Global Strategy and Local Needs in the Luxury Car Market Essay Example for Free

Global Strategy and Local Needs in the Luxury Car Market Essay 1 Introduction Since the 1980’s researchers have been trying to understand what globalization is and how competitive advantage can be gained out of it. This study will look at this movement with a critical eye and reflect whether or not it is sometimes better to give local needs priority in management decisions. The purpose of this study is to analyse whether the â€Å"Global strategy, but local needs† assumption leads to success. The objective is to provide scientific evidence for this strategy, analyse different organizations’ strategies and provide a possible recommendation for the best practice. Globalization is a driver of luxury 1 but it is not the best solution to apply this approach in all strategic decisions. This paper will not only look at this strategic approach in general, but will try to focus in specific on the luxury car market. The luxury segment is a fascinating subject for scientific research, because it still provides possibilities for relatively fundamental research within its niche. 2 Although there is considerable literature about specific brands, there is a lack of systematic and scholarly work that analyses the luxury car phenomenon itself. 3 The importance of this segment has also been emphasized in Sergio Marchionne’s recent speech to the shareholders (appendix 7. 2). The CEO of the Fiat S. p. a and of the Chrysler Group LLC underlined that his strategy for the future of the Group is located in the premium4 car production. 5 The motivation of this paper therefore is to analyse the challenge Maserati will have to address and to arrive to some practicable conclusions. 1 Cf. Kapferer/Bastien 2012, p. 12. 2 Cf. Heine 2012, p. 6. 3 Cf. Berger 2001, p. 160. 4. Expression intentionally quoted to illustrate a later explained statement 5 Cf. Fiat S. p. a. 2012b. Definition and terminology 1. 1 2 Methodology The findings of this project are derived from primary, secondary and tertiary sources of information. The tertiary source was mainly the catalogue of the Deutsche Nationalbibliothek in Frankfurt. Another important part of the data collection contributed the Internet. Most data has been found with the search engine google. com and scholar. google. com and the homepages of the relative brands mentioned in the project. The biggest part of the project’s information was taken out of secondary sources such as textbooks, newspapers and specific literature. Finally, the annual reports of 2011 of selected brands have been consulted. 2 Definition and terminology 2. 1 Strategy â€Å"†¦ Strategy in corporate practice is an integrated concept with the objective of ensuring long-term survival in active interaction with the competition †¦Ã¢â‚¬ 6 In today’s everyday changing business environment all companies are forced to reassess their strategies, their structures and their processes regularly. But the answers to every strategic and organizational challenge is varying among industries. 7 Therefore first a summary of different general strategic alternatives will be presented. Afterwards a detailed analysis of the characteristic strategy in the luxury car market will be developed. 2. 2 Global or Local Strategy In this chapter both terms global and local strategy should be defined. Moreover the strategic challenge of a business to decide between both strategies should be analysed. 6 Cf. Kotler/Berger/Bickhoff 2010, p. 12. 7 Cf. Bartlett/ Ghoshal 1990, p. 17. Definition and terminology 3 Businesses have been international since ancient times and at its beginnings international business had simply the form of exporting and importing. Any business that carries out some of its activities across national boundaries can be defined as an international business. 8 In the 70s and 80s keywords as standardization, rationalization and centralization marked the new tendency towards globalization. 9 Globalization is a term that emerged in the 1980s/90s10 and that has become a buzzword in the 1990s. 11 Originally globalization was only an economic phenomenon that described the integration and merger of national economies, and the development of communication and production of knowledge, transportation and migration. 12 Today the extent to which the organization’s activities are spread across geographical regions has become a major consideration in the implementation of an organizations strategy. 13 A global strategy is the tendency of a company to a consistent strategy and adaptation to local circumstances become redundant. Global organizations gain competitive advantage overcoming national and continental boundaries. Therefore it was a widely held belief that there was the risk that the globalization would overrun all regional and national differences. 14 Though today we have evidence that there is no â€Å"global village† and that regional and national differences cannot be so easily neglected. On the contrary the majority of the apparently global organizations use local differences to gain competitive advantage. 15 Therefore numerous literature and research on the counter-rotating trend to globalization, the so-called localization, can be found. Localization in general means the adaptation to or consideration of local market conditions. Most of the research concluded that the two apparently contrary concepts do not mutually exclude but depend on one another: â€Å"Globalization can mean the reinforcement of 8 Cf. Campbell/Stonehouse/Houston 2002, p. 255. 9 Cf. Bartlett/Ghoshal 1990, p. 36. 10 Cf. Lohmeier 2008, p. 9. 11 Cf. Rohm 2010, p. 4. 12 Cf. Lohmeier 2008, p. 9. 13 Cf. Campbell/Stonehouse/Houston 2002, p. 254. 14 Cf. Lohmeier 2008, p. 10 15 Cf. Lohmeier 2008, p. 58. 4 Definition and terminology or go together with localism as in ‘Think globally, act locally’†¦Ã¢â‚¬  16 . Numerous literatures even deduce a new concept called â€Å"Glocalization. † Glocal strategies are strategies that provide evidence to global and local players, to respond advantageous and purposeful to globalization. They should assist global players to localize their activities where worthwhile and show ways and means to local players to make use of the global area respectively in both cases without abandoning their global or local character. 17 2. 3 Bartlett’s and Ghoshal’s model According to Bartlett and Ghoshal there are three traditional strategic directions a company can follow. Tab. 1: The three strategic directions 18 Multinational Global International Strong local presence Cost reduction through Usage of knowledge and through respect of national centralized but worldwide competences of the HQ needs oriented activities through worldwide diffusion and adaptation 2. 4 The multinational organization The multinational organization according to Bartlett and Ghoshal is the archetype of the organization. At the beginning of the 1900th century this was the most diffused organizational model. As shown in figure 1 in the multinational organizational model the HQ is at the centre with many decentralized, interdependent and autonomous branches surrounding it. The specific needs of the local markets are encouraged and therefore they are able to react to local needs. Historically this organizational model was the one of many European companies that expanded into foreign countries. Several of these companies originally where family owned companies. Processes were based on personal relationship and 16 Cf. Pieterse 1995, p. 49 zitiert nach Lohmeier 2008,p. 53. 17 Cf. Lohmeier 2008, p. 64. 18 Cf. Bartlett/ Ghoshal 1990, p. 32. 5 Definition and terminology informal contacts rather than formal structures and systems. Therefore only elementary financial control was necessary. 19 Branch Decentralized federation: Many key assets, responsibilities and decisions are decentralized Branch Branch HQ Branch Personal control: Informal HQ – subsidiary relationship, simple financial control Branch Multinational mentality: Management considers overseas operations as portfolio of interdependant business. Branch Figure 1: Multinational organization 20 2. 4. 1 The international organization This organizational model has similarities to the multinational organization. However as shown in figure 2 the branches are more dependent on the transfer of information and knowledge from the HQ. The objective of this kind of organization is to transfer knowledge and competences in aspects such as technology or marketing to underdeveloped foreign branches. The national branches can adapt products or strategies, while the HQ determines innovation and processes. In comparison to the multinational organization model there is more systematization and control. According to Bartlett and Ghoshal the international organization model had its breakthrough in the post-war period. The international organizational model is the model for the typical American Management culture of empowerment and delegation. 19 Cf. Bartlett/Ghosal 1990, p. 73. 20 Cf. Bartlett/Ghosal 1990, p. 74. 6 Definition and terminology Branch Branch Coordinated federation: Many assets, resources, responsibilities and decisions are decentralized but controlled by HQ Branch Branch HQ International mentality: Management considers overseas operations as appendix to a central domestic corporation Branch Administrative control: formal management planningand control systems allow higher HQ-subsidiary linkage. Branch Figure 2: International organization 21 2. 4. 2 The global organization Global companies develop their products and strategies considering only one equal worldwide market. Product development, production and marketing strategies remain centralized. 22 As shown in figure 3 the most important characteristics of the classical global organization have HQs that are a centralized hub that severely controls the branches and a management-mentality that views the world as one economic entity. The main feature is the centralization of assets, resources and competences. The function of branches is reduced to sales and services. In some cases financial competitive advantage is gained outsourcing the production sites abroad. Compared to the multinational and international organizations the branches in global organizations have less power to develop or modify new products and strategies. Managers in global organization, especially those located in HQ, often are more concentrated on the global market and consider the market to be equal worldwide. They have no comprehension of the local needs because there is no exchange of information between HQ and the national branches. 23 21 Cf. Bartlett/Ghoshal 1990, p 77. 22 Cf. Bartlett/Ghosal 1990, p. 31. 23 Cf. Bartlett/Ghoshal 1990, p. 75 f. 7 Definition and terminology Internationalization pioneers like Henry Ford build up their production plant according to this model and the Japanese started their offensive in the 70s and 80s with this model. 24 Normally global organizations first where very successful in their home market and used this success then to expand internationally. 25 Branch Branch Centralized hub: Most of the strategic assets, resources, responsibilities and decisions centralized Branch HQ. Branch Operational control: Tight control of decisions, resources and information through HQ Branch Global mentality: Management considers overseas operations as channels for the supply to a unified global market Branch Figure 3: Global organization 26 2. 4. 3 The transnational strategy Bartlett and Ghoshal claim that the traditional directions do note lead to adequate results anymore. Global and international organizations look out for a centralized answer to a worldwide market opportunity. Multinational companies search local solutions. Therefore Bartlett and Ghoshal developed the assumption for a new approach to solve the challenge of increased competitive and changing environment: The transnational strategy. 27 Companies nowadays can only survive in the competitive environment if they succeed in developing simultaneously worldwide competitiveness, multinational 24 Cf. Bartlett/Ghoshal 1990, p. 75. 25 Cf. Bartlett/Ghoshal 1990, p. 31. 26 Cf. Bartlett/Ghoshal 1990, p. 77. 27 Cf. Bartlett/Ghoshal 1990, p. 33 and p. 90. Definition and terminology 8 flexibility and global learning capabilities. These are the main elements of the transnational model. 28. The transnational model is a symbiosis or rather compromise of the other three traditional strategic directions. It combines both kind of competitive advantages: Because the affiliations are seen as strategic partners they can better respond to local needs and global synergies can be positive side effects. In the transnational model local markets are respected, and the proximity to the market is mainly an instrument to react more flexibly on a global scale. 29 The distinction between multinational and transnational companies is the amount to which the HQs are directly involved in the management of the branches. While a transnational company often has a strategic centre that manages to a high degree all the global operations a multinational company does not coordinate directly its foreign activities but rather considers the branches as interdependent business. The transnational organization acknowledges that there are certain resources and competences such as finance or research and development that are better centralized in the HQ while other resources are more advantageous to be decentralized in the markets to spread the competences on a global level. 30 2. 5 The Luxury Concept and Definition. The concept of luxury is known since ancient times. Lucullus, a roman senator who was famous in the ancient Rome for his marvellous evening events and his love for beauty, delicacies and sensorial pleasures, can be considered inventor of the luxury concept. 31 Chevalier and Mazzalovo provide a definition as follows: A luxury brand is selective and exclusive and provides an additional creative and emotional value for the consumer. It is a brand that is giving the desirable attribute of being scarce, sophisticated and in good taste. It also has a slightly understated and aristocratic attribute. 32 28 Cf. Bartlett/Ghoshal 1990, p. 33. 29 Cf. Bartlett/Ghoshal 1990, p. 84 30 Cf. Bartlett/Ghoshal 1990, p. 84. 31 Cf. Heine 2012, p. 2. 32 Cf. Chevalier/Mazzalovo 2008, p. viii Definition and terminology 9 According to Kapferer and Bastien a luxury brand can be defined by six criteria:33 †¢ An extremely hedonistic experience or product †¢ The price is exceedingly higher compared to the functional value †¢ Tied to a tradition, exclusive expertise and culture ascribed to the brand †¢ Accessible only through controlled and restrained distribution †¢ Obtainable with tailored supplementary services. †¢ Indicating a social representation, making the holder or beneficiary feel special and privileged 2. 6 Luxury versus premium car market The concept of luxury is represented in numerous sectors of activities 34. In this study we will look into more details of the specifics of the automobiles luxury sector. According to Chevalier and Mazzalovo luxury automobiles are â€Å"those cars that consumer perceive as being very special and different from the others. †35 It is necessary to differentiate between the concept of luxury and the concept of premium. The term luxury vehicle suggests a vehicle with a higher quality equipment, better performance, particularly precise construction, comfort, higher design, technologically innovative, and features that transfer an image, brand, status or prestige. Often the image is strongly related to the country of origin of the product. Premium products are upper-range branded products with an increased price without the emotional characteristics like hedonism or myth. „Upper premium brands remain comparative, whereas luxury is superlative. â€Å"36 Suitable examples for this difference can be found in the car industry. While an Audi A6 or A8 are super-premium cars because of the excellent usage value they provide, an Aston Martin or a Lamborghini are luxury cars because of their rarity and the prestige of the name. 37 33 Cf. Kapferer/Bastien 2012, p. 47. 34 Sectors of activities of luxury: Ready-to-wear cloth, jewelry and watches, perfumes and cosmetics, fashion accessories, wines and spirits, automobiles, hotels, tourism and private banking. 35 Cf. Chevalier/Mazzalovo 2008, p. x. 36 Cf. Kapferer/Bastien 2012, p. 43f. ; Cf. Kapferer/Bastien 2012, p. 53. 37 Cf. Kapferer/Bastien 2012, p. 53. 10 Strategic examples One historic management error that underlines the difference between luxury and premium is the Jaguar case. When Ford acquired Jaguar in 1989 they invested a lot in technology and training of the Jaguar employees. Thanks to common platforms with Ford they tried to sell small Jaguars. But this strategy seriously damaged the image of Jaguar and loosing the feeling of exclusivity they lost the luxury status. 38 3 Strategic examples In this chapter the before described theoretic information should be put together into a strategic framework. The strategic examples that will be considered are the most successful competitors of Maserati in terms unit sales: Porsche, Audi, Mercedes and BMW (figure 4). The first step was to obtain an overview of the structure of these companies and to identify their dependencies among each other and with other organizations (appendix 7. 3). The second step was to identify certain characteristics of these organizations and to put them into a framework developed to identify their degree of globalization or localization (appendix 7. 4). Based on this information a picture of their strategic directions has been deduced (appendix 7. 5). Bentley 2,57% Audi 6,56% Maserati 1,81% Jaguar 3,06% Maserati Market 2012 Aston Martin 1,74% Ferrari 1,26% Lexus 0,09% Porsche 48,43% BMW 12,23% Mercedes-Benz 22,25% Figure 4 The Maserati market in Germany in 2012 (market shares) 38 Cf. Kapferer/Bastien 2012, p. 51. 39 Management Services Helwig Smitt GmbH, Hofgeismar. 39 Strategic examples 3. 1 11 Daimler AG Gottlieb Daimler and Carl Benz invented the automobile in 1886. 40 Today the Daimler Group integrates different car manufacturers such as Mercedes-Benz, Smart and Maybach. Cooperating with various organizations worldwide it has converted from a mainly domestically oriented exporting company to a globally operating one. The company is now well established not only in Europe but also in Brazil and Argentina and has established joint ventures also in China. 41 However for the Daimler Group â€Å"the cultural inertia has been difficult to overcome, and global pretensions and traditional German attachments form a contradictory and unstable mix. †42 Therefore it is difficult to classify the group to Bartlett and Ghoshals model. The Daimler AG is rather a combination between the multinational and the global organization. Mercedes-Benz being historically strongly connected to its German roots has a centralized HQ, but at the same time its business units have been made self-responsible profit centres and procurement of materials is globally coordinated for each group of materials. Furthermore this has been intensified through local settlement of direct production, more consultancies and engineering in the branches, and also some development tasks located outside Germany. 43. Daimler is relocating its production sites into emerging markets, as for example the recently opened site in Hungary. This trend can be underlined by its decreasing production figures in Europe. They are currently reducing their production in Sindelfingen. 44 3. 2 BMW AG The BMW group may be the most German focused of the three companies. It is globalized in its objectives rather than in its activities. 45 Approximately 60% of the production of BMW is still located in Germany (figure 5). However BMW is one of 40 Cf. Daimler AG 2012, p. 4. 41 Cf. Lane 2001, p. 84. 42 Cf. Lane 2001, p. 85 43 Cf. Lane 2011, p. 84f. 44 Cf. Berens 2012, p. 17 45 Cf. Lane 2011, p. 86. 12 Strategic examples the most respected brands in the world. The explanations for BMW’s success are a strong brand character, a stable, family shareholding and a very German business philosophy. 46 It can be deduced that having local roots increases the perceived value of BMW. Producing nearly all its automobiles in Germany customers perceive BMW as an authentic product of German culture. BMW follows the same strategy of keeping the Mini production in England. 47 South Africa, 3,06% China, 5,65% Austria, 5,91% CKD, 2,16% UK, 11,23% US, 15,88% Germany, 56,11% Figure 5: Vehicle production of the BMW Group in the world in 2011 48 Therefore BMW can be classified an international organization according to Bartlett and Ghoshal’s model. BMW’s key competences are centralized but many other competences are decentralized. Thus BMW efficaciously implements the strategy of local assembling and local purchasing in countries with high customs duties on imports such as Russia, Thailand or India. However, under the terms of the distinction between luxury and premium products, the cars assembled in Thailand would not longer be defined as luxury products. They do serve to initiate customers into the brand, who then should develop the desire to purchase a ‘real’ BMW ‘made in Germany’. 49 BMW’s Management Meeting Place is a good example for the acquisition of knowledge in the HQ and then transferring it to the branches. First this discussion platform has been started in Germany and then it was transferred to locations abroad. The fact that this strategy works, and that behind BMW probably stands a 46 Cf. Kapferer/Bastien 2012, p. 67. 47 Cf. Kapferer/Bastien 2012, p. 78. 48 Cf. BMW AG 2012, p. 28. 49 Cf. Kapferer/Bastien 2012, p. 78. 13 Strategic examples strong team is underlined by the fact that BMW has been rewarded being â€Å"The World’s Most Attractive Employer† by a study conduced lately. In fact the employee attrition ratio at BMW has decreased continuously in the last 3 years (figure 6). 5,85 percentage of workforce 6,00 4,59 5,00 4,00 2,74 2,66 2,16 3,00 2,00 1,00 0,00 2007 2008 2009 2010 2011. Figure 6: Employee attrition ratio at BMW AG 3. 3 50 Volkswagen AG The Volkswagen Group maybe is the most advanced example of a conglomerate of successful car manufacturers. Among all the subsidiary brands the most significant ones are Volkswagen AG, Audi AG and Porsche AG, but there are also Bentley, Lamborghini, Seat and Skoda (appendix 7. 3). In fact Porsche owns 32,5% of the Volkswagen Group shares. Succeeding in managing a portfolio of so dissimilar organizations under one umbrella certainly makes the Volkswagen Group to a transnational organization according to Bartlett and Ghoshal. The cooperation in-between the brands of the Volkswagen Group are very well developed. One successful example of this approach is the common hybrid drive used in the Porsche Panamera, Cayenne and VW Touareg 51 . In addition the Volkswagen group has only little external cooperation mainly in the area of researching. The key competences remain inside the group. Becoming an integrated automotive industry is part of the group’s â€Å"Strategy 2018†. However, every single brand has its specific targets. Volkswagen’s target is to 50 Cf. BMW AG 2012, p. 39. 51 Cf. Porsche AG 2012, p. 67. The Maserati case 14 become the global market leader by 201852. This underlines the global factor. On the other side Porsche’s target is to become â€Å"the leader of exclusive sports cars manufacturers†53. Audi finally has the target to become the â€Å"premium brand that delights customers worldwide† 54 . Therefore the group’s values and capabilities remain inside the group and with a broad portfolio of interdependent and specialized brands completely different target groups can be addressed. The Volkswagen Group leads the global tendencies of the considered companies. But the core strategic functions (e. g. RD and design) remain mainly German. However the Volkswagen Group also recognizes the importance of knowing the local sources and therefore has implemented the C3-Sourcing program. Becoming technical, organizational and social laboratories foreign branches contribute to the integration of the whole group’s worldwide activities. Hence some Audi models that have the same platform as Volkswagen models are now produced in Volkswagen factories in China. This local adaptation is the key of success for Audi’s sales in China, where the top members of the communist party cannot own a car unless it is made in China, but at the same time it forces the brand to give up their luxury strategy and replace it with a premium one. 4 The Maserati case 4. 1 Introduction to Maserati The Italian sports cars producer with the trident on the logo has been founded as Societa Anonima Officine Alfieri Maserati on December 1st 1914 in Bologna. Maserati was originally founded as a family business, but in 1937 it was sold to the Orsi family. In 1968 it was sold to Citroen and finally became part of the Fiat Group in 1993. 55 Thanks to his big sister Ferrari, Maserati has been reconstructed and from 2006 stands alone now in the structure of the Fiat S. p. a. (see figure 7). Today Maserati’s headquarter is based in Modena and it has two production sites in the north of Italy. Furthermore Maserati is divided in regions (Europe, Asia Pacific, 52 Cf. Volkswagen AG 2012, p. 233. 53 Cf. Porsche AG 2012, p. 14. 54 Cf. Audi AG 2012, p . 131. 55 Cf. Wikipedia 2012a. 15 The Maserati case. America and Middle East) with national branches in each separate country (e. g. France, Germany, United Kingdom). Maserati is currently becoming more and more significant for the rest of the Fiat Group. The first strategic milestone of the so-called â€Å"2010-2014 plan† was the integration of the Chrysler Group in June 2011. Figure 8 shows the increase of 30% of the workforce through this merger, mainly in North America. * including 58,5% Chrysler Group LLC Maserati (100%) Fiat Group Automobiles* (100%) AUTOMOBILES Fiat S. p. a. Ferrari (90%) Fiat Powertrain (100%) Magneti Marelli (100%). COMPONENTS PRODUCTION SYSTEMS Teksid (84,8%) Comau (100%) Figure 7: Structure of the Fiat S. p. a. Workforce 80 62,583 63,214 60 40 2011 2010 60,336 44,668 24,616 23,596 20 56 39,498 5,579 0 5,838 Italy Europe (excl. Italy) NAFTA Mercosur 4,894 other regions Figure 8: Increase of the workforce in the Fiat Group through the integration of Chrysler in 2011 56 Cf. Fiat S. p. a. 2011, p. 11. 57 Cf. Fiat S. p. a. 2012c, p. 30. 57 The Maserati case 16 The second milestone was the plan presented in February 2011 in which â‚ ¬ 500 million were invested for the relaunch a production site58. In this new pIant two new models will be produced: The new Maserati Quattroporte by the end of 2012 and the Maserati Ghibli in the second half of the year 2013. 59 Thereby Maserati plans to increase its sales: While in 2011 Maserati sold 6,159 vehicles worldwide, in 2013 20,000 units are planed and by 2015 a growth up until to 50,000 vehicles per year is projected. 60 The Maserati S. p. a. can be classified as a global organization. They concentrate their decision and strategy making in the HQ in Italy and product development, production and marketing strategies remain centralized. The function of the branches is reduced to the implementation and realization of sales, services and marketing activities. The reason is linked to the strong connection with the domestic country and the patriarchal organizational culture that has developed over the years. One cultural example for this approach is that usually in the branches employees refer to the HQ as â€Å"the factory†. And while until today Maserati’s production sites are located just in the domestic market, by the use of a common platform and production site with the Jeep Grand Cherokee in the United States for the new SUV model, Maserati will enter also in the global environment. 4. 2 Maserati’s strength 4. 2. 1 The cooperation with the Fiat Group Being part of the Fiat Group is strength and weakness at the same time for Maserati. Through the cooperation with the other brands of the group, Maserati can benefit from economies of scale and scope. E. g. particular engines for Maserati are developed and produced in the production site of Ferrari. Another example is the collaboration with Jeep that will allow the new Maserati Levante to share the expertise of Jeep in building SUVs. 61 Moreover the fact that the production of this new Model will be relocated to the United States will finally transform Maserati from a purely domestic manufacturer to a global player. 58 Officine Automobilitische Grugliasco. 59 Cf. Fiat S. p. a. 2012c, p. 34. 60 Cf. Wehner 2012. 61 Cf. Baedecker 2012. The Maserati case 17 4. 2. 2 The luxury image Maserati as a brand itself and the Maserati products are stereotypes of luxury. Maserati is like none of its competitors a unique iconic and superlative brand that stands for an extravagant Italian lifestyle and sportiness. It profits from its long-time racing experience and expertise in building extremely performing engines. Additionally some parts are tailor made and its products are positioned in an upmarket pricing class that does not correlate with the functional value they provide. Moreover until today the units sold are rather restricted and therefore it is still a rarity to see a Maserati on the road. Thus possessing a Maserati is to a high degree socially representative and makes the owner feel special and privileged. Maserati is a myth and continuous to benefit from this legend. 4. 2. 3 Driving performance Another very strong characteristic of Maserati is its driving performance. Driving a Maserati is an overwhelming driving experience from the very first moment you switch on the engine. The expertise in building extremely performing engines is definitely a strength that should not be underestimated. „Hearing a Maseratis V-8 engine scream on the way to its 7200-rpm redline is an experience gear heads will cherish. â€Å"62 4. 2. 4 The people that work for Maserati The people that work for Maserati are fundamental assets. A mixture of experienced and long-established employees on the one side and on the other side young, motivated and talented staff are the most important ingredient for the team that is able to face the current challenges. Maserati’s employees identify with the brand to a high level and therefore live for the brand. E. g. in the HQs in Modena are hanging poster with the slogan â€Å"I am Maserati†. 62 Cf. Floraday 2011. The Maserati case 4. 3 18 Maserati’s weaknesses 4. 3. 1 The image of the Fiat Group As mentioned above, being connected to mass-market brands like Fiat and Chrylser could affect Maserati’s luxury status. This is primarily related to the image of Fiat’s quality standards. The fact that some components are commonly introduced in both, Maserati and Fiat, could severely damage Maserati’s reputation. 4. 3. 2 Progress and technology Except for its engines, Maserati is not using the most advanced technology in his cars until now. Competition from other car manufacturers is very strong in this context (e. g. Porsche or BMW). Therefore this is a threat especially in those markets where technology and innovation are very important factors in the consumer buying behaviour process (e. g. Russia or Germany). Moreover while other manufacturers have already developed new propulsive forces e. g. the new Daimler electric fleet63, Maserati continued only the evolution of traditional fuel and diesel engines. As the petrol price rises also this threat is increasing. And depending on the trend of the environmental regulations in Europe and in the rest of the world, this lack of development could become an increasing challenge for the next future of Maserati. 4. 3. 3 Dealer network Another threat is the necessity to improve and expand the dealer network. There is a clear need to increase the distribution capillarity by appointing additional dealers. Moreover, there is also a need to transform the existing dealers bringing them to focus their activities and organizations on the brand. Dedicated sales, after-sales and marketing forces will be key to this transformation. E. g. most of the Maserati dealers sell also Ferraris and should adapt their staff with personnel dedicated exclusively towards Maserati. 63 Cf. Daimler AG 2012, p. 41. The Maserati case 4. 4 19 Maserati’s opportunities 4. 4. 1 Industrial opportunities With its current models range (Quattroporte, Gran Cabrio and Gran Turismo) Maserati is represented in the core segments.

A Farewell to Arms Setting Theme :: essays papers

A Farewell to Arms Setting Theme Rain, like water, is often times used in literature as a symbol of a new life, or a fresh beginning. But in the novel A Farewell to Arms, Ernst Hemingway uses rain in a totally different, non-traditional way. In this novel, Hemingway uses rain to establish a negative, depressed tone, to warn of future unfortunate circumstances, and to accompany scenes which death occurs in, to add to the horrid situation. Hemingway uses rain in the scene when Henry leaves the train station to go back to war. In the book, it rained the entire night that Henry left. â€Å"Outside the mist turned to rain and in a little while it was raining hard. We heard raining on the roof.† The use of rain in this scene causes the reader to feel drained and unhappy. By using rain in this specific part of the book, it makes the tone more emotional, and depressing which is exactly what the author was trying to achieve. Hemingway also uses rain as apart of the scene before Catherine and Henry are about to find out about some terrible news. Before the barman entered their hotel room, Hemingway desribed the weather outside as violent and stormy. â€Å"That night there was a storm. I woke up to hear rain lashing the window-panes. It was coming through the windows.† The use of rain in this scene is a warning of the imminent negative news Henry was soon to discover. He received the knowledge that the Italian Army was going to arrest him before and during when it was raining it outside. Therefore, the rain played a substantial part in establishing this scene. Rain also accompanies and surrounds the death of Catherine, and their stillborn child. It was raining before Catherine went into labor, the whole time she was in the hospital giving birth, and after both her and her child’s death. The setting outside while Catherine was in labor was dark and dreary. â€Å"I could see nothing but the dark and the rain falling across the light of the window.† Again rain was used in this part of the book to add to the already terrible situation, and made the reader really see and feel the total distress of this scene. A Farewell to Arms Setting Theme :: essays papers A Farewell to Arms Setting Theme Rain, like water, is often times used in literature as a symbol of a new life, or a fresh beginning. But in the novel A Farewell to Arms, Ernst Hemingway uses rain in a totally different, non-traditional way. In this novel, Hemingway uses rain to establish a negative, depressed tone, to warn of future unfortunate circumstances, and to accompany scenes which death occurs in, to add to the horrid situation. Hemingway uses rain in the scene when Henry leaves the train station to go back to war. In the book, it rained the entire night that Henry left. â€Å"Outside the mist turned to rain and in a little while it was raining hard. We heard raining on the roof.† The use of rain in this scene causes the reader to feel drained and unhappy. By using rain in this specific part of the book, it makes the tone more emotional, and depressing which is exactly what the author was trying to achieve. Hemingway also uses rain as apart of the scene before Catherine and Henry are about to find out about some terrible news. Before the barman entered their hotel room, Hemingway desribed the weather outside as violent and stormy. â€Å"That night there was a storm. I woke up to hear rain lashing the window-panes. It was coming through the windows.† The use of rain in this scene is a warning of the imminent negative news Henry was soon to discover. He received the knowledge that the Italian Army was going to arrest him before and during when it was raining it outside. Therefore, the rain played a substantial part in establishing this scene. Rain also accompanies and surrounds the death of Catherine, and their stillborn child. It was raining before Catherine went into labor, the whole time she was in the hospital giving birth, and after both her and her child’s death. The setting outside while Catherine was in labor was dark and dreary. â€Å"I could see nothing but the dark and the rain falling across the light of the window.† Again rain was used in this part of the book to add to the already terrible situation, and made the reader really see and feel the total distress of this scene.

Macquarie Bank

?Introduction Macquarie Bank has been recognised as one of the most prestigious banks in Australia and around the world. Macquarie was established in Australia in 1969, it began operations in Sydney in January 1970 with only three staff. Macquarie Bank first opened its doors for business on 1 March 1985 with a retail branch in Sydney. Today, Macquarie Bank operates in a range of investment banking, commercial banking and selected retail financial services markets both in Australia and overseas. It is the only substantial, majority Australian owned investment bank and is a licensed trading bank under the Australian Banking Act 1959 (Macquarie History, 2007). Macquarie Bank has been consistently associated with a stream of major financial innovations, which have underpinned its reputation as a market leader. Their main focus that has helped them in their success is their risk management department as well as their focus on select markets on which they enter. The Macquarie culture is represented by the way in which they work together. The values to which they aspire can be summarised in six principles: integrity, client commitment, strive for profitability, fulfilment for our people, teamwork, and highest standards. Macquarie Bank’s commitment to the six principles is vital for continued growth and prosperity (Macquarie, About Macquarie, 2007) Operating Environment: The Macro Environment Political and legal forces Political and legal forces hold a great impact on all industries that wish to operate legally within a country. Regulatory groups are required within the banking industry to assist in the stable operation of a nation. A major regulator would be The Australian Prudential Regulation Authority (APRA). Various other major political and legal forces which solely influence the banking industry include The Australian Bankers’ Association (ABA), The Australian Securities and Investments commission (ASIC) and The Reserve Bank of Australia (RBA). APRA was created to be an advisory figure in the regulation of the Australian financial services industry. This group â€Å"oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry† (APRA, 2007). The ABA works with its members to provide analysis, advice and advocacy and contributes to the development of public policy on banking and other financial services† (ABA, 2007). The ABA acts as a union for banks and ensures that the banking industries views are heard, when the government decides to alter policies or legislations. Th e ABA also helps to strengthen the benefits of competition to Australian banking customers. ASIC’s task is to enforce and regulate companies and financial services laws in order to protect the customers as well as the investors and creditors. ASIC exists to regulate; â€Å"Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit† (ASIC, 2007). â€Å"The RBA’s main responsibility is the monetary policy† (RBA, 2007). The board members make the policy decisions with the aim of gaining a low and stable inflation over the medium term. According to the RBA website, the other major goals include; maintaining financial system stability and promoting the safety and efficiency of the payments system. The RBA also acts as a banker to the Australian Government and actively participates in financial markets, manages Australia’s foreign reserves and issues Australian currency notes. Global Forces Changes in the financial status of markets overseas, drops or increases in interest rates overseas, and even new political regimes can all affect organisations around the world. Global forces which have recently held an effect on Macquarie bank would be the current drop in the US economy which has affected markets all around the world. The main impact which it has made in Australia has to do with financial institutions since they hold assets from the US market. This has directly affected Macquarie with its financial services and products. Economic forces Economic forces pertaining to Australia can greatly influence the way businesses operate. General economic forces such as inflation rates, interest rates, currency exchange rates, unemployment levels, average disposable income, and personal saving rates can all affect organisations to a certain extent (Hill et al, 2004, p74). Inflation has affected Macquarie bank which then in turn goes to interest rates. Currently economic forces within Australia include rises in certain industries including the mining industry and real estate. By these industries entering a boom period, it increases the amounts which these industries will be willing to invest which in turn increases profits for banks. Technological forces In modern society with technology being so closely tied to having a competitive advantage, a lot of industries compete to keep up to date with new developments. The invention and increased use of computers, internet, and phones have all made a major impact on organisations around the world. The main effect that technological advancements have made within Macquarie bank is that internet banking is now a common and widely used item so banks need to constantly upgrade their technology in order to prevent hackers from entering their databases and causing havoc. Operating Environment: The Micro Environment There are many forces that can impact the outcome of a firm’s growth and profitability. For Macquarie Bank, the forces that impact their success will be explored with the analytical frame work introduced by Michael Porter; his five forces model, which will look at the major contributing factors that will aid and deter the growth of Macquarie Bank in this industry. Risk of threat of new entrants The risk and threat of new entrants into the market can be seen as both high and low. High, since there has been a deregulation of the market for banking, which will allow for overseas competitors to compete in the local market. This is a large threat since these are the competitors that have a large pool of resources that can actually compete to a high level with Macquarie. However, the threat can also be seen as low since there is still a high degree of entry barriers, i. e. operational regulations and laws implemented by the government and other regulatory boards. Additionally, a major factor that will deter competitors would be such things as brand loyalty as well as the over saturation of banks in the industry. Therefore, the threat of new entrants can be seen as moderate and is highly dependant on the entrant’s resources and capabilities. Rivalry among established companies The rivalry in the banking industry can be seen as discrete, yet volatile. They advertise in the media about their interest rates, products and services, however, apart from that, their actions are rarely seen. Each bank firm always try to gain the better package and interest rate to attract more customers. However, these rates are quite similar with little variance. A major factor that gives them the competitive advantage would be the image the bank upholds and the services provided in comparison. The main point of attack that most banks concentrate on now is their customer service area, since most of the services that they provide are quite similar. Macquarie has a very well maintained, high profile image. They provide a lot of diverse services; however, they charge premium service fees for them. This has not deterred people from using their services, but has given their users a sense of assurance; they feel as though they pay top dollar for top service and quality. This sense of prestige as well as resources and capabilities has given the Macquarie bank their high image and profile as well as success. Bargaining power of suppliers The main supplier of Macquarie bank would be their shareholders. By owning a share in Macquarie depicts that these people have invested money into this organisation and since there are various options to choose from, Macquarie must be unique in some sense to attract these people. It would become costly for Macquarie to lose these shareholders as with banks, money is the good which is being transferred and to lose shareholders would only lead to a deficit in funding for the bank. Therefore, the bargaining power of suppliers would be seen as high since there is no switching cost for them to move their money into another investment area. Macquarie must come to a compromise with supplier demands or face losing a stream of equity and funding. Threat of substitutes The main threat of substitute services for Macquarie Bank would be; credit unions and building societies. Credit unions, especially the larger ones offer most of the services that Macquarie offer, however, with fewer fees. Building societies although not as main stream and service diverse as credit unions have the potential to develop the competencies to deliver them, for example, Bendigo Bank; which was originally a building society. Although these two types of institutions do not offer the wide array of services that Macquarie does, it can steal away some of Macquarie’s customers, since they deliver a minimal version of the services that Macquarie provides. Additionally, with Macquarie’s reputation and diverse array of services, the threat of substitutes would be on a miniscule level. Bargaining power of buyers The banking industry in Australia can be seen as a saturated market. This saturation allows buyers (consumers) a level of bargaining power. This means that the consumer can negotiate interest rates and packages to their advantage against the provider. However, since there are only a few financial institutions in Australia, many of whom can charge higher prices for services and packages. Yet on the other hand, the domestic banking industry is considered to be competitive, which can offset the balance with only having fewer firms in the market. Therefore, the bargaining power of buyers can be considered as moderate. Competitive Advantages Macquarie bank provides investment banking, commercial banking, retail financial services in Australia and selected financial services offshore. It operates through the following business segments: Asset and Wealth Management; Financial Markets; Investment Banking; and Lending. Macquarie is a diversified international provider of financial and investment banking services. It has the following key resources and capabilities compared to Commonwealth and Bendigo Bank: Human Resource Macquarie bank’s hosts and presenters are industry experts who have the xperience and knowledge to achieve the maximum outcome in this complex and rapid changing economic environment. With a network of over 10,000 people in 24 countries, the staff can add the most value and advantages to clients. Annette Martins is currently employed as an associate economist in the economics team at Macquarie bank. Her past experience includes working for the NSW Treasury as an economist within the Economic and Fiscal directorate. Other staffs have worked for such as Reserve bank of Australia (Macquarie, 2007). At Macquarie, there are elites in different professions such as Economy matters, Marketing, Property and Vision. All the staff members are carefully drawn from a broad range of industries and market segments. It is also allowing them to apply their expertise to the customers. Customer Resource Macquarie bank is currently operating its services in more than 40 countries around the world as OzForex is serving around 30,000 transacting customer internationally. It provides a depth of service (accurate and insightful view) with specialist capabilities to wholesale and private customer in both the domestic (Australia) and international economies (Macquarie, 2007). Simultaneously all these customers may invest their money with other Macquarie’s business groups such as Funds management or financial service groups. They both run domestically and internationally. The Financial service group services more than 670,000 clients all together with other Macquarie Departments. Department Resource Macquarie is currently operating its service in seven major business groups which are Investment Banking Group, Equity Markets Group, Treasury and Commodities Group, Banking and Securitisation Group, Real Estate Group, Funds Management Group and Financial Services Group. With all these services, Macquarie owns huge customer resources within Australia and foreshore. Each department in Macquarie is serving specific groups which may overlap with other departments because Clients may be interested in more than one service which Macquarie provides (Macquarie, 2007). Subsidiary Companies Macquarie is providing its specialist banking and financial service in select markets around the world. It also has a lot of subsidiary companies around the world. OzForex is an online foreign exchange provider which Macquarie has purchased 51% of the shares. It will allow Macquarie to offer tailored foreign exchange services to its substantial retail financial services within financial service groups (Macquarie-OzForex, 2007). Comparison against rival Banks Commonwealth bank’s principal activity is providing integrated financial services which include business and institutional banking, superannuation, life insurance, funds management and broking services and finance company activities. It operates in Australia, NZ, UK, USA, and Japan†¦etc. It has a wide presence in Australia with the largest branch and ATM network. It also received the award for excellence – Best Bank in Australia but was not mentioned in relation to investment services (Commonwealth Bank, 2007). Bendigo bank’s main financial services include business banking and commercial finance, funds management, treasury and foreign exchange services, superannuation and trustee services. It operates mainly in all Australian estates and the Australian Capital Territory. Bendigo bank is responsible for a number of banking innovations in Australia such as visa credit and debit cards (Bendigo, 2007). With all the resources and capabilities when comparing Macquarie bank to Commonwealth bank and Bendigo bank, Macquarie is on a leading position for investment banking. Deregulation is expected to lead to an increase in competition in the banking industry, and could involve a decrease in profitability. There are four factors in a bank’s competitive advantage that needs to be considered: (Chen. T. , 1999) Manpower Financial management Asset base Intangible assets Achieving success in the industry will involve 3 key factors. These are the costs, product and financial strength of the corporate entity. To be successful in the banking industry, the bank needs an insight into the changes in banking methods, cost management and long-term financial solutions. Macquarie bank’s strategy is to expand selectively in practical areas. (Macquarie Annual Report, 2007) Macquarie has entered the market of infrastructure investing since 1996. It has become one of the largest private managers of infrastructure in the world, with rapidly increasing revenue and profit. Macquarie bank’s specialist funds are currently buying toll roads, airports and rail systems world-wide. It is also a key growth driver and has been exported to international markets; its assets under management in specialist funds increased 50 per cent from $A87. 6 billion to $A131. 3 billion. Macquarie’s long-term strategy has allowed them to enter new sectors and regions flexibly as opportunities arise. This strong risk management has become a key factor of Macquarie’s success. The overall result is driven by strong growth in every region where Macquarie operates. Macquarie has achieved No. ranking in Australia for mergers and acquisitions whilst maintaining its leading market position for equity rise. It has also been ranked No. 1 broker by the ASX (Australian Stock Exchange) in market share. Macquarie bank, Australia’s largest Cash Management Trust (CMT) provider also has an agreement with Australia’s largest retail equities network, GBST (Glob al Banking & Securities Transactions). These strategic alliances provide Macquarie with an enhanced reach to its customers as well as customers from other alliances, hence forming a broader network. Company Strategy Macquarie company strategy Macquarie states that â€Å"Our strategy is to expand selectively, seeking only to enter markets where our particular skills and expertise deliver real advantage to clients† (Macquarie Annual Report, 2006); â€Å"Macquarie aspires to be a pre-eminent provider of financial services over the long haul† (Macquarie, 2007). This statement also shows that their strategy is to be a leader in their sector. (For more information on the business level strategy, please refer to appendix 1). Competing with Macquarie. Macquarie Bank Group can be seen as the market leader in investment banking, inancial services and retail banking â€Å"Macquarie Bank has been consistently associated with a stream of major financial innovations, which have underpinned its reputation as a market leader† (Macquarie History, 2007). The way that they have focused on market segments has given Macquarie an edge over their competitors; since they service the market segments which they see profit and growth in for themselves as well as their customers. What this means is that they minimise their risk of entering â€Å"stagnant† areas and maximise growth and return by servicing their target groups. Macquarie Bank Financial Results Total income from ordinary activities for the year 2007 was up 49% to $A7,181m; International income was up 70% to $A3,457m; Net fee and commission income was up 25% to $A3,540m; Trading income was up 20% to $A1,047m; Net interest income was up 23% to $A728m. Asset and equity investment realizations and other income were up 257% to $A1, 866m (Macquarie Financial Report, 2007). The expense to income ratio was slightly down at 73. 2 % (Macquarie, 2007). Refer to appendix 2 for the pie chart. *EPS = Net Earning / Outstanding shares Macquarie banks financial possession as of May 2007 is Net profit of A$1. 46bn. There has been a 60% increase as compared to the later year and six times the level increase as compared to the last five years. Earnings per share increased 48% from $A4. 00 to $A5. 92. This is 4. 5 times the level of earnings per share of five years ago (Macquarie, 2007). Earnings per share are generally considered to be the single most  important variable in determining a share's price. It is also a major component of the price-to-earnings valuation ratio. The P/E looks at the relationship between the share price and the company’s earnings. A high P/E  suggests that investors are expecting  higher earnings  growth  in the future compared to companies with a  lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually  more useful to compare the P/E ratios of one  company to other companies in the same industry, to the market in general or against the company's own historical P/E. P/E Ratio = Market price per Share / EPS P/E of Macquarie for 2007 = 82. 75/ 5. 916* = 13. 987 (Macquarie Financial Report, 2007) The Pay-out Ratio shows the amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends. (Investopedia, 2007) Macquarie Bank (Payout Ratio) 2005 2006 2007 53. 20% 54. 40% 54. 30% As the ratios above show, there has been very slight fiction in the level of dividend payouts. There has been a 0. 0% decline in the ratio which could only mean, that investors are feeling secure with the payout of the company which in turn means the company has higher retained earnings in their balance sheet and are able to keep investor confidence. Other data from the financial report suggests a decline in the expense to income ratio, for every $A1 of income $A0. 732 goes into expense. This suggests that Macquarie is h andling its expense well and is confident enough to pay off their investors. Return on Equity is a ratio that captures profitability, efficiency and capital structure within an entity. Changes in the ratio will reflect the direction of an entity’s profitability, asset efficiency and capital structure. ROE for Macquarie Bank 2006 = Net profit/ Average equity x 100 ROE = 916 /5968 ROE =15. 34% ROE for Macquarie Bank 2007 = Net profit/ Average equity x 100 ROE = 1463 /7519 ROE = 19. 46% The ROE increased from 2006-2007. In 2006 an investment of one dollar of shareholders equity returned 15. 34 cents of earnings available for distribution to shareholders. In 2007 an equivalent dollar investment generated 19. 6 cents of earning available to distribute to the shareholders. A figure which depresses the return on equity is if the cost of debt exceeds the return on assets. The debt ratio indicates how many dollars of debt exists per dollar of assets. It shows the leverage between a company is debt financed or asset financed. Equity Ratio for Macquarie 2007 = total equity / total assets x 100 = 7519/ 136, 389 x 100 = 5. 56% est. 6% This shows that 6% of Macquarie†™s debt finances their assets. They are relatively debt financed. Another way to measure the company’s financial leverage is the debt to equity ratio. It is calculated by dividing  its total liabilities  by  stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. = 128,870 / 7519 = 17. 14 A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of  debt is  used to finance increased  operations (high debt to equity), then Macquarie could potentially generate more earnings  than it would have without this  outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as  more  earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may  outweigh the return that  the company  generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. (Investopedia, 2007) Issue 1 Macquarie Bank users a decentralised management structure. This decentralisation refers to when decisions are made at different levels within an organisation (Hill et al, 2004, p273). Decentralisation Overview: Macquarie’s management and organisation structure is considered to be non-hierarchical. This means that the chain of command within the organisation is designed to be decentralised. This management approach allows the lower and mid-level managers within the seven divisions of Macquarie to make decisions on their own. Macquarie encourages their employees to gain a sense of ownership and to develop entrepreneurial skills in order to make strategic decisions (Macquarie Management, 2007). By giving the lower and mid-level managers the power to make decisions, it will reduce the bureaucratic cost to the company. In other words, delegating lower and mid-level managers’ decision-making responsibility, will lead to a reduction in upper level managers within the organisation. Furthermore, having a decentralised management structure will reduce information overload to the central management team, which will enable them to spend more time focussing on market and industry forces (Macquarie Management, 2007). A decentralised management structure may be good in order to keep costs down and provide central managers more time to make effective decisions; it may however cause further problems within the organisation. Problem 1: Communication & Coordination issues involving the Decentralisation Approach: The decentralised management theory states that lower bureaucratic costs will avoid communication and coordination problems within an organisation. This may be true in theory, however in reality it is not always the case. For example, the seven divisions of Macquarie are run and operated independently. All of the lower and mid-level managers of the organisation make their own decisions within each division. Since every division in Macquarie are related, it is surprising to see that they do not effectively communicate with each other because there is no level manager do so. In other words, there is no managerial network that integrates with each of the divisions. This could mean that information and other resources are not equally shared, which can lead to difficulties in creating value for the ompany. Problem 2: Leadership Issues using the Decentralised Management Approach: Another decentralised issue that could affect Macquarie is for when the organisation is facing periods of uncertainty. For instance, when the Macro-environment is volatile or unpredictable it is important for an organisation to show strong leadership. In these uncertain times it is important that leadership decisions are best given from higher-level managers. One of the issues concerned with Macquarie’s management structure is that leadership decisions do not come from lower or mid-level managers. In fact, decision-making made by an organisation’s division can be made to benefit them rather than to benefit an organisation as a whole. Therefore, this decentralised management approach may not be effective to face periods of uncertain times. Recommendations Macquarie decentralised management system is working well despite some of the issues facing the company. However, Macquarie Bank can benefit from using both a centralised and a decentralised management structure. A centralised management system is the complete opposite of decentralised management structure, where decisions are made by upper-level managers of the organisation (Hill et al, 2004, p273). The approach that Macquarie should take is to find a balance between a centralised and decentralised management regime. For instance, issues such as investing money into infrastructure should be done using a centralised approach and consequently issues dealing with recruitment and training should be done through decentralisation. Archiving the balance between the two management structures will determine the success of Macquarie Bank. Additionally, Macquarie should add a managerial network that integrates with all of the divisions in order to improve communication and resource sharing to create value for the organisation. However, it is important to note that as the company expands the decentralised approach may become less effective due to rising bureaucratic costs. Justifying the Recommendations: The real question that must be put forward to Macquarie is that can they continue to grow under a decentralised management regime? This is a key issue regarding the organisation structure for Macquarie Bank. As the Macquarie organisation expands, many critics argue that sustaining a decentralised management system in the long-term will fail. This is due to the fact that expanded business growth will not be able to maintain current hierarchical levels because it is too difficult, but more importantly it will lead to inefficiencies in managing the companies’ resources (Hill et al, 2004, p274). However to solve these issues, Macquarie can choose to divide the functional responsibilities up within the company across the same level, best known as ‘Horizontal Division of Work. ’ Using a functional structure in a horizontal framework will enable people with similar tasks be grouped together in order to increase productivity. This will reduce bureaucratic costs for an expanding business and increase operational flexibility. Therefore, Macquarie should consider a decentralized managerial approach in the short-run but in the long-run they may opted for a functional structure in order to reduce costs. Issue 2 Macquarie’s focus strategy to expand selectively, seeking only to enter markets where their particular skills and expertise, deliver real advantages to clients has served them well to this day, with expediential growth, it can have some implications. The main implications that can arise from this course of action and strategy are the limitations of the potentially profitable and growing markets that Macquarie could miss out on. This can lead to limited growth and a loss of market share if Macquarie continues this course of action to a stringent degree. It is near impossible to predict the trends to such an exact degree as too when to enter a market to obtain maximum growth, however, if there is the potential for that growth to occur, then the advantage can be taken by entering that market before this growth eventuates. However, by doing so creates risk. This risk is the gamble on predicting the success of the potential growth in the area. Although Macquarie does have a whole department dedicated to risk management, it still does not account for the ability of the environment to make unforeseeable changes. These environmental factors are out of the companies control, however, the company can anticipate an environmental change and implement a course of action to take in order to counter or profit from it. Therefore, Macquarie’s strategy of focusing on a select market to enter, although has helped them grow into a gigantic organisation, it could also be their downfall due to the potential growth they could miss out on by trying to minimise their risk. Problem 1: Market selection and alienation The way that Macquarie’s strategy focuses on expanding selectively to only enter markets where their particular skill are suited will cause these limitations in their possible future growth. This strategy can be seen as a focus strategy since Macquarie looks at targeting a particular market or customer segment; as stated in their original strategy, to expand selectively†¦where their skills and expertise deliver real advantages (Hill et al, 2004, p317). What a focus strategy entails is the focus on a niche market, which can be defined by, in Macquarie’s case, the type of customer and geographical region (Hill et al, 2004, p317). Although this strategy entails cost – control due to lower output levels to reach a scale of economy, Macquarie bank has grown so much that it does not have to take this part of the theory into too much account. Additionally, since Macquarie has created some unique attributes and competencies to its products and services accompanied by their high level of service quality it has given them a competitive edge by using this focus strategy. This has allowed Macquarie to charge higher rates which has aided them in reaching the scales of economy. However, the issue of a focus strategy, in Macquarie’s case, is that by minimising their risk by entering possibly slow growing economies can minimise their growth rate. This is due to the environmental and operational environment which they have no control over which can eventuate in that market to grow exponentially. Although this can be predicted, it cannot always be acted upon with enough haste to reap the maximum benefits. This leaves room for other competitors to move in and take advantage of this risk. Thus this strategy implemented by Macquarie can hold potential growth defects for them if they hold to this strategy too closely. Recommendation: To combat this market selectivity, Macquarie needs to manage change throughout the organization. The changes which it will introduce will establish a sense of urgency. Strategic leadership can assist in making that change happen within Macquarie Bank. Strategic leadership is the process of providing the direction and inspiration necessary to create, provide direction to, or sustain an organization or an organizational unit Dubrin et al, 2003, p400). An Innovative way to expand within the same banking industry and yet keeping the same image of Macquarie’s high scale markets is driving convergence which also helps redraw industry boundaries. Instead of competing with competitors, it can compete with its own financial advisory services. Another way to compete is imitation. Macquarie can benchmark their performance to other high scale ba nks globally and use two key components; strategic follower ship and learning by watching (Dubrin et al, 2003, p410). Justification for Recommendation Offering a higher quality than its competitors, can help combat markets selectively. Customer’s service, for banks is one of the ways total quality management, can be used. The variable which makes TQM possible is extensive employee involvement. Other hot topics are corporate social responsibility, it is a well-researched field of management and it provides guidelines for leaders about how to be more accountable to a new global economy. After the advents of Enron, topics of CSR and Corporate governance have emerged as ways to prevent people working in highly funded projects to have some form of transparency within the system. Macquarie which is Australia top investment bank should undertake such a role as they are leaders in the industry. Conclusion to Macquarie Banks strategic approach In summary, we have gone through a historical overview of Macquarie Bank and have come up with the expected result from this power house institution. Macquarie bank is an institution known for its complex ways of handling its organization, critics say it is like ‘wrestling in the dark with a ghost’ (Schwab, A; 2007). After evaluation of strategies we realize that Macquarie is a bank which provides prestige for Australia and has a high reputation in the minds of many. References Australian Bankers Association, (2007), ‘The Australian Bankers’ Association’s role,’ (online) http://www. bankers. asn. au/default. aspx? FolderID=2 (Accessed 13th September 2007) Australia Competition and Consumer Commission, (2007), ‘Role and Activities,’ (online) http://www. accc. gov. au/content/index. phtml/itemId/54137/fromItemId/3744 (Accessed 13th September 2007) Australia’s Free Trade Agreement, (2007), ‘Benefits of Free Trade Agreements for Australia,’ (online) http://www. fta. gov. au/default. aspx? FolderID=239=187 (Accessed 13th September 2007) Australia Prudential Regulation Authority, (2007), ‘Streamlined data collection for life companies and friendly societies,’ (online) http://www. apra. gov. au/media-releases/07_15. cfm (Accessed 13th September 2007) Australian Securities and Investment Commission, (2007), ‘ASIC at a Glance,’ (online) http://www. asic. gov. au/asic/ASIC. NSF/byHeadline/ASIC%20at%20a%20glance (Accessed 13th September 2007) Bendigo Bank, (2007), ‘Corporate Governance,’ (online) http://www. bendigobank. com. au/public/about_us/corporate_governance/corporate_governance. asp (Accessed 13th September 2007) Chen, T, (1999), Critical Success Factors for Various Strategies in the Banking Industry, vol 17 issue 2/3. Commonwealth Bank, (2007), ‘Company Profile,’ (online) http://about. commbank. com. au/group_display/0,1922,CH2047,00. html (Accessed 13th September 2007) Dubrin, Dalglish Miller, (2003), Leadership, 2nd edition, John Wiley and Sons, Australia Hill, Jones, Galvin, Haidar, (2004), Strategic Management: An Integrated Approach 2nd edition, John Wiley and Sons, Australia Investopedia, (2007), ‘Debt-Equity Ratio,’ (online) http://www. investopedia. com/terms/d/debtequityratio. asp (Accessed 17th September 2007) Macquarie Bank, (2007), ‘About Macquarie Bank,’ (online) http://www. macquarie. com. au/au/about_macquarie/index. html (Accessed 10th September 2007) Macquarie Bank, (2007), ‘Corporate Governance,’ (online) http://www. macquarie. com. au/au/about_macquarie/corporate_governance. htm (Accessed 8th September 2007) Macquarie Bank, (2007), ‘Financial Report 2007,’ (online) http://www. macquarie. com. au/au/about_macquarie/acrobat/financialreport2007. pdf (Accessed 11th September 2007) Macquarie Bank, (2007), ‘History of Macquarie Bank,’ (online) http://www. macquarie. com. au/au/about_macquarie/company_profile/history. tm (Accessed 10th September 2007) Macquarie Bank, (2007), ‘Macquarie Bank 2007 Annual review,’ (online) http://www. macquarie. com. au/au/about_macquarie/acrobat/annualreview2007. pdf (Accessed 11th September 2007) Macquarie Bank, (2007), ‘Macquarie Bank announces 60% increase in profit and 47% increase in dividends per share,’ (online) http://www. macquarie. com. au/au/about_macquarie/media_centre/200705015a. htm (Accessed 17th September 2007) Macquarie Bank, (2007), ‘Major Seven Major Business Groups,’ (online) http://www. macquarie. com. au/au/about_macquarie/company_profile/mgmt_organisation/six_groups. tm (Accessed 11th September 2007) Macquarie Bank, (2007), ‘Management and Organisation Structure,’ (online) http://www. macquarie. com. au/au/about_macquarie/company_profile/mgmt_organisation. htm (Accessed 16th September 2007) Reserve Bank of Australia, (2007), ‘Structure and Functions of the RBA,’ (online) http://www. rba. gov. au/ActionPlan/index. html (Accessed 13th September 2007) Appendices Appendix 1 Focussed product differentiation A key element that has helped Macquarie differentiate its services from their competitors is how they have selected their market segments; however, this will be discussed in the next section. The reason they have a distinctive service differentiation from their competitors can be based on their values that they hold within the company. These values are; high ethical and professional standards, commitment to clients and growth, motivating and retaining quality staff, creating aligned staff and shareholder rewards and stringent reporting to create a high level of accountability (Macquarie, 2007) Focussed market segmentation Macquarie’s focussed market segmentation plan is to target a preferred demographical segment. They target the areas where they can best maximize their business as well as service their customers to the expectations that customers would hold from this prestigious company. They have a large commitment to the people they service as well as constant improvement to deliver higher standards of services and products to those people. As mentioned earlier, they expand selectively, seeking only to enter markets where Macquarie’s particular skills and expertise deliver real advantage to clients Focussed distinctive competency Another factor that has given Macquarie its strategic advantage would be

The Oil Spill Of The Petroleum Arena Essay - 897 Words

A company whose headquarters is based in London, England, BP PLC is one of the market leaders in the petroleum arena; who paired with Halliburton, and Transocean for what was intended to be a mutually beneficial partnership for all companies involved. On April 20, 2010, the company experienced one of the most historic events in the oil industry; which is referred to as the Deepwater Horizon oil spill of 2010 or Gulf of Mexico oil spill of 2010. To date, this event is noted as the largest marine oil spill to have ever occurred in the USA; extending to a total of 5 states. This spill worsened over a period of it Dean we voting in over 200,000,000 gallon of crude oil being pumped into the Gulf of Mexico. According to Dutta, (2013) a drilling rig was damaged when the explosion on 20th of April 2010 as work was being carried out on the Macondo well. This explosion not only affected the companies involved in the operations, but also affected humanity, the environment, and the economy. It took the oil a mere eight days to sink to the bottom of the rig and over three months of a leakage before BP could get the barrel capped. With such a disaster, many sectors were affected including tourism and fishing, whose impacts were directly compro mised. The beaches would have been affected, likewise, the sea, putting a halt to swimming and fisheries. In reviewing the circumstances surrounding the BP Deepwater oil spill, it can be noted that the company was initially focused on theShow MoreRelatedThe Beachfront Plain Is Undulating With Heights Somewhere Around Zero And 600m Above Ocean Level1740 Words   |  7 Pagesenvironmental damage and the World Bank s Chad-Cameroon oil and pipeline project. Amsterdam: Netherlands Committee for IUCN. Guyer, J. (2002). The Chad-Cameroon petroleum and pipeline development project. African Affairs, 101(402), 109-115. Horta, K., Nguiffo, S., Kemneloum DjiraïbeÃŒ , D. (2007). The Chad-Cameroon Oil Pipeline Project. 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