Management - Small Business Enterprise - Assignment Sample

MANAGEMENT: SMALL BUSINESS ENTERPRISE

Here is the sample assignment:

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Table of Contents

Introduction ................................................................................................................................3 Task 1 (LO1) ..............................................................................................................................3 Comparison with similar organizations using KPIs...................................................................3 Task 2(LO2) ...............................................................................................................................5 Overcoming the weaknesses and make strategies ....................................................................5 Task 4(LO4) ...............................................................................................................................9 Change management .................................................................................................................9 Conclusion ..............................................................................................................................13

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Introduction The overall growth of an industry as well as an economy depends on the performance of the operating firms, whether large scale or small scale enterprises. Small and medium enterprises account for more than 60 percent jobs in most developed economies and more or less 95% companies in most of the industries fall in the category of small and medium enterprises (Analoui and Karami, 2009). Small enterprises face lot of contemporary issues relating to management of internal organisational functions, meeting client requirements and business benchmarks. Such enterprises also face marketing issues such as brand promotion, attracting more customers, penetrating newer markets etc .It is also necessary that small organisations implement effective strategies in place to analyse and measure their internal processes and human resource capabilities. This assignment intends to highlight the issues faced by small enterprises in relation to performance management as compared to similar other competitors. The company chosen for this purpose is Loganair Ltd, a small sized airlines firm based in Scotland, UK. It is a small company compared to other players in the aviation industry. Being a small scale firm, it does not have adequate resource capabilities and faces challenges in terms of maintaining a sustainable performance.

Task 1 (LO1) Comparison with similar organizations using KPIs Loganair Ltd. Is small domestic airline in Scotland, UK with a fleet size of 26. It is headquartered in Glasgow International Airport. It is one of the regional and smaller airlines in UK which operates majority of low cost flights (Loganair.co.uk. 2014). Loganair Ltd, saw an increase in in turnover by 20% to £87million in March 2013 and its profit before tax rose by 24% to £4.3 million. The passenger volume increased by 12% to 592,000 (BBC News. 2014). Comparison with similar sized company in airline industry in UK is very difficult as each of them has its own speciality. Every company has different fleet size, different routes of operations, different vision strategies. Considering all the facts, Loganair Ltd has been compared with Flybe, another low-cost domestic airline in UK with much bigger fleet size and greater number of destinations.

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Flybe during the same period of time, witnessed an increase of 1.3% in revenue to £328.2 million. This airline saw that passenger volume increased by 5.6% to 4.3million (Flybe.com. 2014). It is the leading domestic airline among the Scottish Airports with a capacity of 80% deomestic seats provided for the passangers in comparison to the other nine flight carriers on various routes. Flybe provides services to the passengers in a point-to-point regional hubs by providing them a better communication to the destination with less time. Flybe claims that they are the one those who understand the basic needs of the airlines should provide to the passangers. Upto 2008, Flybe ran a franchisee arrangement with Loganair Ltd. Later the Flybe brand started their flights across 28 routes including the island communities Shetland, Orkney and other islands that are transport isolated. Key Performance Indicators (KPIs) of Loganair Ltd: In order to measure the performance of a company in any industry,certain performance indicators are used (Dobson, 2009). These indicators consider all the facts relevant to that industry – finacial outcomes, customers’ feedback or response (e.g. total number of customers for the product or service), brand value, market share and some others. In case of airline industry, the KPIs are – total revenue, operating profit, market share, efficiency (cost per passenger, fuel burned per passenger-mile, load factor ), passenger volume , customers’ feedback etc. KPIs are connected with the goals and objectives of the organisation, i.e. Loganair Ltd. it is generally used in operating the organisational strategies, thus focusing upon the improvement and evaluation; again to track the performance against key success factors. KPI is not a static process, it varies as per the objectives and business focus. So the indicatores for Loganair as followedEfficiency is one important KPI for airline industry. Efficiency measures include cost per passenger (the cost incurred by the airline for each passenger,which follows economies of scale and that is why larger aircraft is pereferred, fuel consumed per passenger per mile). Other important efficiency measure for airline industry is load factor. It measures the utilization of the total capacity of an aircraft. Load factor is defined as the proportion of seats occupied to the total number of passengers that the aircraft could have accomodated. Next comes the KPI of total passenger volume. This the total number of passengers is refferred to as many passengers are travelling in one flight, one day, one week. It does not reveal the

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actual picture until it is being compared with other information like fleet size or number of destination or total number of flights it operates etc. In any business, customers’ feedback is very important to make chages in strategies of the company. So, customer’s feedback is the third major KPI for Loganair. Now-a-days almost all companies use round the clock customer service to know their grievences and others. Loganair also has 24 hours customer service to enable the customers to lodge the complaints and enquires and feedbacks for the services. Fourth indicator is the finacial outcomes that include the total revenue, profit before tax and after tax, profit growth rate that is issued to the organisation. The advantages of the KPIs are discussed above. But there are some disadvantages also. The efficiency as a performance indicator does not have any connection with the database. The other KPI disadvantages of the Loganair organisation are that measures are not measured properly, in a proper manner so that it can improve in future. Again, the data of all the indicators like passenger volume and customer feedback are collected in a frequent manner to understand the current sitiation. But it grows a problem of short term data collection which limits the span of the organisation’s developement.

Task 2(LO2) Overcoming the weaknesses and make strategies The weaknesses of Loganair Ltd. are efficiency, passenger volume, customer feedback and the revenue related problems. Revenue is the major weakness that harasses any organisation most. To improve the revenue problems and the other above mentioned weaknesses, Loganair should follow some basic strategies to improve their situation. Firstly, Loganair should follow a particular and effective business plan that is enough flexible to change as per the requirement. As the passengers of Loganair is not enough satisfied with their services, they should re-assess the market they accessing. Also, there should be certain plans regarding low cost of ticket and other services that would attract the customers towards Loganair. Again by maintaining customer supports that are continuously innovating, helps the organisation to commit best to the customers and creating customer loyalty. This will help the organisation to compete better with customers and compare. Again, a strong management team helps any organisation in improving the business success, and Loganair Ltd is no different to that. They identify the business plan, improve it, and emphasises upon the marketing and sales section. Management team also is responsible for the weakness and shortcomings of the

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organisation that is never meant to hide. This can affect the competition around Loganair. Any this type if step is considered suicidal because ultimately it hampers the business, reputation, market and customers.

Task 3 (LO3) Achieving the organizational objectives Loganair is limited to a small portion of UK – it does not even include the capital city London and bigger cities like Birminghum or Leeds. It has always maintained its image as a low profile domestic airline and did not try much to expand. Its limited geographical boundary did not allow it to be a large brand like British Airways or even Flybe. It operates flights only to 31 destinations, that does not even include some major cities in the UK. It’s fleet size is only 26 which does allow it to exapnd more (Loganair.co.uk. 2014). As the immediate result of lower fleet size and less number of destination, it does not have substantial market share. Its main objectives that should follow the problems are-

Increasing market share by at least 2%

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Expand the operation domestically for the time being, as it only operates in domestic sector

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Increasing the profit by 5%

To achieve these objectives, Loganair Ltd is required to follow a SMART goal thet will help in develope the performance and prepare in planning future objectives to improve the business. SMART goals are an abbriviation of Specific, Measureable, Achieveable, Relevant and Timebound goals that will define the accomplishments. So for Loganair, the specific goals are to focus upon the complex goals to break into sub-goals; gain they should offer a clear and specific objective to reach the goals. Any vauge action is not allowed in the SMART model. Next comes the measurable element in the model. These includes the measurements that are achieved from a certain measure like quantitive, qualititive and timely performances. These measure the output of results and any job that is to be done in what particular way. For Loganair, it can be said that these measures will help the organisation in achieving better customer feedback and provide a better service while flying. If Loganair follows the above mentioned elements, it will be easy for them to attain the goals, i.e. associated with the expectations of the internal and external customers. The unit goals are will

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be significant enough so that can be achieved easily and work upon accelerate performance. Again a relevant step to business expectations and customer needs will value the goals and helpful in increasing the profit as well as the market. Again time based and timely framed goals help any organisation like Loganair to ensure active approach towards the results and its ways. For the analysis regarding the market, there are so many tools available. But the most useful

Star

Question marks

Business growth rate

Cash Low

Dogs

cow

High

one is the BCG Matrix (Adcock, 2010).

High

Low

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The BCG matrix is supported upon the following four factors: Star – Stars indicate high growth rate and high market share. This is the most impprtant part for any business. The company needs to concentrate on this part most than others. For Loganair, Scotland is the area where it has always enjoyed high market share and high growth rate. So it needs to strengthen that area. Cash Cow – Cash cows mean low growth but high market share. This indicates the market has seen many new entries to eat into the market share it used to enjoy and now its business is grwoing much in this region.Loganair used to enjoy high market share in northern England but now as the result of too many new domestoc airlines, it is not experiencing any major growth. It is the “cash cows” for Loganair. Dogs – “Dogs” mean low market share and low growth. It indicates that that market is not good at all for the industry. Therefore, it is not to invest much in that market. Loganair has experienced this experience in some part of Ireland. Question Marks - If the company has a low maket share in a particular market but the market shows high growth rate, then that markert becomes a real area of concern for the company. Loganair experienced that southern England has very much potential for future growth in this industry but it did not get any significant market share here. By this anlysis, the company can realize in which markets it should concentrate more and which market it should pull out or at lease divest some amount to cut down losses (Baker, 2007). Scanning the environment is another way to assess the situation. The PESTEL analysis identifies the forces that can hinder the progress of the business (Fifeld, 2007). So to improve the market share, total turnover, profit and brand value Loganair have to work upon the ‘Dog’ part, i.e. the Ireland problem. As this segment is yeilding no profit to the organisation, Loganair Ltd. should try to convert the ‘dogs’ into the ‘Cash Cow’ part. Business Plan to implement change

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A cash cow in business delivers continious flow of money. So, Loganair can improve some or the other services that would attract the customers in the Ireland flights (dogs) to convernt the segment into cash cows. Extensive Brand promotion -- They can introduce special fare packages to attract the passengers, or can try a new offer in the travelling season. An offer in the Christmas season can play wonder. Or any offer that is not tremendously profitable to the organisation at primal level,but can offer a continious money flow among the company that will survive the Ireland portion in existing and make business. Loyalty cards can be offered to regualar service users in the Ireland area. Strengthing the service quality – Loganair can enhance its service quality in terms of better internal infracture, better customer services, promptness in service delivery, relaibility of offers etc. The use of advance technogly such as ‘cloud computing’ can be used to maintain an extensive database of customers who must be incentivised to give their long term custom. Cross cultural training must be provided to support staff to take care of customers coming from international destinatons.

Task 4(LO4) Change management For a small organization like Loganair, constant change is much more essential in order to make the organization grow. This change may be in anything – reshaping the organizational structure, overhaul change in its team, change of base (increase or decrease of the number of locations where it operates as per the management decisions), operational change (change in the number of fleets, the type of fleets being used, change the number of routes it is operating right now, change in the pricing, adapting sustainability in its operation etc.), change in its overall image (e.g. change in the name, logo or any other significant change).

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Create a sense of urgency

Form a guiding coalition

Create a vision

Communicate the vision

Empower others to act the vision

Create quick winks

Build on the change

Institutionalize the change

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(Source: Singh and Waddell, 2004, pp 117)

Change management theory: Kotler’s eight-step model The application of this theory has been proved to successful in many businesses including some large companies and several small ones (Singh and Waddell, 2004). 1. Urgency for change The first step is to create urgency for change. The operational level employees such as the cabin crew must be trained on providing better customer services and technology and must be counselled about such urgency. The necessary process to feel that urgency includes --Identification of the cost (monetary and non-monetary) and consequences if the proposed changes are not implemented right now. If Loganair does not increase the size of operations i.e. number of routes and frequency of flights in some of the busy routes, the airline is very likely to fall behind of others. It may even lose its existing customers, not to mention about new customers. The management should come up with the evidences showing the potential of the proposed changes. Loganair employees may resist the decision of closure of a route and introduction of a new route instead. It is the responsibility of the management to come up with the probable positive impacts of this decision. - Clear communication: Only a clear communication can persuade the employees to accept the change.

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- Using all the outside support and evidences to justify the change Loganair management needs to use the data available in the market to justify the closure of an existing route and introduction of a new one. 2. Form a guiding coalition – Until the management and the employees understand the need of change, no change can see the light of reality. Changing something major in a company is not easy but it needs commitment and agreement from all the team members. The management needs support from all of them to implement the changes – be it at strategic level or operational level. That is why management needs to form a coalition for making the changes (Green, 2007). Open communication must be implemented to ensure timely information exchange and feedback sharing. Team should be formed in the way keeping in mind that without the appropriate team with a mix of people in different departments, it is impossible to work on the changes (Pugh and Mayle, 2009). The entire process of guiding coalition should confirm that the team has Position power – Sufficient number of key players on board to ensure smooth operation Expertise – The team members should be assigned work as per their expertise in the appropriate departments. Credibility – The leaders chosen by the management for the implementation of change, should be respected by team members Leadership – After all, the leaders should prove that they are true leaders. 3. Create a vision – When the decision for changes are taken, there are many such ideas of changes will be seen available. But not all of them are ideal or none is useless. So there is a need for linking the best ones to create the vision (Pugh and Mayle, 2009). Longanair managers must implement transformational leadership to create a visionary change. 4. Communicate the vision – The team members need to be communicated about the new vision of the company to enable them cope with that at least mentally. Sending out the clear message regarding the vision to the right people is one of the initiatives of the change process. Loganair employees must be communicated that now it wants to go international, no longer wants to be considered as a domestic airline.

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5. Empowering others to act on the vision – According to Singh and Waddell (2004), execution of the change vision starts with empowerment of employees to act as they think keeping in mind the objectives and vision. This gives a kind of ownership to the employees.If Loganair wants to increase the profitable routes, the operation management should start the process of closure of some non-profitable routes. 6. Check quick winks –Loganair’s decision of increasing the profit value in the profitable routes calls for usage of larger aircrafts to reduce the per unit cost. Initially the number of large aircrafts will be less; but the favourable report from those will result in usage of greater number of large aircrafts. 7. Build on change – Significant changes do not happen overnight, they take time. So, there is a need for constant change. The management should check the outcome of one change and then go for it continuously to for a sufficient time period.Any significant increase in profit value may not been seen immediately but constant efforts will make it possible. 8. Institutionalize the change – Changes in one department or part of a department cannot impact much. If the efforts for change be adopted in many other departments or functions, then only company can see an overhaul change (Singh and Waddell, 2004).

Conclusion This assignment focused on the internal organisational and external marketing issues faced by small companies such as Loganair. Through situational analysis such companies can analyse their competitive position in the market and formulate effective strategies to counter threats and overcome weaknesses. The implementation of appropriate marketing strategies as per changing business environment, globalisation, technological progress and changing consumer demands is essential along with maintaining a strong organisational behaviour.

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