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Compass group is a leading food service company in the world. During the period of years 2001 to 2005 the Compass group has followed a very robust strategy for the purposes of expansion of its business organically across the various countries in the world. The strategy of the company during this period was to grow organically as much as possible and to build value for the stakeholders of the company. Undertaking an environmental scanning and analysis is very important for the purpose of assessing the strategy of a company and its performance. This also creates awareness of the pros and cons of the marketability of the product of the company for being able to perform in an effective manner for increasing the sales and revenues of the company.
SWOT analysis brings various benefits to the companies.
The benefits of SWOT Analysis in developing a marketing plan are as under-
This technique enhances the strengths of the business.
It is a source of information for doing planning for the strategic and marketing purposes.
Opportunities are pop up in front of the management who can than take steps to tap the same for the purpose of growth of the company and business.
It highlights the weakness which is of key importance and gives the directions for dealing with the same.
The threats are identified which can be taken care of before actual disaster can affect the company or its businesses.
Through SWOT analysis, core competencies of the firm are identified and highlighted and the steps can be taken for the purpose of improvement in the same.
With vast advantages for the same, SWOT Analysis have also a few of the disadvantages. The SWOT analysis although is a tool of importance but it has subjectivity involved in it. Categorization of factors like the strengths, weaknesses, opportunities and threats to an organization might be very subjective as there is a great deal of uncertainty prevailing in the market. SWOT Analysis although give emphasis on the significance each of the four elements, but it does not give a picture as to the manner in which organization can work and identify the SWOT elements.
Certain limitations or disadvantages of SWOT Analysis which are beyond the management's control are as under:
Increase in prices of raw materials;
Sudden changes in economic environment;
New Government legislations;
Compass strategy was to increase the value for its shareholders by providing exceptional quality of food and services to the clients of the company thereby increasing the wealth of the shareholders. Also, growing organically by acquiring businesses in various countries of the world for the purposes of organic expansion was among the strategies of the company. The strategy of the company for increasing shareholders wealth revolved around four principles:
To maximize the return on investments of the shareholders
To keep the customers of the company satisfied at all times
To consistently deliver the services of the company
To place the best people into the business of the company
The Compass group had a strategic focus on the five areas where the company put emphasis:
Customer and client satisfaction - meaning that the customers and the clients are put at the foremost of everything that the company does. And to work closely with the customers of the company in order to be able to responding to their needs quickly after carefully listening to them.
Market leadership - this means that improvement in quality and effectiveness in cost by having teams which are experienced in the specific markets and sectors. Also, developing a unique portfolio of leading food services in the world.
Preferred employer - Providing good and exceptional opportunities to the staff of the company so that they have opportunity to develop their careers and utilize their full potentials.
Operational excellence - means that superior systems, processes, equipment and standards to be used and applied. Investments made in IT and adopting the best practices throughout the business.
Financial performance - Means focus on obtaining growth in the EPS and the return on investments of the company on a continuous basis. Also to attain growth in sales volumes and net profits for maximizing the value to the shareholders.
During the period from 2001 to 2005 the company followed a highly aggressive strategy of growth by acquisitions. Compass made various large scale acquisitions in the countries like Germany, US, Italy, UK, Switzerland, Japan, Norway etc. These acquisitions were worth millions and billions of pounds and they provided the company with the platform from rapid growth and expansion in the countries across the world.
This strategy helped to enhance the position of the company as a leading caterer in the world but the strong cash flow of the company was affected in this manner. This in turn put pressures on the margins and returns of the company. The company had set a growth target of six percent each year for itself but this target became of question due to the strategy of expansion and acquisitions.
An analysis of the financial data of the performance of the company for the five years from 2001 to 2005 shows that the operating profit, earnings per share of the company is showing a mixed trend as under:
Amounts in £M
Excluding exceptional items
Profits before tax
Profits after tax
The profits of the company have risen during the period from 2001 to 2004 but they are again at a decline in the year 2005 and a similar trend is shown by the EPS of the company.
Also the analysis of the share price of the company reveals that although the company may be expanding by means of acquisitions but the share prices of the company are declining from 469.75 pence in 2001 to 206.25 pence in 2005. This is happening simultaneously while the sales of the company are continuously rising.
The rise in sales but a contrasting decline in profits, EPS and share prices show that the overall performance of the company is not on a very positive note. The company may be expanding or growing organically but the performance of the company is not increasing rather its declining. The focus now needs to be put on sustaining profits, EPS and share prices instead of achieving sales targets of 6% each year without making any profit growths.
3. BRIBERY CASE IN THE CONTEXT OF BUSINESS ETHICS AND STRUCTURE:
Bribery means offering, promising or providing an undue benefit to an official with the intention to get or to retain an improper advantage by making the official to act or not to do certain act which is related to the performance of the official's duty. In the context of the business ethics and structure bribery is considered to be a crime of high significance.
In terms of business, speaking about business ethics means the following three things:
To avoid violation of the criminal law in the work related activities.
To avoid such actions that can bring civil law case / suit against the company.
To avoid those actions / things which are not good or infact bad for the image of the company.
In the year 2005, Compass was subjected to the investigations relating to the alleged bribery of the United Nations officials by Compass subsidiary Eurest Support Services (ESS). The allegations were the use of leaked details of UN tenders to win contracts. The implications of the same in the context of business ethics and structure on the company are as under:
Loss of money and company reputation of the company
Filing of law suits by the competitors to further malign the position of the company in the global market
Loss of business and customers
Loss of reputation in public dealing contracts and biddings
This is further explained by means of following three different ways of dealing with standards of business ethics:
3.1. DERIVING BUSINESS ETHICS FROM PROFIT MOTIVE:
This has both strong and weak implications associated with it. The businesses operate for the sake of profits and the weak version of this states that moral business practices bring profits to the business. On the other hand, takes a different strategy and says that profit motive brings ethical environment meaning that if customers ask for safe products and workers want privacy they will choose businesses that will meet their demands.
In the context of Compass the company needs to put more emphasis on the matter in order to earn profits but not at the cost of the reputation of the business.
3.2. BUSINESS ETHICS RESTRICITED TO FOLLOWING THE LAW:
This approach is to restrict moral obligations of a business to what is prohibited by the law. Things beyond the scope of law such as privacy at work etc are therefore not covered. However, in the modern business world in order to ensure smooth business operations the organizations need to take steps beyond the law to maintain work ethics. This is what needs to be developed in the context of Compass.
3.3. DERIVING BUSINESS FROM GENERAL MORAL OBLIGATION:
This is the element which is beyond the profit motive and the law elements for the purposes of ethical compliance. This means that the proper ethical behavior is something which is above the law and beyond the profit motive.
Bribery is termed as highly unethical business practice and is therefore discouraged and criticized by all the ethical standards set. In this context, there are strong implications of the bribery matter on the reputation of Compass. Therefore, it needs to develop, implement and maintain a set of ethical standards which is followed unanimously across all the countries of the world in order to save the company from future hassles and allegations like these.
4. OPPORTUNITIES AND THREATS FACED BY COMPASS IN THE US AND THE UK:
The United States and the United Kingdom are the major markets for the operations of the Compass group. More than 50% of the revenues of the company come from these regions. The figures provided show that the share of turnover from North America is 32% and that of the United Kingdom is 23% and therefore these are the significant contributors to the profits of the company. Also the company is earning business and industry and the education sectors in the US and the UK markets which have great potential for further growth.
There are a lot of opportunities offered by the UK and the US markets for Compass. These opportunities are primarily in the health care and education sectors. These are the sectors which have sustained growth and business despite of the recession and downfall in the business and industrial sectors. These sectors being less cyclical have seen an enormous growth for the sales of Compass.
There are also opportunities for offering multi service packages to existing customers where a variety of speciality services such as retail stores and facilities management services.
The threats come from the concerns relating to the standard of the food. These particularly arise in the UK where Compass suffered the criticism of unhealthy school dinners.
Other threats are from the business and the economy suffering and showing a downturn. Cost cutting measures have been implemented by various customers and removal of their various employee benefits has resulted in diminished orders and lower revenues and reduced numbers of people are there to serve.
4.3. STRATEGIES TO DEAL WITH SAME:
There are numerous strategies that can be undertaken to deal with the situations in these regions in this context Ansoff's matrix can be used so that the existing market and new product strategy can be used and applied to gain a competitive advantage over others.
Ansoff's Product matrix was developed by Igor Ansoff. It is a good tool which is developed for businesses to enable them to decide and focus growth strategies for the products and markets in which they are presently operating or will be operating in the future. This approach gives various ways to achieve growth using both new and existing products and markets. For each approach there is a separate strategy given. This is explained by the figure below:
(Source: http://bizeco.blogspot.com/2006/06/ansoff-matrix.html ) (Retrieved 22/06/2010)
We can see from the above figure that the introduction that the Ansoff's product matrix deals with four different strategies for the existing and new products and markets. Appropriate marketing plan should be device in order to achieve this goal.
This strategy means that the Compass group needs to develop new product such as that of a multi service nature that can cater to the vast needs of a single customer. In this way it can bring immense benefits in terms of revenue and profits for the Compass group but also it will bring cost savings for the customers of the company.
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