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Customer Relationship Management (CRM) Implementation Framework

4683 words (19 pages) Essay in Management

5/12/16 Management Reference this

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Customer Relationship Management (CRM) is a customer-focused business strategy aimed to managing relationships by focusing on customer retention and relationship development. However, its successful implementation is elusive as there is no agreed upon definition, components and/or implementation guidelines. Thus, this study contended to address and resolve the semantic confusions surrounding the concept and the implementation of CRM. In an attempt to clarify such confusions, this study conducted an extensive literature review to track the main features of the concept and the exact components of its implementation. This paper provides a conceptual definition for CRM that capture all the facets cited in literature. Then the paper develops a framework that maps the implementation of CRM as consists of 16 elements that are categorized under three key dimensions, namely; people change, business process and technology.

Keywords: CRM, Strategic perspective, Implementation dimensions.

Introduction

The rapid changes on the competitive environment have forced enterprises to fundamentally rethink the way they do business (Ozgener and Iraz, 2006). Globalization of business, internationalization, deregulation, information technology advances and shorter product life cycles possessed new forms of competition and structural modifications of exchange processes which have led to the emergence of the relationship paradigm for creating long-term relationships among customers and suppliers (Sahay, 2003, Stefanou et al., 2003 and Zineldin and Jonsson, 2000). Thus, the last decade has seen much attention devoted to the subject of relationship management which became a powerful tool for developing long-term relationships with clients, suppliers and distributors (Osarenkhoe and Bennani, 2007).

Firms that are organized around the product, in a product-focused approach, tend to set the processes in terms of the product lines instead of the customer lines (Mendoza et al., 2007) and acquire customers for their products by using mass marketing efforts (Chen and Popovich, 2003). However, these firms may face challenges as their product oriented culture could be inconsistent with the customers’ expectations (Mendoza et al., 2007). On the other side, the approach of customer centricity, which is a process of segmenting groups of customers based on similar attributes, intends to manage those segments in a way that maximizes both the benefits to customers and the long-term profit potential of the organization (Izquierdo et al., 2005 and Nguyen et al., 2007). Consequently, customer-centric approach organizations integrate marketing and other business processes to serve customers and respond to market pressures with the goal to increase revenue, reduce the cost of sales and services, and improve operations (Chen and Popovich, 2003). Good customer relationships are at the heart of business success (Osarenkhoe and Bennani, 2007).

In this context, customer relationship management (CRM) is considered the broader issue of customer-focused management (Hendricks et al., 2007) and, in addition, it has roots in relationship marketing (Chen and Popovich, 2003, Bull, 2003 and Mendoza et al., 2007). Ozgener and Iraz (2006) highlighted that CRM is the key competitive strategy businesses need to stay focused on their customers and to integrate all customer-facing activities throughout the organization by using information and communication technology in order to get closer to the customers and create long-term relationships. CRM aims at improving long run profitability by shifting from transaction-based marketing, with its emphasis on winning new customers, to customer retention through effective management of customer relationships (Chen and Popovich, 2003, Bull, 2003 and Mendoza et al., 2007). Since dissatisfied customer causes market damage, CRM, which is of largely strategically character, is considered an effective option and an important topic of conversation in business world (Ozgener and Iraz, 2006).

However, Mendoza et al. (2007) argued that CRM should not be considered as a magical solution that will solve all the company’s problems because companies are different in their culture and business processes. In this regard, the literature revealed some shortages regarding this concept and its implementation. Coltman (2007) confirmed the fact that the exact meaning of CRM is still subject to a wide range of views. Additionally, Bull (2003) mentioned that there is a relative lack of CRM empirical studies. In particular, Stein and Smith (2009) stated that no existing research to support the value of CRM in the business-to-business market space. Besides, Mendoza et al. (2007) declared that there are few experienced companies that allow adequate understanding and implementation since CRM is a relatively new concept.

Although an enormous debate has been initiated regarding the identification and the importance of different CRM implementation determinant factors, Osarenkhoe and Bennani (2007) claimed that the concepts presented and discussed in different perspectives of CRM reflect a lack of accurate operating elements for CRM implementation. Similarly, Sigala (2005) asserted that there is still no agreed framework as to how CRM can be best applied and adopted within organizations. In accordance, Mendoza et al. (2007) underscored that the most critical problem that hinder companies from being engaged in implementing CRM is the lack of an implementation model to guide companies for such strategy.

Additionally, Blery and Michalakopoulos (2006) and Crosby (2002) highlighted another conflict regarding CRM as for some authors it is seen as a technology solution rather than a strategy while others argued that the lack of strategy can be a serious cause of failure. Coltman (2007) suggested that one reason for the disappointing results of many CRM initiatives can be attributed to the overemphasis on CRM as an IT solution and the absence of a strategic framework for CRM success. Stein and Smith (2009) mentioned that the number of implemented CRM systems has grown generally in the form of IT databases and communications systems during the past ten years. However, Chalmeta (2006) stated that main causes of the failure of CRM strategy are thinking that technology is the solution and CRM is considered as being a new technology instead of a new way of doing things. In accordance, Coltman (2007) and Lavender (2004) attributed the disappointing results of many CRM initiatives to the overemphasis on CRM as an IT solution and the absence of a strategic framework for CRM success.

Statement of the Problem

Since CRM is relatively a new concept there is no consensus among researchers and practitioners about the exact meaning/definition of the concept. In addition, the few experienced companies engaged in CRM implementation practice and the lack of empirical studies at the academic level lead to inadequate understanding of the various elements that are required for the sufficient implementation of CRM. This view is supported by several researches that agreed on the lack of CRM implementation model or framework.

Research objectives and methodology

The aforementioned deficiencies in the CRM research and implementation recognize the imperative need to hold in-depth investigation on the subject. Consequently, this study is designed to produce a comprehensive framework for CRM implementation that attempted to help organizations’ management develop strategies for CRM success. In order to achieve this aim, the definitions of the concept will be presented and discussed to clarify the similarities and differences between previous studies’ perspectives. Then, the basic constructs that are combined into the CRM will be reviewed with the aim to illustrate the concept. Finally, the in-depth analysis of different issues regarding implementation steps and outputs will help to identify required factors that affect its success.

CRM Definition

There are various perspectives of CRM definitions in the extant literature. Several studies believed that CRM is mainly evolved from the inspiration of customer centricity. Ozgener and Iraz (2006), Xu and Walton (2005) and Zineldin (2006) affirmed that CRM provides transform organizations into customer-centric enterprises that maximize the value of every customer. Likewise, Chen and Popovich (2003) stated that CRM is an enterprise-wide customer-centric business model that must be built around the customer. Moreover, Blery and Michalakopoulos (2006) and Chalmeta (2006) identified that CRM is a customer-focused business strategy that can help companies to build long lasting relationships with their customers through the application of customer focused strategies. Simply, CRM is the management of relationships between the firm and its customers in order for both the company and its customers to receive maximum value from the relationship (Maguire et al., 2007).

The nature of CRM, as a strategy rather than a set of tools and methodologies, was a concern of enormous debate in literature. At one side, the strategic view of CRM was affirmed by various researches. Stein and Smith (2009) defined CRM as an integrated strategy solution intended to maximize synergies across all of the firm’s existing programs targeting relevant customer communities. In addition, Osarenkhoe and Bennani (2007) underscored that CRM is the key competitive strategy required to keep businesses focused on the needs of their customers through integrating a customer facing approach throughout the organization.

On the other side, Chen and Popovich (2003) declared that some organizations consider CRM as a tool specifically designed for one-to-one customer communications which is a sole responsibility of sales/service, call centers, or marketing departments. Likewise, Ozgener and Iraz (2006), Bull (2003) and Zineldin (2006) depicted CRM as the set of methodologies and tools that help an enterprise manage customer relationships in an organized way by identifying the right customer groups and optimizing the balance between corporate investments and the satisfaction of customer needs to generate the maximum profit.

Moreover, definitions of CRM highlighted the importance of information and knowledge. Information is essential to understand who customers are, what they do, and what they are like (Chen and Popovich, 2003, Lindgreen and Antioco, 2005 and Sigala, 2005). Bull (2003) pointed out that CRM is the utilization of customer related information or knowledge to deliver relevant products or services to customers. In accordance, Osarenkhoe and Bennani (2007) defined CRM as a continuous learning process in which information about individual customer is transformed into a customer relationship.

Another essential feature is that CRM refers to all business activities directed towards initiating, establishing, maintaining, and developing successful long-term relationships. This opinion is declared by (Ozgener and Iraz, 2006) who defined CRM as a cross-functional process for achieving a continuing dialogue with customers, across all their contact and access points, with personalized treatment of the most valuable customers, to increase customer retention and the effectiveness of marketing initiatives. Blery and Michalakopoulos (2006) and Chalmeta (2006) also asserted that CRM should be viewed as the dynamic integration of sales, marketing and customer care service which aims to add value for both the company and its customers. In the same vein, Zineldin (2006), Bull (2003), Crosby (2002) and Mendoza et al. (2007) viewed CRM as a holistic approach that reaches into many parts of the business, to coordinate and effectively maintain the growth of different customer contact points or communication channels.

It is noticed that many studies focused on the technological aspect of CRM and many organizations considered CRM as simply a technology solution that extends separate databases and sales force automation tools to bridge sales and marketing functions in order to improve targeting efforts (Chen and Popovich, 2003). However, Osarenkhoe and Bennani (2007) and Nguyen et al. (2007) alleged that CRM is more than just technologies. CRM should be viewed as a combination of people, process and technology (Chen and Popovich, 2003, Xu and Walton, 2005, Da Silva and Rahimi, 2007 and Sigala, 2005). In the same vein, Ozgener and Iraz (2006), Coltman (2007) and Nguyen et al. (2007) agreed on the importance of the strategic integration of various human, technological and business capabilities to improve and sustain profitable relationships. Moreover, Pan et al. (2006) believed that CRM should be perceived as a business approach involving the seamless fusion of people, process and technology in a manner which optimizes and strategies the business’s customer contact points. Likewise, King and Burgess (2007) and Shahin and Nikneshan (2008) agreed that CRM is an integration of technologies and business processes that are adopted to satisfy the needs of a customer during any given interaction.

Through the in-depth analysis of the mentioned above definitions, it is clear that there are some major criteria which could b involved in the design CRM definitions those criteria are the customer centricity approach, strategic perspective, the utilization of information and knowledge, the holistic cross-functional approach and the integration of people, process and technology. Furthermore, it is clear that the mentioned above criteria embraces the general view for all definitions. Accordingly, CRM can be defined as a customer-centric strategy that aims at maximizing the value of every customer and that applied through a cross-functional approach integrating people, business processes and technological capabilities to create value for the company and its customers in successfully developed long-term relationships.

CRM strategic perspective and dimensions

To survive in dynamic marketplaces, companies clearly need to establish strategies that can face the turbulent changes in the market environment (Zineldin, 2006). Throughout the 1990s, there was a shift in many organizations’ strategies from managing transactions towards the need to relationship management (Osarenkhoe and Bennani, 2007). Torkzadeh et al. (2006) declared that it costs up to twelve times more to gain a new customer than to retain an existing one. Since the cost of obtaining a new customer exceeds the cost of retaining an existing customer (Zineldin, 2006), the relationships marketing rational is to enhance long-term profitability by moving from transaction-based marketing and its prominence in attracting new customers, to customer retention by means of effective management of customer relationships (Sigala, 2005). Accordingly, CRM is the strategy used to learn more about customers’ needs and behaviors in order to help organizations to develop stronger relationships with them (Osarenkhoe and Bennani, 2007).

In order to develop an effective process for establishing and maintaining the added value and relationship with key consumers, company have to renew or improve their CRM strategies by producing and delivering high quality core products and supporting services in a more systematic manner (Zineldin, 2006). The strategic view of CRM emphasizes the fit of CRM strategy into the context of the company’s overall business strategy and the assessment of the company’s current CRM capabilities in order to allocate resources based on customer’s lifetime value to the firm (Becker et al., 2009 and Nguyen et al., 2007). According to Chen and Popovich (2003), a five percent increase in customer retention resulted in an increase in average customer lifetime value of between 35 percent and 95 percent, leading to significant improvements in company profitability.

Osarenkhoe and Bennani (2007) believed that CRM helps to bring together a variety of information about customers, sales, marketing effectiveness and responsiveness and market trends. Such information is critical for marketing managers to facilitate their business strategy. In this context, Stein and Smith (2009) and Coltman (2007) highlighted the significance of the knowledge of the customer and the integration of organizational processes for successful CRM strategy implementation. Volas et al. (2007) argued that the information provided by customer relationship management (CRM) systems may complement or corroborate that from traditional market research.

Therefore, the analysis of the strategic perspective of CRM revealed some basic factors which should be engaged in identifying the CRM as a strategy. These factors include; maximizing customer value, customer centric approach, customer knowledge and integration of organizational process. It is clear that these factors match the aforementioned criteria of the proposed conceptual definition of CRM.

Although the emphasis on the strategic side of CRM, Osarenkhoe and Bennani (2007) affirmed that the past attempts of extant literature on implementation of customer relationship strategies have been insufficient and not gone far enough in the transition from the transaction-based marketing to the new relationship paradigm. Such failures resulted from the perception of CRM as a technological solution for problems in individual areas (Mendoza et al., 2007 and Coltman, 2007). Therefore, Xu and Walton (2005) and Chen and Popovich (2003) asserted that implementation of CRM enterprise technology requires changes to organizational culture, while both technology and business processes are both critical to successful CRM initiatives.

In accordance, different studies stressed the identification of people, process and technology as the three key dimensions for CRM implementation. For instance, Ozgener and Iraz (2006) stated that CRM is the strategic application of people, processes and technology to improve and sustain profitable relationships with customers and partners. Similarly, Torkzadeh et al. (2006) affirmed that the interplay between technological, organizational, and individual factors affects the outcomes of CRM systems. Likewise, Chen and Popovich (2003) and Mendoza et al. (2007) agreed that CRM is a business strategy integrating three key dimensions of people, process, and technology that maximizes relationships and encompasses the entire organization.

CRM implementation will be described as a triangular dimensional framework whose vertices are the three dimensions of people, business processes and technology. Each of these dimensions will be investigated in order to capture its impeded elements which demonstrate the comprehensive framework for CRM implementation.

People changes

It is evident that the human factor is crucial in a CRM strategy, both from an inward perspective i.e., organization and employees and from an outward perspective i.e., customers (Mendoza et al., 2007, Shahin and Nikneshan, 2008 and Da Silva and Rahimi, 2007). By referring more than 70% of customers defect to dissatisfaction with service quality, Torkzadeh et al. (2006) affirmed that a significant portion of customer dissatisfaction is due to employees’ inability or unwillingness to respond to service failures. Therefore, CRM demands more than information and communication technology, it requires all members of the organization to understand and support the shared values which recognized the customer as the focal point of the organization (Ozgener and Iraz, 2006). Implementation of a relationship orientation can only come from the people in the organization understanding the objectives set and meeting the required standards (Osarenkhoe and Bennani, 2007).

Relationships are built on the foundation of mutual commitment, commitment level has been found to be the strongest predictor of the voluntary decision to remain in a relationship (Kim et al., 2008). In this context, Osarenkhoe and Bennani (2007) highlighted that all beliefs and actions that managers say and do determine the outcome of an implemented strategy. Also, Ozgener and Iraz (2006) warned that the most important barrier to CRM is the lack of senior management commitment to CRM. Chen and Popovich (2003) cited that customer-centric management requires top management commitment and support to CRM throughout the entire CRM implementation. Osarenkhoe and Bennani (2007) pointed out that top management commitment is one of the underlying element surrounding management and employees that successful CRM implementations require. Zineldin (2006) shared the idea that promises and commitment are central concepts in CRM. With any complex project, the organizational culture of the change and the proper management are necessary for achieving success (Becker et al., 2009 and Chalmeta, 2006).

The degree of success with CRM implementation is directly related to the level of involvement of the employees during the early and subsequent stages in the change process (Chen et al., 1996). Thus, CRM largely depends on staff attitudes, commitment and performance and so, success on the external marketplace requires initial success on the internal business by getting employees’ commitment (Shum et al., 2008 and Sigala, 2005). The people dimension of a relationship entails managing the social structure of a relationship cross-functionally (Osarenkhoe and Bennani, 2007). In order to get all employees committed and to ensure the efficient implementation of CRM, different changes are required to be occurred in accordance to company employees. In addition to changing attitudes for both management and workers, implementation of CRM projects involve defining new job roles and redesigning the company organizational diagram in an attempt to ensure that everyone in the company has their function allocated, and know what they have to do and how to do it (Chalmeta, 2006).

Employees must be trained in this new customer service philosophy. Such philosophy creates a corporate culture with a defined approach focused on the customer that enjoys the commitment of management and employees (Shum et al., 2008 and Hennig-Thurau, 2004). In addition, employees will need to know how to work with and exploit technology as well as manage the information exchange. Lavender (2004) warned that the major reason behind CRM applications failure is the people lack of critical information skills due to the emphasis on technical issues rather than end user issues. In accordance, Nguyen et al. (2007), Mendoza et al. (2007) and Ozgener and Iraz (2006) believed that the failure of implementing CRM is mostly due to absence of complementary customer management skills, lack of knowledge and research and lack of project management skills. Therefore, Blery and Michalakopoulos (2006) and Dimitriadis and Stevens (2008) revealed the need for a combination of technical, operational, cultural and organizational skills for CRM implementation.

As well as changing the company culture, the CRM project requires working teams to be created to take responsibility for the change and transmit it throughout the organization (Lambert, 2010 and Chalmeta, 2006). This involves a restructuring of the company’s job manual and organizational diagram, as ”customer teams” made up of staff from different departments, like marketing, design, sales, and so forth, will be created (Blery and Michalakopoulos, 2006). Accordingly, Osarenkhoe and Bennani (2007) considered changing the organizational structure as a core dimension of relationship strategy. Therefore, CRM calls for new job descriptions and organizational structures (Sigala, 2005).

Moreover, according to Ozgener and Iraz (2006) and Mendoza et al. (2007), inefficient communications between departments lead to inter-departmental conflicts which are considered as obstacles that hinder the successful implementation of CRM. Thus, King and Burgess (2007) asserted the importance of interdepartmental cooperation. CRM projects require implementation project teams with representatives from sales, marketing, manufacturing, customer services, and information technology (Chen and Popovich, 2003). It should be noticed here that the teams should be carefully selected in order to use the right personnel to support the project (Blery and Michalakopoulos, 2006).

Even with the best definitions of processes and the most advance technology, the relation between people has determining effects in any business strategy (Mendoza et al., 2007). In this vein, Ozgener and Iraz (2006) alleged that poor communication is one of the most important barriers for CRM implementation. Therefore, King and Burgess (2007) emphasized communication and data sharing as critical factors for CRM success. To successfully implement CRM projects, a communication plan should be developed in order to realize the integration of all members of the organization towards achieving its objectives (Chalmeta, 2006).

Since the company’s people are the part that determines the success or failure of the whole CRM strategy, Hennig-Thurau (2004) and Sigala (2005) declared that motivational thinking and reward systems should be treated as important elements to be implemented for supporting the success of CRM.

The previous discussions indicate that the endorsement by and commitment from top management, all employees’ commitment and involvement, skills development, interdepartmental teams, communication and data sharing and motivational thinking should be considered the most significant elements for people dimension and are therefore vital for successful CRM implementation.

Business process changes

CRM is a continuous effort that requires redesigning core business processes starting from the customer perspective and involving customer feedback (Chen and Popovich, 2003). By developing processes throughout the entire organization from a customer perspective, all employees are able to see their part in the customer experience and create possible tools in their work (Osarenkhoe and Bennani, 2007).

Optimizing customer relationships requires a complete understanding of all customers; profitable as well as non-profitable, and then to organize business processes to treat customers individually based on their needs and values (Mitussis et al., 2006 and Chen and Popovich, 2003). As such, one crucial factor of it is to analyze those processes which in any way involve interaction with the client, depending on the type of business, main processes that involve client interaction are marketing, sales, and services (Mendoza et al., 2007).

According to Chalmeta (2006), the starting point for implementing CRM is the design of the organizational framework that consists of both the company’s objectives (mission, vision and strategy) and culture (policy and values). The CRM implementation objectives should be completely defined in accordance to the strategic priority which should embrace the whole organization (Blery and Michalakopoulos, 2006). However, Nguyen et al. (2007) claimed that inappropriate research and planning and lack of senior management support lead to the disconnection of CRM vision and execution which, in turn, hinders CRM to meet expectations. Thus, corporate objectives should be linked to customer satisfaction in order to provide greater business coherence and generate new business opportunities that aim to improve and extend customer relationships (Chalmeta, 2006).

The concept of forging intimate connections with consumers to understand the needs, preferences and potential of distinct market segments has been a crucial driving force behind organizations’ rising emphasis on CRM (Pan et al., 2006). For this, Zineldin (2006) considered the quality of interaction with customers, in addition to product and process quality, as one of the factors that affect the satisfaction and loyalty of customers. As such, one crucial factor of CRM is to analyze those processes which in any way involve interaction with the client, depending on the type of business, main processes that involve client interaction are marketing, sales, and services (Mendoza et al., 2007).

By defining the goals of implementing CRM, organizations can broaden their CRM focus by allowing marketing as well as sales and services to work together efficiently to achieve the ultimate goal which is to serve the customers better with high quality (Nguyen et al., 2007). Consequently, CRM gives sales force more time to sell, improves customer response times and quality of customer service, and allows marketing to better understand customer issues and trends (Ozgener and Iraz, 2006).

Volas et al. (2007) emphasized the necessity of CRM as it can take over the traditional role of market research. However, in practice, there is a gap between what firms do, what they should do, and what is most desirable to do (Osarenkhoe and Bennani, 2007). Thus, the business processes of the customer-oriented company (marketing, sales and after-sales) should be re-designed to achieve the defined objectives and to improve customer satisfaction and loyalty (Chalmeta, 2006).

Accordingly, Nguyen et al. (2007) declared that every contact that the company has with its customers determines the economic value of its future because only the satisfied customer will return. In this regard, Osarenkhoe and Bennani (2007) affirmed that poor service quality as well as the core product quality is the dominant reasons for losing business. Also, this view was supplemented by (Schierholz et al., 2007 and Chalmeta, 2006) who alleged that offering a better service, as a result of implementing a CRM system, achieves greater customer satisfaction and improves company’s performance and competitiveness.

If customers do not attain their expectations, they will become dissatisfied and will not continue to buy products or services (Kim et al., 2008). Since the cost of losing profitable customers to the competition is very high (Zeng et al., 2003), the rapidly changing market and the growth of customers’ demands as well as the fast growing competitors, are considered barriers that organizations face in successfully implementing CRM (Nguyen et al., 2007). To overcome such barriers, organizations should formulate a real CRM strategy which begins with identifying those customers whose behavior can be influenced (Chalmeta, 2006). In this regard, CRM emphasize the use of technology and human resources to gain insight into the behavior of customers and the value of those customers (Osarenkhoe and Bennani, 2007).

With the aim to increase the effectiveness of providing customer service, Chalmeta (2006) emphasized the need to have complete homogeneous information as a part of CRM system implementation. In the same vein, Blery and Michalakopoulos (2006) confirmed the need for additional and more complete information about customers in order to offer complex services to satisfy them, and only in this way the competition can be defeated. Hence, Ozgener and Iraz (2006) cited that at businesses, CRM philosophy and practices value customer information as a corporate asset which is committed to help businesses implement strategies and solutions for improving the way they sell, communicate service and analyze customers.

Furthermore, optimizing customer relationships requires companies to know how to segment customers through differentiating profitable customers from those who are not and establishing appropriate business plans for each case (Chalmeta, 2006). The complete understanding of all customers should be used to organize business processes to treat customers individually based on their needs and values (Chen and Popovich, 2003). Thus, CRM helps companies better understand their customers’ needs so they can provide these needs to their customers at the right time while improving the company’s processes (Nguyen et al., 2007).

Chen and Popovich (2003) stated that customer relationship marketing techniques focus on single customers and require the firm to be organized around the customer, rather than the product. Accordingly, the implementation of

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