil their objectives. For example suppliers such as Boeing, and Airbus are critical stakeholders for aviation business of the group, hence they need to be placed in the section which marks them as ‘Meet their Needs’ since any issue with such stakeholder might severely impact the business. Similarly employee objective needs to be shown consideration in the stakeholder analysis process. Hence in similar way all the other stakeholders can be classified on the basis of their importance and influence.

P7: Roles and responsibilities of senior management towards strategy implementation

Behind success of any business strategy, senior management of the organisation has major role to play. There are various roles and responsibilities which are critical in success of the strategy. In Virgin Group following are the key people who are responsible for business strategy execution (About us – Virgin.com, 2014)

Josh Bayliss (CEO Virgin Group): This particular role in Virgin is responsible for capital investment made by the group and overall management of Virgin brand. CEO helps in identifying the key areas of business where the strategy needs to be implemented and can be termed as the captain of the ship. That is why CEO is an important role in the organisation.

Peter Norris (Chairman Virgin Group): Role of chairman is to advise the group from time to time. Unlike CEO who is involved in day to day activity of the group, Chairman is more focused towards getting an overview of the strategy.

JP Moorhead (CFO): CFO in Virgin group is responsible for overall financial and risk position of the organisation. CFO is one position which has clear view of the available funds and investments for the group and how effectively then can be utilized.

Apart from above three roles, Partner is the only role present in Virgin Group who are also involved in the business strategy development and implementation in the group.

P8: Resource requirements to implement a new strategy for Virgin Group

For implementation of a business strategy there are numerous resources required. It might be availability of human resources or availability of financial resources. At times business organisations have impeccable strategies, but due to lack of resources they fail to implement (Goodwin & Wright, 2001: 1-16).That is why before implementing any business strategy it is important for the business to analyse the position of its resources and how it can use them in an optimum manner. There are various functions where there is potential requirement in Virgin Group such as:

Human Resource requirement: Based on Virgin Group’s current organisational structure, it is clear that there is no role defined management of organisation’s information technology related aspect. IT is an essential and critical component of any global organisation. Hence it is required that Virgin Group should have dedicated leadership position for handling its IT strategy. Since the group already has CEO, CFO and Director’s role defined, it can add another position such as CTO or CIO in the organisational structure. Responsibility of person having this role will be focusing on streamlining Virgin Group’s entire IT strategy. Similarly IT heads for various other businesses can be appointed as well, who will report to CTO of the group. This will ensure that there is control of the IT strategy across all the other businesses of Virgin Group.

Financial Resources: Currently airline sector is seeing stiff competition across globe including UK. Virgin Atlantic being one of the core business of Virgin Group, there should be certain dedicated financial strategy for the aviation business. Although Virgin Atlantic in itself is capable of managing itself from the revenue it generates, but in order to expand further in developing economies more funding will be required. For this Virgin Group can reduce its stake in various non-performing businesses and use that fund in fuelling growth and expansion plan of Virgin Atlantic.

Marketing resources: Virgin Group should hire some reputed marketing agencies on contract basis for a period of one or two years. It can then fine tune its marketing strategy and launch new promotional and marketing campaigns across all of its businesses. It will help Virgin Group to reinvent its brand image and brand value in relatively newer generation who are not that much aware about legacy and history of the group.

P10: Targets and timescales

As defined in P7, possible alternative strategies for Virgin Group are as follows:

Launch of fresh marketing campaign in all the locations where Virgin Atlantic operates
Organisational restructuring at various level to reduce unnecessary hierarchy across business
Expansion in new markets where there is potential of growth
Focus on use of technology to reduce operational cost across aviation business.
Aviation sector is dependent on the demand supply factor, hence price rationalization of air tickets should be done in such a way that it should be relevant to market demand, thus attracting more customers.
Thus based on above strategies it is clear that the target which needs to be achieved is as follows:

Reinvention of brand image and extracting benefit from the brand legacy
Optimization of organisational process through re-structuring
Focus on growth and expansion in new markets
Focus on core competencies/core business
Strategies which will be implemented to achieve the above mentioned targets has to be time bound in nature and should be measured through various methods (Dess&Origer, 2007:313-330). Establishing a specific timeline will help Virgin Group in assessing its progress, and will ensure that in case of any mid-way issue it can tweak its strategy accordingly. There are few assumptions which need to be made before establishing the time line for strategy implementation:

These strategies include both UK’s as well as overseas business of Virgin Group
There is no slippage in terms of deadline in achieving or implementing a milestone.
These strategies will be implemented by the parent group and as required will be applicable for other group businesses as well.
Thus based on above assumptions and targets defined, a one-year strategy implementation plan can be prepared. This period will be divided in four quarters and there will be quarterly review to assess the progress. Following the time line for the strategy implementation:

Gantt chart for Icon college business decision making Assignment

References

About us – Virgin.com. 2014. About us – Virgin.com. [ONLINE] Available at:https://www.virgin.com/about-us. [Accessed 09 June 2014].

Brugha, R., &Varvasovszky, Z. (2000). Stakeholder analysis: a review. Health policy and planning, 15(3), 239-246.

Buzzell, R. D., & Gale, B. T. (1987). The PIMS principles: Linking strategy to performance. Simon and Schuster.

Campbell, A., &Yeung, S. (1991). Brief case: mission, vision and strategic intent. Long Range Planning, 24(4), 145-147.

Dess, G. G., &Origer, N. K. 2007. Environment, structure, and consensus in strategy formulation: A conceptual integration. Academy of Management Review, 12(2), 313-330.

Dyson, R. G. (2004). Strategic development and SWOT analysis at the University of Warwick. European journal of operational research, 152(3), 631-640.

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