(b) Explain how the process of developing scenarios might help John better understand the macro-environmentalfactors influencing Airtite’s future strategy. (8 marks)

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5 The way in which managers treat their employees can significantly influence the satisfaction that the employees derive from their work and thus the overall success of the organisation. Understanding the importance of motivation is therefore an important management skill.
(a) Content theories address the question ‘What are the things that motivate people?’
Content theories are also called need theories (because they concentrate on the needs fulfilled by work) and are based on the notion that all human beings have a set of needs or required outcomes, and according to this theory, these needs can be satisfied through work. The theory focuses on what arouses, maintains and regulates good, directed behaviour and what specific individual forces motivate people. However, content theories assume that everyone responds to motivating factors in the same way and that consequently there is one, best way to motivate everybody.

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(c) A number of opportunities appear to exist in the downstream supply chain.
As already mentioned above, Perfect Shopper can revisit its contract distribution arrangements. At present, distribution to
neighbourhood shops is in the hands of locally appointed contract distributors. As already suggested, it may be possible to
contract one integrated logistics company to carry out both inbound and outbound logistics, so gaining economies of scale
and opportunities for branding.
One of the problems identified in the independent report was the inflexibility of the ordering and delivering system. The
ordering system appears to be built around a fixed standard delivery made every two weeks, agreed in advance for a three
month period. Variations can be made to this standard order, but only increases – not decreases. Presumably, this
arrangement is required to allow Perfect Shopper to forecast demand over a three month period and to place bulk orders to
reflect these commitments. However, this may cause at least two problems. The first is that participating shops place a
relatively low standard order and rely on variations to fulfil demand. This causes problems for Perfect Shopper. Secondly, any
unpredictable fall in demand during the three month period leads to the shop having storage problems and unsold stock. This
potentially creates problems for the shop owner, who may also begin to question the value of the franchise. Hence Perfect
Shopper might wish to consider a much more flexible system where orders can be made to match demand and deliveries
can be made as required. This would also remove the requirement for a three monthly meeting between the franchisee andthe sales representative from Perfect Shopper. Investments in IT systems will be required to support this, with participating
shops placing orders over the Internet to reflect their requirements. This move towards a more flexible purchasing arrangement
may also make the outsourcing of warehousing and distribution even more appealing.
Perfect Shopper may also wish to investigate whether they can also provide value added services to customers, which not
only simplify the ordering system but also allow the shop managers to better understand their customers and fulfil their
requirements. The supply chain may legitimately include the customer’s customers, particularly for franchisers. This is already
acknowledged because Perfect Shopper produces tailored marketing material aimed at the end-consumer. Point of Sales (PoS)
devices feeding information back to Perfect Shopper would allow sales information to be analysed and fed back to the
shopkeeper as well as allowing automatic replenishment based on purchasing trends. However, this may be culturally difficult
for independent neighbourhood shopkeepers to accept. Furthermore, it would potentially include information outside the
products offered by Perfect Shopper and the implications of this would have to be considered. However, a whole shop sales
analysis might be a useful service to offer existing and potential franchisees.
Customers are increasingly willing to order products over the Internet. It seems unlikely that individual shopkeepers would be
able to establish and maintain their own Internet-based service. It would be useful for Perfect Shopper to explore the potential
of establishing a central website with customers placing orders from local shops. Again there are issues about scope, because
Perfect Shopper does not offer a whole-shop service. However, Michael de Kare-Silver has identified groceries as a product
area that has good potential for Internet purchase. In his electronic shopping potential test any product scoring over 20 hasgood potential. Groceries scored 27.

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(ii) Effective delegation can be achieved by assigning agreed tasks to the subordinate, ensuring that resources are allocated and by specifying expected performance levels and ensuring that they are understood. In addition, it is necessary to ensure that the subordinate has the ability and experience to undertake the tasks by maintaining frequent contact and ensuring that the subordinate has authority to do the job. Sufficient authority must be delegated to fulfil the task. This authority in turn may be specific or general; the scenario suggests that the authority of the managers and supervisors is specific. The subordinate should not refer decisions upwards, and the superior should not expect this. In addition there should be no doubts over boundaries; they must be clearly defined as to who holds what authority and who accounts to whom. Therefore there must be clarity as to departmental functions and individual authority, which is at the root of the problem at Flavours Fine Foods.

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(c) Matthew has set ambitious growth goals for the 2005–7 period in his quest to become ‘unquestioned leader’ in their region
and to roll out the model nationally. Clearly there are choices to be made in terms of implementing the strategy and much of
the success of the strategy will depend on the extent to which appropriate resources, structure and systems are in place to
facilitate growth. Many alternative models consider how strategy is implemented, but one of the most popular is the McKinsey
7S model in which the 7S’s are strategy, structure, systems (the so called ‘hard’ or tangible variables) and staff, style, skills
and shared values (the ‘soft’ or less tangible variables). The 7S model has a number of key assumptions built into it. Normally
we tend to think of strategy being the first variable in the strategic management process, with all other variables dependent
on the chosen strategy. However, Peters and Waterman argue that the assertion, for instance, that a firm’s structure follows
from its strategy ignores the fact that a particular structure may equally influence the strategy chosen. If we have a simple
functional structure, this may severely limit the ability of the firm to move or diversify into other areas of business. Equally
important is to understand the linkages between the variables, just as with the value chain, recognising if you change one of
the variables you then have to see the consequences for each of the other variables.
Our earlier analysis will have provided us with an understanding of the strategy being pursued by Universal. It is now looking
to offer its service to other parts of the country and become a national provider. In strategy terms, this is a process of growth
by way of market development, with the same service in different regions or markets. Universal’s experience is dominated by
operating in one region and the consequences of moving into new regions should not be underestimated. There are interesting
examples of companies having conspicuous success in their home territory but finding competition and customer relationships
very different outside their home market, even in the same country.
Matthew has already recognised the need to create a new structure to handle the growth strategy. This is ‘growth by
geographic expansion’ and while it may be the most simple growth strategy to control and co-ordinate, the creation of regional
centres managing the sales and installations in the region will add an additional level of administration and complexity.
This structural change will have significant implications for the systems employed by the company. Development of a national
operation will necessitate new methods of communication and reporting. Customer service levels depend on the management
information systems available. There is an opportunity for the new regions to benchmark themselves against the home region.
Efficient systems lie at the heart of Universal’s ability to offer a higher value added service to the customer. Standardised
processes have allowed a ‘no surprises’ policy to be successfully implemented. The extent to which the same business models
can be simply repeated in region after region will have to be tested. There is little mention of IT systems, but the pace of
expansion should be closely linked to the system’s ability to cope with increased demands.
Staff – reference has been made earlier to Universal being a people business, able to deliver a better quality of service to the
customer. The heavy reliance on self-employed staff means that a very active recruitment and training process will have to
be in place as Universal moves into different regions. New layers and levels of management will have implications for the
recruitment and development of both managers and staff reporting to them. The degrees of autonomy given to each of the
regions will materially affect the way they operate. Reward systems clearly link both staff and systems dimensions and there
is need to ensure that the right number and calibre of staff are recruited to expand the market coverage. Does Universal have
a staffing model that is easily ‘rolled’ out into other regions?
Equally important are any changes to the skill set needed by staff to operate nationally. Matthew feels that the model is
relatively lowly skilled with staff controlled through standardised systems. However, change is inevitable and the recruitment
and retention of staff in a labour intensive service will be key to success.
Universal is very much a family business dominated by the two founding brothers. Even with expansion being entirely within
their local region the rate of growth to a ￡6 million turnover business predicted to treble in size over the next three years, will
necessitate changes in the style. of management. Time management issues amongst the owner-managers have already begun
to emerge and a move from involvement with day-to-day management to a more strategic role is needed. Certainly growth to
date has been more emergent than planned, but vision and planning will be equally necessary as the firm operates nationally.
There are tensions for Matthew in making sure that his change in role and responsibilities does not result in him becoming
remote from his management and staff. Communication of the core values of the company will become even more necessary
and communication is key to managing the growth process.
The 7S’s is not the only model that will be useful in understanding the problems of implementing the growth strategy.
Greiner’s growth model has merit in drawing attention to the stages a growing business following an organic growth strategy
can expect to go through. Johnson and Scholes now refer to strategic implementation as ‘strategy in action’ made up of three
key activities, structuring an organisation to support successful performance. Universal’s move from a regional to a national
company will call for different structures and relationships. Enabling links the particular strengths and competences, built
round separate resource areas, to be combined to support the strategy – which in turn recognises and builds on identified
strengths. Finally, growth strategies will involve change and the management of the change process. They argue that change
will involve the need to change day-to-day routines and cultural aspects of the firm, together with overcoming resistance to
change.
All too often, a company grows at a rate which exceeds the capacity to implement the necessary change. This can expose
the firm to high levels of risk. Growth pressures can stimulate positive change and innovation, but in companies such as
Universal where considerable stress is placed on performance, targets and quality may be a casualty. Equally concerning is
if the rate of growth exceeds the capacity to invest in more people and technology. Growing the people and the systems isalmost a prerequisite to growing the business.

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(a) Environmental Analysis
Clearly, both the macro-environment and the industry environment facing Airtite are becoming more challenging and scanning
the environment and understanding the relative significance of the challenges is a key step in developing a future strategy to
deal with it. Many models and tools and techniques are available to assess the size of the competitive threats facing Airtite.
One of the earlier scanning models looks to measure whether the environment an organisation faces is becoming more
complex and more dynamic. Evidence from the scenario suggests both are occurring and this means it is becoming
increasingly difficult to predict the future nature of competition from what has happened in the past. Airtite’s future is linked
to an increasingly global environment and many conflicting and contradictory factors require the company to develop a
process through which these factors are considered on a regular and systematic basis.
Johnson and Scholes suggest there are five steps in terms of environmental analysis:
Step 1 Audit of environmental influences
Step 2 Assessment of the nature of the environment
Step 3 Identification of the key environmental forces
Step 4 Identification of competitive position
Step 5 Identification of the principal opportunities and threats
Systematic consideration of each of these steps leads to an understanding of the strategic position of the firm.
A PESTEL analysis is part of the process of environmental appraisal and it is important for John to recognise those parts of
its environment it can influence. All too often firms can regard themselves as ‘victims’ of the chosen environment, failing to
recognise that through their strategic decisions they can profoundly change the competitive environment for their current or
potential competitors. A good PESTEL analysis inevitably links into an informed SWOT analysis. In both instances it is
necessary to isolate the key forces causing environmental change – simply creating a long list of factors may simply convince
you of your inability to change the situation.
Once having decided which are the critical factors, it is then necessary to decide on the likelihood of a particular
environmental change occurring and the significance of its impact on the firm. Matching the competitive capability of the firm
against the attractiveness of the business sector Airtite is operating in will provide an understanding of the firm’s competitive
position and the options open to it. Many other models and tools and techniques are available, including Porter’s five forces,product life cycle analysis and scenario building to generate alternative strategic responses.

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(b) Perfect Shopper currently has a relatively short upstream supply chain. They are bulk purchasers from established suppliers
of branded goods. Their main strength at the moment is to offer these branded goods at discounted prices to neighbourhood
shops that would normally have to pay premium prices for these goods.
In the upstream supply chain, the issue of branding is a significant one. At present, Perfect Shopper only provides branded
goods from established names to its customers. As far as the suppliers are concerned, Perfect Shopper is the customer and
the company’s regional warehouses are supplied as if they were the warehouses of conventional supermarkets. Perfect
Shopper might look at the following restructuring opportunities within this context:
– Examining the arrangements for the delivery of products from suppliers to the regional warehouses. At present this is in
the hands of the suppliers or contractors appointed by suppliers. It appears that when Perfect Shopper was established
it decided not to contract its own distribution. This must now be open to review. It is likely that competitors have
established contractual arrangements with logistics companies to collect products from suppliers. Perfect Shopper must
examine this, accompanied by an investigation into downstream distribution. A significant distribution contract would
probably include the branding of lorries and vans and this would provide an opportunity to increase brand visibility and
so tackle this issue at the same time.
– Contracting the supply and distribution of goods also offers other opportunities. Many integrated logistics contractors also
supply storage and warehousing solutions and it would be useful for Perfect Shopper to evaluate the costs of these.
Essentially, distribution, warehousing and packaging could be outsourced to an integrated logistics company and Perfect
Shopper could re-position itself as a primarily sales and marketing operation.
– Finally, Perfect Shopper must review how it communicates orders and ordering requirements with its suppliers. Their
reliance on supplier deliveries suggests that the relationship is a relatively straightforward one. There may be
opportunities for sharing information and allowing suppliers access to forecasted demand. There are many examples
where organisations have allowed suppliers access to their information to reduce costs and to improve the efficiency of
the supply chain as a whole.
The suggestions listed above assume that Perfect Shopper continues to only supply branded goods. Moving further upstream
in the supply chain potentially moves the company into the manufacture and supply of goods. This will raise a number of
significant issues about the franchise itself.
At present Perfect Shopper has, by necessity, concentrated on branded goods. It has not really had to understand how these
goods sell in specific locations because it has not been able to offer alternatives. The content of the standing order reflects
how the neighbourhood shop wishes to compete in its locality. However, if Perfect Shopper decides to commission its own
brand then the breadth of products is increased. Neighbourhood shops would be able to offer ‘own brand’ products to compete
with supermarkets who also focus on own brand products. It would also increase the visibility of the brand. However, Perfect
Shopper must be sure that this approach is appropriate as a whole. It could easily produce an own brand that reduces the
overall image of the company and hence devalues the franchise. Much more research is needed to assess the viability ofproducing ‘own brand’ goods.

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(b) Good Sports has pursued a conscious niche or focus differentiation strategy, seeking to serve a local market in a way that
isolates it from the competition of the large national sports good retailers competing on the basis of supplying famous brands
at highly competitive prices. Does it make strategic sense for Good Sports to make the heavy investment necessary to supply
goods online? Will this enhance its ability to supply their chosen market?
In terms of price, e-business is bringing much greater price transparency – the problem for companies like Good Sports is
that customers may use their expertise to research into a particular type and brand of sports equipment and then simply
search the Internet for the cheapest supply. Porter in an article examining the impact of the Internet argues that rather than
making strategy obsolete it has in fact made it more important. The Internet has tended to weaken industry profitability and
made it more difficult to hold onto operational advantages. Choosing which customers you serve and how are even more
critical decisions.
However the personal advice and performance side of the business could be linked to new ways of promoting the product
and communicating with the customer. The development of customer communities referred to above could be a real way of
increasing customer loyalty. The partners are anxious to avoid head-on competition with the national retailers. One way of
increasing the size and strength of the niche they occupy is to use the Internet as a means of targeting their particular
customers and providing insights into the use and performance of certain types of equipment by local clubs and users. There
is considerable scope for innovation that enhances the service offered to their customers. As always there is a need to balance
the costs and benefits of time spent. The Internet can provide a relatively cost effective way of providing greater service to
their customers. There is little in the scenario to suggest they have reached saturation point in their chosen niche market.
Overall there is a need for Good Sports to decide what and where its market is and how this can be improved by the use ofe-business.

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5 The way in which managers’ duties are undertaken can significantly influence the satisfaction that employees derive from their work. Abraham Maslow suggested that individuals have a hierarchy of personal needs which are identifiable, universally applicable and can be satisfied in the workplace. Understanding this concept provides guidance to management as to the appropriateness of
motivational techniques.
(a) Maslow’s theory of motivation is a content theory. Its basic idea is that each individual has a set of needs which have to be
satisfied in a set order of priority.
Maslow suggested that individuals have five needs:
Self-actualisation
(or self fulfilment)
Esteem needs
(or ego)
Social needs
Safety needs
Physiological needs
These needs are arranged in a hierarchy of importance and movement is upwards, from physiological needs to selfactualisation.Any individual will always want more; each need must be satisfied before the next is sought. However – andcritically so far as motivation in the workplace is concerned – a satisfied need is no longer a motivator.
The theory is usually presented in the shape of a triangle, with physiological needs at its base and self-actualisation at itsapex. The triangle shape has a clear significance. As an individual moves up toward the apex, the needs thin out, that isphysiological needs are far greater than self-actualisation needs. For many individuals, reaching social needs is often thehighest need to be satisfied. The theory is sometimes presented as a staircase; again with self-actualisation at the top. Thissecond diagrammatic form. reflects the application of the theory to more modern situations, where it can reasonably beassumed that those within the organisation have already achieved physiological and safety needs. For such individuals, socialand esteem needs may well be greater.
Physiological needs are the basic survival needs which, although part of the theory, probably have less relevance today. Theseneeds are usually seen as food, shelter (which is sometimes noted as a safety need), warmth and clothing.
Safety needs are the desire for security, order, certainty and predictability in life and freedom from threat. The above two so-called ‘lower order needs’ dominate until satisfied.
Social needs are the gregarious needs of mankind, the need for friendship, relationships and affection. This is often seen as the desire to be part of a family.
Esteem needs are the desire for recognition and respect, often associated with status, especially in the modern world.
Self-actualisation (self fulfilment) is the ultimate goal. Once this state is achieved the individual has fulfilled personal potential.
However, later work by Maslow has suggested that there are two additional needs; freedom of enquiry (free speech and justice) and knowledge (the need to explore and learn). These additional needs are a further development of social needs and recognise the changing nature of modern life.

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(b) It is important to note that there is nothing in the nature of the activities carried out by HR staff and departments that prevents
outsourcing being looked at as a serious option. Indeed, amongst larger companies the outsourcing of some parts of the HR
function is already well under way, with one source estimating that HR outsourcing is growing by 27% each year. Paul,
therefore, needs to look at the HR activities identified above and assess the advantages and disadvantages of outsourcing a
particular HR activity. Outsourcing certain parts of the recruitment process has long been accepted, with professional
recruitment agencies and ‘head-hunters’ being heavily involved in the advertising and short listing of candidates for senior
management positions. Some HR specialists argue that outsourcing much of the routine personnel work, including
maintaining employees’ records, frees the HR specialist to make a real contribution to the strategic planning process. One
study argues that ‘HR should become a partner with senior and line managers in strategy execution’.
If Paul is able to outsource the routine HR activities this will free him to contribute to the development of the growth strategy
and the critical people needs that strategy will require. In many ways the HR specialist is in a unique position to assess current
skills and capabilities of existing staff and the extent to which these can be ‘leveraged’ to achieve the desired strategy. In
Hamel and Prahalad’s terms this strategy is likely to ‘stretch’ the people resources of the company and require the recruitment
of additional staff with the relevant capabilities. Paul needs to show how long it will take to develop the necessary staff
resources as this will significantly influence the time needed to achieve the growth strategy.
Outsourcing passes on to the provider the heavy investment needed if the company sets up its own internal HR services with
much of this investment now going into web-based systems. The benefits are reduced costs and improved service quality.
The downside is a perceived loss of control and a reduced ability to differentiate the HR function from that of competitors.
Issues of employee confidentiality are also relevant in the decision to outsource.

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(b) The analysis of each of the market entry strategies has begun the process of identifying how the marketing mix of product,
price, place and promotion will vary significantly between the three outlets.
Product – here the nature of the product in terms of recipes and product range can be varied reasonably easily to meet the
demands of the outlet.
Price – again this will vary in significance between the three outlets with the greatest pressure coming from the supermarkets
and catering wholesalers. Margins may come under pressure with the supermarkets looking for a contribution to sales
promotions.
Promotion – here the issue of brand development is a crucial factor. Using her own brand, Helen can develop the product
range and extend the outlets she sells through.