A LATIN AMERICAN COMPANY START UP: INTEL IN COSTA RICA by Ehab Ahmed Abusabha

A LATIN AMERICAN COMPANY START UP: INTEL IN COSTA RICA
Study Research by Ehab A Abusabha
University of Wollongong in Dubai



Table of Contents
PART 1. PRE CASE RESEARCH 4
1.0 ABOUT COSTA RICA 4
1.1 ECONOMY OF COSTA RICA 4
1.1.1 STATISTICS 5
2.0 ABOUT INTEL CORPORATION 7
2.1 STRENGTHS OF INTEL 8
2.2 WEAKNESSES 9
3.0 THE FIVE FORCE FRAMEWORK 9
3.1THE THREAT OF ENTRY 10
3.2 THE THREAT OF SUBSTITUTES 10
3.3 THE POWER OF BUYERS AND SUPPLIERS 11
3.4 COMPETITIVE RIVALRIES 12
5.0 SOURCE OF COMPETITIVE ADVANTAGE 13
6.0 PRODUCT LIFE CYCLE 13
PART 2. STRATEGIC/BUSINESS PLAN 15
7.0 STRATEGIC BUSINESS PLAN 16
7.1 APPOINTMENT OF THE NEW CEO FOR THE COSTA RICA FACTORY 16
7.2 FAST TRACKING THE INTEGRATION OF TICOS INTO THE INTEL CORPORATION CULTURE 16
Staff Retention & Compensation Strategy 16
Motivation & Performance Strategy 17
7.3 THE IDENTIFICATION AND DEVELOPMENT OF THE NEXT GENERATION LOCAL MANAGEMENT TEAM 18
Staffing & Recruitment Strategies 18
8.0 PLAN CHART 20
List of Activities: Error! Bookmark not defined.
9.0 CONCLUSION 22
10.0 REFERENCES 23






Part 1. Pre case Research


1.0 About Costa Rica

Costa Rica is located in Central America, bordered by Nicaragua, Panama & Caribbean Sea. Costa Rica comprises of many islands & has some lakes of which the largest one is lake Arenal.
Costa Rica is a democratic republic with a strong constitution. It is seen as one of the most stable countries in Latin America. Costa Rica has avoided the violence which has plagued Central America; it is seen as an example of political stability in the region which had made Intel to come to Costa Rica, and is referred to as the "Switzerland of the Americas". (Wikipedia,2005 ’History of Costa Rica’.)
1.1 Economy of Costa Rica

Costa Rica's has a stable economy which depends on tourism, agriculture, and electronics exports. Costa Rica has very good cultivate land which produces coffee & banana It has the second biggest GDP per capita of Latin America. In the past 15 years poverty has been reduced and a strong social safety net has been put into place. In past few years software development has the main business. Costa Rica's location in the Central American provides easy access to American markets as it has the same time zone as the central part of the United States and direct ocean access to Europe and Asia. (Wikipedia, 2005 ’Economy of Costa Rica’).
The economy has been growing for Costa Rica because of the implementation of Government plan of expansion in the high tech industry. The investors who are willing to establish themselves are exempted from tax by the central government, which provides an open opportunity for trade and also education system has also improved in this country with time & illiteracy rate has decreased. Costa Rica also exports electricity to Central America and has the potential to become a major electricity exporter if it plans for new generating plants and a regional distribution grid are created. (Wikipedia,2005 ’Economy of Costa Rica’. )
After few instability in the economy & then during the period of 90s economical growth was steady although in 1995 there was a decline which bowed towards negativity in 1996. Health per capita was maintained in 90`s. The exports increased during this decade
1.1.1 Statistics
Area: 51,100 sq km (19,652 sq ml)
Population: 3.59 m.
GDP: purchasing power parity—$24 billion (1998 est.)
GDP—real growth rate: 5.5% (1998 est.)
GDP—per capita: purchasing power parity—$6,700 (1998 est.)
GDP—composition by sector:
agriculture: 15%
industry: 24%
services: 61% (1997)
Household income or consumption by percentage share:
lowest 10%: 1.3%
highest 10%: 34.7% (1996)
Inflation rate (consumer prices): 12% (1998 est.)
Labor force: 868,300
Labor force—by occupation: industry and commerce 23.3%, government and services 55.1%, agriculture 21.6% (1996 est.)
Unemployment rate: 5.6% (1998 est.); much underemployment
Budget:
revenues: $1.1 billion
expenditures: $1.34 billion, including capital expenditures of $110 million (1991 est.)
Industries: food processing, textiles and clothing, construction materials, fertilizer, plastic products
Industrial production growth rate: 10.5% (1992)
Electricity—production: 4.785 billion kWh (1996)
Electricity—production by source:
fossil fuel: 14.11%
hydro: 75.44%
nuclear: 0%
other: 10.45% (1996)
Electricity—consumption: 4.931 billion kWh (1996)
Electricity—exports: 44 million kWh (1996)
Electricity—imports: 190 million kWh (1996)
Agriculture—products: coffee, bananas, sugar, corn, rice, beans, potatoes; beef; timber
Exports: $3.9 billion (f.o.b., 1998)
Exports—commodities: manufactured products, coffee, bananas, textiles, sugar (1997)
Exports—partners: US, Benelux, Germany, Italy, Guatemala, El Salvador, Netherlands, UK, France (1997)
Imports: $4.5 billion (c.i.f., 1998)
Imports—commodities: raw materials, consumer goods, capital equipment, petroleum (1997)
Imports—partners: US, Japan, Mexico, Venezuela, Guatemala, Germany (1997)
Debt—external: $3.2 billion (October 1996 est.)
Economic aid—recipient: $107.1 million (1995)
Currency: 1 Costa Rican colon (C) = 100 centimos
Exchange rates: Costa Rican colones (C) per US$1—272.58 (January 1999), 257.23 (1998), 232.60 (1997), 207.69 (1996), 179.73 (1995), 157.07 (1994)
Fiscal year: calendar year
[Source: Photius Coutsoukis, 1999 ]




2.0 About Intel Corporation

In 1968 there were three engineers from Fairchild Semiconductor who created Intel in Mountain View, California, to develop technology for silicon-based chips. The group of three consisted of Robert Noyce , Gordon Moore, and Andy Grove.
Intel initially provided computer memory chips such as DRAMs and EPROMs. The electronic Industry was revolutionized by these chip design success.. In 1979 Moore had become Intel's chairman. When Intel's 8088 chip was chosen for IBM's PC in 1981, Intel had secured its place as the microcomputer standard-setter. (Hoovers,2005,’Intel Corporation’)
Intel was forced out of DRAM market in 1985 by the Cutthroat pricing of Japanese competitors; in a breathtaking strategy shift which has become the subject of countless business school case studies, the company refocused on microprocessors. Intel licensed its 286 chip technology to Advanced Micro Devices (AMD) and others to create an industry standard. Reacting to AMD's escalating market share , Intel fiercely protected the technology of its 386 and 486 chips; AMD sued for breach of contract. (Hoovers,2005,’Intel Corporation’)
In 1995 many microcode suits were settled by Intel and AMD. AMD got the code license and Intel won $58 million in damages. Rather than fight an accusation from Digital Equipment that Intel stole its technology to develop the Pentium, Intel bought Digital's semiconductor operations.
In 1998 Grove handed the CEO reins to President Craig Barrett; Grove replaced Moore as chairman, while Moore became chairman emeritus.
Intel’s operational overview includes Manufacturing, Research and Development, and e-Business. As the leader in silicon process technology and high volume silicon manufacturing, Intel serves this desire at virtually every level, providing the building blocks of the Internet economy and assisting to archaic computing, communications and wireless information technologies. Intel is managing advanced research to prevail over technical barriers so they will not obstruct the company's future manufacturing and product plans. Intel operates everything online, from order processing to materials (Hoovers,2005,’Intel Corporation’)
2.1 Strengths of Intel
Intel with its strength continues to transform the way people work, learn & communicate.
• Manufacturing and Technology Leadership
With leading-edge manufacturing technologies, Intel improves its chip designing for better performance & it benefits from significant product performance and cost advantages.
• Architecture/Platforms
Intel always designs products with end users in mind, thus delivering platforms with full sets of technology ingredients for end users.
• Ecosystem Development
By investing in the development of complementary technologies and research Intel helps bring the digital transformation to more people and also in friendly usage.
• Global Presence
Intel has its offices or factories in close to 50 countries this makes it to address the unique needs of local markets worldwide.
• Intel’s brand
Intel has strong branding system. Intel still continue to invest in branding programs that help build a strong preference for Intel® products, Intel inside brand is the famous & now it is know as Intel leap ahead.
• Corporate Excellence
Intel’s ongoing commitment to good corporate citizenship and ethical business principles contribute to its success. ( Intel,.2006,‘Intel Strengths’.)
2.2 Weaknesses
Some of the weaknesses are its high cost of Research and Development. But it still needs to keep update itself with new demands of the consumers, which increases the cost of Research and Development, if it fail to do so, competitor may take over the majority market share, resulting in liquidation of the Intel corporation, so its necessary to have better infrastructure for research & development. ( Leslie P Norton,2003,‘oh mother’)
Intel sales are also dependent on motherboard manufacturing. Prediction of demand and the ability to deliver enough machines to satisfy demand in a short period of time is also an issue.
Intel sale is dependent on other Pc manufacturers; any decrease in manufacturing of Pcs can result in a reduction in chip manufacturing which Intel must keep in mind.


3.0 The Five force framework

Figure 1: The Five force framework
Source: Adapted from M.E.Porter , Competitive strategy

3.1The Threat of Entry

The competition in Costa Rica becomes higher, when companies like Motorola, and Advanced Micro and Texas Instruments are entering the industry. New entrants might change major facts of the market place like market shares, prices, customer loyalty. always new direction to react are there and adjustment for existing major players in this market. The threat of new entries will depend on extra factor which there are threat to entry. Threat of new entrants will be bigger when Computers manufacture Processes are not restated by regulations, differences when compared licenses and permits are required to do business need to be protection from new entrants.
Customers might have brand loyalty to some other brand like Motorola which is well known in the market, you need to know that without strong brand loyalty as Intel has, a potential competitor Start-up costs are low for new businesses entering in Costa Rica . The bigger commitment needed in R&D and capital assets by Intel , the less chance to new competitors to enter the industry.

Microprocessor products provided are not unique, machine and the assets used to produce them are available in china with very competitive price ,which allow firms to enter semiconductor market .
Economies of scale are minimal. If there is little Intel improvement in efficiency as scale increases, other company sees the opportunity and try to entering a market if Intel not produce the large volume that cover the mark

3.2 The Threat of Substitutes

Industry substitutes different products and services that can be used by customer instead of using the Intel products, For example, Motorola processor substituting for a Intel Microprocessor. This can show evidence that different sectors are converging, there may be substitution of need by a new computer part as Intel microprocessor that produce,
However Intel believe that it will continue to flourish and the substitutes threats is invisible for them especially that’s only 10 % of the world’s population only is currently using the internet. According to a Saatchi & Saatchi survey, Latin American Internet use is expected to jump from 7 million users in 1997 to 34 million in 2000 which means more customer to computer field in general and to microprocessors and semiconductors specific industry . (M.E.Porter Competitive strategy).

3.3 The power of buyers and suppliers

There is two power can effect Intel which can be linked together. The relation with market buyers and sellers which might have similar force in constraining the long term plan for freedom of an Intel and which influencing the margins of that Intel.
Buyer force is likely to be high when some of the following conditions influence, there is a aggregation of buyers, especially if the volume purchases of the buyers are high where just a few suppliers dominate the market. The same with the Intel market where few players are dominating the industry, Intel is one of them. In addition there is supplying industry comprises a large number of small operators which Intel might not notice.
On the other hand there are alternative sources of supply ,supplier force is likely to be high when There is a concentration of suppliers rather than a fragmented source of supply ,The brand of the supplier is powerful - for example, a retailer might not be able to do without a particular brand. Intel is a strong brand name showed a success in many countries. There is the possibility of the supplier integrating forwards if it does not obtain the prices. (Porter, Techniques for Analyzing Industries and Competitor).

3.4 Competitive Rivalries

Many semiconductor market experience different levels of competitive rivalry. Competitive rivals are other company with the same products and services target at the same customer group. There are a number of semiconductor factors that affect competitive rivalry also the degree to which competitors are in balance capabilities. Where competitors are strong equal size also there is threat of intense competition as one competitor attempts dominance over another, in addition the less competitive markets tend to be those with dominant companies within them and the smaller players have accommodated themselves to this situation
"Concentration and Balance" in the microprocessor industry - There are four major competitors in this industry. In 1993, Intel accounted for 74% of the worldwide market; Motorola 8%; Advanced Micro Devices 6%; Texas Instruments 2%; and numerous competitors, each with less than 2% of the market, accounted for the remaining 10% of the global market. [Source: Dataquest] The trend in the number of competitors has been relatively stable, but the relative market share of the industry leaders is changing. ( e-competitors, Michael Porter's industry structure analysis).
Costa Rica Market growth rates may affect rivalry. The idea of the life cycle suggests that conditions in markets, primarily between growth stages and maturity, are important, not least in terms of competitive behavior. For example, in situations of market growth, an organization might expect to achieve its own growth through the growth in market place, whereas when markets are mature, this has to be achieved by taking market share from competitors. Intel is competing in a growing market , and it has to achieve it is market position through the growth of the microprocessor market (Porter, Techniques for Analyzing Industries and Competitor).
High fixed costs in an industry, which Intel built in Costa Rica , may result in price wars and very low-margin operations as capacity-fill becomes a prerogative.
Differentiation is one of the important issue, as expel Intel depend heavily in the quality as a source of differentiation in addition, exit barriers which Intel face in Costa Rica might be high because of different reasons. For example, high investment in non-transferable fixed assets and high redundancy costs.
5.0 Product life cycle
the market life cycle is short, just as research and development costs can be prohibitive in the break-neck pace of computer technology innovation


Figure2: Product life cycle (Exploring corporate strategy , Garry Johnson)


6.0 Source of competitive advantage

The high degrees of technical &education level are significant advantages. Its intent is to entice high tech corporations to take advantage of Central America's most educated, computer literate and disciplined work force, as well as creating a more modern production infrastructure.
Costa Rica was chosen because it offered important location-specific advantages. Among these, the most important ones were the already existing tax exemptions for any firms satisfying certain conditions under the free zone scheme, the high educational level of the labor force, a stable political scenario, and a relatively corruption-free environment. (Zorawar Singh, Intel in Costa Rica)
The process of making Intel executives aware of the advantages that Costa Rica
represented for the company was neither easy nor cheap in financial terms, though its cost effectiveness soon became evident. Intel’s decision process took more than one year, on the other hand two important issue explain Intel decision to move into Costa Rica As competitive advantage :first advantages the country offered—tax exemptions, good governance and institutional strength, and a highly educated labor force, among the top ones and the explicit and coordinated effort by the Costa Rican government to convince Intel that going to that country was the right decision (Felipe Larra A n,A Case Study of FDI in Central America).




Figure3 : Exploring corporate strategy (exploring corporate strategy , Garry Johnson)

Part 2. Strategic/Business Plan

Business Plan Introduction

Dear Head Office CEO,
After the major board of directors meeting which held on October 20th of 1997, and taking under consideration your directives on below matters:
Bringing home to USA the factory CEO .
Pushing back productions go live date by 4 months into the year after.
Reducing target ramp up 50% for all mid-term planning..
I had the below business strategic plan which I expressed the experience I had as Director of Strategic Human Resource in the company’s subsidiary in Cost Rica.
The level of Adoption and integration between the company’s cultures and local environment will shape the future strategies of the company.
Below is a summarized set of strategies towards future business plan in adapting intel’s culture with Ticos’ Culture. As we have to move fast and act smart with the strategies and plans pointed in below crucial plan.

Best Regards,
HR Director


7.0 Strategic Business Plan

I’ve introduced a group of solutions and plans for the Intel’s factory in Costa Rica in terms of Culture integration and adoption of the local labors. I took under consideration also the Staff with American background and Intel Head office mentality. Those changes aim to correct the existing HRMS problems faced by old CEO and take the firm to another level of implementing successful integration policies to meet the company’s targets.
7.1 Appointment of the new CEO for the Costa Rica Factory

Since the board has decided to appoint a new CEO, it is a matter that has I have given primary importance to. We will be transferring Mr. Marc Salvesen from our UK subsidiary to assume the duties of CEO at the new Costa Rica plant. Mr. Salvesen has proved himself in his various international tasks and assignments and would therefore make an ideal candidate for this post. In addition to that, the fact that he comes from Austria and has worked across many cultures gives him the ability to deal with the new Costa Rican low power distance culture better than any other candidates. I am confident that he will turn the face of the Costa Rican plant and make it a success like our other plants.

7.2 Fast tracking the integration of Ticos into the Intel corporation culture

Staff Retention & Compensation Strategy

As the Ticos’s Culture based on relationships between people. With a warmed family atmosphere, you have to give them ambitions to work hard under loyalty themes and team sprits eg. “One team, one Goal”. Staff in the cost Rican environment needs to feel that they are a part of a family.
• Staff Accommodation: Intel should start building group of compounds in different local areas with common service centers like garden yards, Post offices and medical centers. This will help the ticos to live the atmosphere of family firms with senior management with them having a larger family under Intel imperial.
• Medical Facilities: Under the idea of being caring oriented the company should offer medical insurance packages which will cover the employees themselves and their families and loved ones. As I mentioned in the centralized compounds there should be a 24 by 7 medical centers response to emergency cases.
• Allowances: rescue allowance should be innovated to employees interact directly with machines and materials.
• Education Facilities: As the location of the firm is too far from the central of the city we have tow options, first: building small schools which will be part of the compounds common services, which is costly but efficiently. The second option is to provide transportation to staff’s children to go to the nearest schools to the compound. Offering the staff’s children’s to have the opportunity to complete high studies as scholarship and work as senior staff in the planet will be a good future investment.
• Miscellaneous Facilities: There will be a gymnasium, swimming pool and sports ground within the compound to be used for staff team sports. The sports ground is to be also used for quarterly company picnics and companies day outs.

Motivation & Performance Strategy

For the company to improve the performance of individuals, you should spread the norms of exchanging ideas and experiences between individuals. This will increase the trends of having effective meetings. Courses should on effective meeting should be offered as a compulsory knowledge to all staff. The importance of time should be crucially highlighted to ticos as they enjoy flexible timings, emphasizing on the discipline system to be followed where entire team will be affected by an individual. This system cannot be flexible because the staff should realize the company’s strict discipline policy.
On the other hand Bounce system can be introduced to staff as a result of their overall yearly performance which could be weighted upon attendance, overtime, quality and quantity of work and additional self development skills.
Leaders of the groups will held the responsibility of setting targets and dead lines to their members, this will ease the integration of Intel practices to the ticos mindset
Experiences should be exchanged and meeting should be held regularly (every 1 month) between teams with higher performance to transfer the strength points to weak teams.
Cost Rican Culture respect status and individuals stayed away from individual challenges avoiding embarrassments. So Intel should offer constructive confrontation course compulsory to all staff. This will give more confident to individuals.
As a startup phase by the firm, staff complaints should be taken under consideration where complains boxes should be placed at various locations around the plant. Some of the major complaints should be announced in the local intranet by the HR manager.

7.3 The identification and development of the next generation local management team

Staffing & Recruitment Strategies

Qualified employees will be the skeleton of the new human resource assets in the firm, in order for us to do that Intel need to implement a flexible plan for recruiting skills.
As the startup date been postponed four months and the sales target been decreased to ½ million, this will give enough time to start recruiting 2000 employees and have enough training time frame before production.
Some of the recruitment and staffing techniques are discussed in details below.

• Selection
In the first phase the best policy to be applied is the Utilizer strategy which will deploys the human resources of the firm as efficiently as possible through. (Gray Oddou, P77, 200).
This means recruiting highly qualified and efficient skills from other firms to start the operation in Costa Rica and hold them for 6-10 months. Experienced skills could be transferred from our existing planets in Malaysia and Philippines. Some Ticos will be recruited as well based on their experience with semiconductors industry. Intel Head office will have to negotiate about cooperation with local educational institutes to supply the firm with fresh graduate trainees whom you can contract them with long term contracts.
• Training
As mentioned in the motivation and performance strategy, the staff will work and trained in groups to increase the collectivism norms in the planet.
Some of the major teams that can be implemented are SWAT Teams. Where the leaders will conduct training directly under the SWAT teams. The group leaders will then train the other members of their group. The SWAT team should be made aware of the situation in Costa Rican and what they can expect, before they leave for Costa Rica. This will save a lot of time once they are in Costa Rica.
Technology can be used to implement training to through the internet and through video conferencing. Interaction will be between co-workers and engineers in the malysian and Philippines firms and trainees.
Another effective training strategy is “Tandem Pairs” To balance the company’s belief of individual success and the Ticos value of group success. As an implementation of this strategy will be small groups of 10 as a beginning. The team leaders will be a tandem pair which has a Ticos and expatriates from other firms. The expatriates would be responsible for training and orienting the other members of the group into the Intel culture, practices and norms. The Tico in the pair will be responsible for monitoring the work of the other group members. After the first phase (18-20 months) the number of members in the group can be reduced in order to comply with the global Intel’s HR practices

8.0 Plan Chart

Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Tasks
Complete construction of common accommodation W W W W W W
Appoint Mr. Marc Salvesen from our UK subsidiary as our new CEO W W
Staff selection and recruitment W w w w
Formal training to new employees on Intel culture w w w
Selection of SWAT team and making them aware of the situation in the Costa Rican plant. W W W
SWAT team arrives in Costa Rica and starts preparation for the training for employees. W W
SWAT team trains the Intel employees. W W W W W W W
Employees are grouped with tandem pairs as leaders. The grouping is done depending on the abilities as governed from the one month of training. W W
Intranet and video conferencing is installed and employees are familiarized with them. W W W
Targets are set for each group. W W W
Full steam ahead operations at full capacity. The SWAT teams still available on site W W W W W



9.0 Conclusion



Intel selection of Costa Rica is not at all a wrong decision, Costa Rica had improved a lot from its past in terms of economy, education, trade which had attracted Foreign Direct Investment. This will also bring more benefits to Costa Rica’s long term Goals; they have picked targets carefully and picked their battles wisely which brought huge investment into their soil. This is going to bring long term Benefits in the development in the time to come.
As in the case of any foreign direct investment, integrating the country and the corporate culture is the primary task in the Costa Rican site. The cultural differences will certainly pose a problem and will be a major hindrance to our set time frame. The important thing is to minimize the obstacles that occur. Intel in Costa Rica should as far as possible follow the practices of Intel global. But there should be provisions for flexibility. By considering the culture of the Ticos and integrating into the corporate culture, Intel is rewarded with a long term dedicated workforce. As the Ticos adapt to the Intel culture some of the start up practices can be slowly phased out. The primary concern at this point is to build up our Costa Rican plant to match the outputs of our existing plants world wide. This cannot be done without applying the strategies mentioned above.











10.0 References
1. Barshefsky, Charlene. 2001. "Trade Policy for a Networked World." Foreign Affairs. March/April 2001.
2. Bremner, B. and Ihlwan, M. "Intel Struggling in Cost Rica." Business Week. 25 September 2000.
3. Evans, P. and Wurster, T.. Blown to Bits: How the New Economics of Information Transforms Strategy. Harvard Business School Press, 2000.
4. Davidson, William. The location of foreign direct investment activity: Country characteristics and experience effects. Journal of International Business Studies, US, 1980.

5. Mendenhall, M & Oddou, G. Readings and Cases in International Human Resource Management, Third Edition, South-Western College Publishing, 2000.

6. Muralidharan, Raman & Arvind Phatak.. International R&D Activity of US MNCs: an empirical study with implications for host government policy. Multinational Business review, US, 1999.

7. Meyanathan, S. D. Industrial Structures and the Development of Small and Medium Enterprise Linkages.Washington D.C, US, 1994.

8. Spar, D. “Attracting High Technology Investment:Intel’s Costa Rican Plant.” Foreign Investment Advisory Service Occasional Paper 11. Washington.D.C,US, 1998.

Electronic Resources



9. Hoovers,2005,’Intel Corporation’ Available: http://cobrands.hoovers.com.ezproxy.uow.edu.au:2048/global/cobrands/proquest/history.xhtml?COID=13787, [Accessed: 26 Feb 2006]

10. Leslie P Norton,2003,‘oh mother’, Available: http://www.smartmoney.com/barrons/index.cfm?story=20030602 [Accessed: 26 Feb, 2006]

11. Intel.2006,‘Intel Strengths’,Available: www.intel.com, [Accessed: 26 Feb 2006]

12. ICRT (International Campaign for Responsible Technology). 1999. "Costa Rica Lures Intel and Microsoft." [http://www.svtc.org/listserv/leter12a.htm ]. 6 February 2001.
13. Photius Coutsoukis,1999,‘Photius Coutsoukis’,
14. Available:http://www.photius.com/wfb1999/costa_rica/costa_rica_economy.html [Accessed 26 Feb 2006]

15. Wikipedia, 2005 ’History of Costa Rica’. Available: http://en.wikipedia.org/wiki/Costa_Rica [Accessed 26,Feb,2006]

Training and Career Development policy / practice

College of Graduate Studies



“Training and Career Development policy / practice“

Human Resource Management

October 26, 2005


Signed by:
Ehab Ahmed Abusbaha


















Table of Contents

1- Abstract
1. Introduction
2. Explore training and Career Development policy

• - Training Policy:
• - Identification of training needs
• - Determine Training Objectives:
• - Plan the Training Provision:
• - Undertake the Training & responsible:
• - Evaluate the Training:
• - Feedback:

3. Define and describe the traditional practice:
4. Contrast the traditional, Training and Career Development practice:
5. Describe the Training and Career Development practice
6. Examine the roles of the stakeholders affected by the practice
7. Reasons and benefits of adopting Training and Career Development practice
8. Conclusion
9. Reference
10. Appendix A













Abstract

In this assignment I have done exclusive research to talking about Training and Developing policy/ practice. I’ll highlight the effectiveness of this policy which will includes contrast the traditional and describe its operation where employees are very important resources where some organizations assign huge budget to train them then I ll define and describe the traditional practice with some example to clear the picture I have includes sample policy at the end of this assignment which I used to prove some and major points and I ll show how stakeholders effected by training practice and at the end I ll be showing Reasons and benefits of adopting the Training and Developing policy /practice followed with some effective conclusion















2- Introduction:

HRM approach always views people as the source of competitive advantage, seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personal techniques.
HRM Effectiveness in recruiting, hiring, deploying, and retaining employees has become more important to the success or failure of organizations as the importance of knowledge in the economy has continued to grow. Even in tough times, there are significant challenges to finding the most talented individuals out of the large number of applicants.
Training and development is one of the significant tools in the organization, which can turn the organization to top successful company today if really used right by HR department.














3- Explore training and Career Development policy:

Changing nature of work today is one of the challenges we facing and the workplace environment Rapid change requires skilled, knowledgeable, workforce with employees who are adaptive, flexible, and focused on the future.
One of HR key responsibilities is to develop staff, Encourage growth and career development of employees by helping employees achieve their business goals at organization and beyond you can develop human resources by providing adequate training and encouragement of staff development, and opportunities for growth (ucsfhr, 2004).

Training and Development are closely similar related, Training activities which are directed at addressing a short-term problem will also help the employee develop skills necessary for longer-term success. Because of its shorter-term focus, training is inevitably able to operate in a more planned and structured manner. Many employers will direct their training in a way similar to that outlined in figure 1

Figure 1

As example HR policy
See appendix A

Training Policy:

When it come to training policy, the organization need to ask the basic questions like - why do we train, what purpose will training serve, who do we train, when do we train, where will the training take place. In other words, the organization is asking itself to make a commitment to training, and to ensure that it serves the purpose of developing the long-term interests of the organization
The HR training policy use to develop all employees to high quality and effective service that meets the needs of all Sections / Departments, As we can see the training Policy is designed to contribute to the organizations department overall aims to enhancing the quality of the workforce, maintaining the values set out in the Vision Statement, making the best possible use of its most important asset, ensuring that all employees have the necessary knowledge and skills to enable the HR to continually improve the quality and effectiveness of its services.
Training is regarded as an integral part of the management process, which is a benefit rather than a cost, and the HR recognizes the need to provide both financial and human investment to reinforce its commitment to this policy. As result we can say the resources required for the training and development of all employees is clearly identified.

Identification of training needs:
In order to train effectively it is necessary first to decide in some detail what specific knowledge and skills the jobs involve, what the individuals already possess, and what gaps in such knowledge and skill training can fill. (Gode 1972)
We can identifies 9 key areas where training will be needed in most organization, these are:
1. New recruits to the company
2. Transferees within the company
3. Promotions
4. New plant or equipment
5. New procedures
6. New standards, rules and practices
7. New relationships and authorities
8. The maintenance of standards
9. The maintenance of flexibility.
The actual and specific training required should be determined by application of the following formula:
Current and future organization I needs, minus Skills currently possessed by workforce equals the skills gap.

Determine Training Objectives:
The objectives of this policy are to ensure that training and development is relevant to the corporate objectives, enable all employees to take some responsibility for their own development by participating in a formal, Review and discussion, on an annual basis, of their performance and training needs, ensure that each department produces an annual Training Plan, in addition the policy help to establish clear roles and responsibilities for implementation of all aspects of the policy and ensure that all employees have equality of opportunity in access to appropriate training and development activities.



Plan the Training Provision:
Trainers must consider the methods available for delivering the training required. For many areas training can be delivered in a number of ways, and these may be either on or off the job. As a general rule in deciding the best way to deliver, the trainer should bear in mind not only speed, cost and effectiveness but also the axiom that the further away training occurs from the workplace the more acute the problem of transference to the workplace will be.
In planning the training provision the priority to be given to any particular area of training should be considered. The training needs analysis should identify the urgency with which the training areas should be addressed. However, because needs are quite likely to exceed the budget to support training, it is likely that some difficult decisions will need to be made either about provision, timing or method of training selected (Bolton, 1997)

Undertake the Training & responsible:
See appendix A policy for more details
The Senior Administrators and directors responsible for:
Supporting the implementation of the Policy, providing advice and encouragement as necessary.

Human Resources responsible for:
Collating the training plans submitted by departments to compile an annual corporate training plan.
Establishing the criteria for monitoring and evaluating the operation of the policy across all departments, providing support and assistance in implementation. Advising on the training available to assist managers and employees to comply with the policy, ensuring that training and development resources are fairly allocated and individual records maintained for all employees (Governing Council, 1995).

Department/Division Heads are responsible for:
Ensuring that the policy is adopted, promoted. Monitoring and reviewing the effectiveness of the policy. Documented review and discussion, on an annual basis, of their performance and training needs. Ensuring that employees are aware of their contribution to the achievement of organization objectives and encouraged to develop within the context of their role. Encouraging employees to accept responsibility for their own development. Ensuring equality of opportunity in access to training and development.

Staff Members have responsibility to:
Contribute to their own development through effective preparation for and participation in the annual review, process and the identification of training needs. Assist as appropriate in the development of other employees. Participate in the evaluation of work related training and development activities (Governing Council , 1995).
.
Evaluate the Training:
All trainers, managers and writers about training are agreed on the importance of evaluating training. Where there is less agreement, is how this can and should be done. (Hamblin 1974) has defined the process of evaluating training as:
Any attempt to gain information (feedback) on the effects of a training programme, and to assess the value of the training in the light of that information

Feedback:
On the basis of the short, medium and long-term evaluation undertaken the training manager will need to decide:
a. To what extent the training programme(s) has met it objectives.
b. Which, if any, training objectives remain to be satisfied.
c. How the training provision should be revised, improved or replaced.



4- Define and describe the traditional practice:

planned process designed to modify attitude, knowledge or skill behavior. Development, on the other hand, takes a longer-term view, and although still based on behavioral change or learning, adopts a far longer timescale. It encompasses such areas as life-long learning, the learning organization and organizational development - all of which, except in the most general sense. Development focuses on the longer-term needs of the employer and the employee .and here is some practices in which can be help to enhance the work and developments :
recognizes the impact of social, economic and cultural factors on the career and subject choices of workers; strategic planning processes; considers careers education as an integral aspect of wider learning; provides information and resources to workers at all year levels with the aim of encouraging girls to consider exploring non-traditional options; provides opportunities for all workers to explore a range of training options through the provision of accessible information resources and support in a positive and non-judgmental environment (NESB,2005).
provides an open and accessible training room in which workers are encouraged to explore resources at their own pace; provides regular careers information through forums, newsletters or bulletins.

5- Contrast the traditional, Training and Career Development practice:

Traditional training is less and less effective for today's than training and development used today. Most Traditional training is still done in lecture format, Lectures are not appropriate for adult learners today an new technology used today by human recourse, employee are more likely to forget lecture material than material gained through experience used by Traditional training. Training should be headed in new directions such as Personal experience, group support, and mentoring are preferred over lectures, Group experiences are useful, in that they allow learners to assist each other in understanding material Learners want to know how what they learn will be applied to workplace which mean using of the latest computerized technology in addition to the audio and video technology.
When we compare local (UAE) Training and Career Development and Western HRM practices we see that in USA we have open career systems where individuals are given considerable freedom to manage their own careers. In such settings we find a chance to bid on jobs and training opportunities (Towers 1996, p. 31). However, Japanese companies operating in USA and UK Job Training is typically provided internally, though at least in the early stages of operations there has been a tendency to buy-in managerial talent (Towers 1996, p. 55). On the other hand, In European companies there is an “increase in training at all levels”. Training and development is increasingly seen as a critical part of an organization’s HR strategy (Towers 1996, p. 83). For example, in UK it is estimated that business spends ₤16 billion on training and developing their employees each year.
In UAE where business is growing very fast and we have huge number of skilful expatriates’ workers. Excluding enterprise companies, medium and small size companies don’t have training and development strategy. As a result substitution of workers isn’t difficult in case they need more competent people. In addition they’re in no voice of employees in the training strategy. May be because we don’t have labor unions that present this voice as in USA or Europe. Also UAE labor doesn’t have rules to force organizations to do so. The unions and government were united in seeing the need to promote learning to improve competitiveness, but also in recognizing the role of lifelong learning as a citizenship issue (Marchington & Wilkinson 2002, p.365).



6- Describe the Training and Career Development practice:


Training is traditionally described as falling into one of two categories
- On-the job
- Off-the-job
On-the job training takes place when the trainee is not removed from the workplace when the trainee is not removed from the workplace
Training undertaken in this way has the advantage of being immediately transferable to work situation and is generally considered to be cheap and cost effective. However, it can also appear to be random and haphazard in its rigour and application. At the other extreme is off-the-job training, which occurs when the trainee is removed from the workplace to (for instance) attend a training course. While the content of off-the-job training can be more certain, the degree to which it can be applied back to the workplace is not. Examples of the range of locations for training is considered
in table 1




Table 1



Training Methods can summarize as the following:
Action learning, Appraisal (performance management), Assignments, Case studies, Coaching, College/university-based courses, Computer-based learning, Delegation, Training room instruction, Demonstration, Developing teams, job rotation, Open/distance learning, Role playing, Simulation.


7- Examine the roles of the stakeholders affected by the practice:

To shed light on issues relevant to this area, we can examine ways in which selected training and development have been affected by and have responded to past efficiency improvement initiatives such as infrastructure. Stakeholders can help facilitate the process of change for training and development that serve organization which effecting all of stakeholders. From a policy perspective, system-level stakeholders with purview over multiple training and development providers, sponsors, and customers are important because of their ability to look across sites and identify goals and objectives that address broad, high-level issues.

8- Reasons and benefits of adopting Training and Career Development practice:

If we come to the reasons of training we have to know why do firms train workers? We follow an approach that economists call Human Capital Theory, in which the simple answer is, Firms train workers and pay for the training if doing so enhances the firms profits. The firm, in deciding whether to invest in the human capital of an employee, computes three (expected) net present values (NPV)
Using NPV the organization can find if the training is worth to the organization or not and due to the limit on this assignment am going to stop here.
When we come to the benefits there is 3 factors can be described: the length of time the employee can be expected to work with the firm; the skills that the employee has before undergoing training; and the extent to which the skills provided by the training complement other skills the employee already may have. Perhaps less obvious are the gift-exchange aspects of the training and the impact of training on recruitment efforts. Least obvious are the external effects of the training: signals to other employees; signals to customers and suppliers; and general reinforcement of the organizational culture (Baron kreps, 1991).
In addition benefits that organizations might expect from training and development can be greater productivity and better quality. Greater versatility from the workforce, better job satisfaction (as evidenced by lower absenteeism and lower turnover) and greater motivation, reduced need for supervision, Greater understanding of and adherence to employer values, Reduced accident rates, Less scrap and fewer mistakes.

9- Conclusion

Training and development is one of the significant tools in the organization, which can turn the organization to top successful company today if really used right by HR department, Setup a policy such as training and development in the organization is so crucial element. In my opinion local (UAE) HR Department is doing great efforts in Planning, accomplishing and evaluating training and developing policy. HR is commitment to support development of its people and encourage them to learn.
Harrison (2000, ix) states that ‘People hold the key to more productive and efficient organization. The way in which people are managed and developed at work has major effects upon quality, customer service, organizational flexibility and costs’.
By providing a framework for training and developing employees, HR Department as a training and development is contributing in the strategy of the company by training employees and maintaining the quality of training.


Word count : 2487 word


10- Reference:


1. Dessler, G., 2003, “Human Resource Management” 9th edn., Pearson Education Inc., New Jersey.

2. Stone, J., 2002, “Human Resource Management” 4th edn., John Wiley & Sons Australia Ltd., Milton.

3. Schuler, R., Dowling, P., Smart, J., and Huber, V., “Human Resource Management in Australia” 2nd edn., Harper Educational Publishers., Australia.

4. Russo, G., Rietveld, P., Nijkamp, P. and Gorter, C., 1995”Issues in training Strategies: an economic perspective” International Journal of Career Management, Vol.7, No.3, pp.3-13. (Emerald Insight)


5. Engleman, D., 1998,”Effective Employment Screening Practices”, Career Development International, Vol.3, No.4, pp.164-168. (Emerald Insight)

6. Harrison R. 1992,” Employee Development”, IPD, London.

7. Marchington M. & Wilkinson A. 2003, 2nd Edition, People

8. Kowalski, K. M. and C. Vaught. 2002. “Principles of adult learning: Application for mine trainers” NIOSH Information Circular 9463, pp. 3-8

9. ‘Employee Development & Training’ (online). Available: http://ucsfhr.ucsf.edu/pubs/managingHR/?x=671 (Accessed: 22 Oct, 2005)

10. ‘Training and Career Development Policy’ (online). Available: http://www.utoronto.ca/govcncl/pap/policies/training.html (Accessed: 22 Oct, 2005)

11. ‘CAREERS EDUCATION FOR GIRLS: A GOOD PRACTICE REVIEW’ (online). Available: http://home.vicnet.net.au/~atec/cefg.htm (Accessed: 22 Oct, 2005)











11- Appendix A

Training and Career Development Policy
Contents :
Policy
Definition
Responsibilities
Senior Administrators
Department/Division Heads
Supervisors
Staff Members
Human Resources
Programs and Resources


Policy

The investment that the University makes in partnership with staff members in their continuing career development allows it to achieve maximum flexibility in meeting its current and future skills requirements. Therefore, the University is committed to creating and fostering an environment that facilitates and enhances the skills training and career development of its staff. Staff will be provided with opportunities and time away from the job so that they may maintain and develop their skills, adapt to changing workplace needs and fulfil their employment potential within the University. Career development of staff is a primary means for the achievement of the University's employment equity goals and objectives.

Definition
For purposes of this policy "training and career development" includes formal training, work experiences, job networking or formal courses of study to update and enhance the skills/knowledge necessary to make a continuing contribution to the work of the University, in current and future roles.

Responsibilities

Senior Administrators
Create and foster an environment that facilitates and enhances the skills training and career development of staff by:
Considering staff development initiatives in annually reviewing performance of division/department heads.
Providing resources for staff training and development to ensure that skill levels of administrative staff are strong, broad and well-suited to the pursuit of the University's objectives.

Department/Division Heads
Create and foster an environment that facilitates and enhances the skills training and career development of staff by:

In their annual plans, in consultation with staff, identifying as clearly and realistically as possible their staffing requirements, as well as needs for staff training and development initiatives, based on agreed upon objectives.
Assessing supervisors in their annual performance reviews on their efforts to develop their staff and, where appropriate, providing opportunities for development of supervisory skills.

Supervisors
Create and foster an environment that facilitates and enhances the skills training and career development of staff by:

Discussing with staff development needs in relation to the work of the unit.
Providing opportunities for the discussion of individual goals on at least an annual basis and for the development of a mutually agreed on plan for training and career development.
Recognizing developmental achievements during the year.
Based on the operational requirements of the unit, providing job-specific training to enable staff members to acquire skills and knowledge necessary to the work of the unit based on identified needs, for example by participating in training seminars, job network meetings and temporary assignments.
To the extent that operational requirements allow, providing staff members with appropriate opportunities to acquire skills or experience which would enhance the staff member's ability to make a continuing contribution to the work of the University, for example by participating in training seminars, job network meetings and second[] ments.
Supervisory approval for time away from the job for purposes of training and career development will be based on the following criteria and shall not be unreasonably denied:

operational requirements of the work unit in relation to duration and timing of the development activity
benefit of the development activity to the work of the University
benefit of the development activity to the achievement of the staff member's career goals within the University.
Staff Members

Take the primary responsibility for managing their own careers by:
Examining current skills and identifying areas for further development.
Seeking opportunities for ongoing skills enhancement.
Taking advantage of relevant training.
Keeping skills and knowledge up to date to meet changing workplace needs.
Contributing to the department/division's annual planning process.
Human Resources

Provide support to administrators and staff in carrying out their career development responsibilities by:
Administering and reporting on central funding support for staff training and development.
Conducting training needs assessments and developing programs in consultation with the University community.
Supporting individual career development through the provision of counselling, workshops and publication of career information.
Posting job vacancies which represent career opportunities for staff in accordance with Staffing policy.
Providing information and consultation to managers on implementing staff planning and career development processes within their departments/divisions.
Providing training in management and supervisory skills.
Programs and Resources

Educational Assistance
Secondments
University Training Courses
Professional Development
Job Sharing
Job Shadowing
Cross-Training
Career Counselling
Lateral Transfers
Intern/Extern programs
Apprenticeship programs
Resume Writing and Interview Skills workshops
Career Catalogue
Annual Education Fairs
The University is committed to a Career Development Program that may include but is not restricted to the above components.

(signed)

Michael G. Finlayson

Vice-President, Administration and Human Resources

Ehab Ahmed AbuSabha

Starbucks Customer Service Strategy UAE by Ehab abusabha

Retail Marketing Management – Report
“Starbucks Customer Service Strategy”

Ehab AbuSabha
eabusabha@yahoo.com



Table of contents

1. Introduction ----------------------------------------------------------3

2. Starbucks Customer Service Strategies ---------------------------------4

a. Strategic Advantage through Customer Service -------------------------4

I Customization Approach -----------------------------------------4

II Standardization Approach----------------------------------------4

b. Starbucks as Service Provider -----------------------------------------4

c. Service Goals ----------------------------------------------------------5



3. Strategies employed by the retailer to achieve business objectives ----------5

-The Gaps model for improving Starbucks Service strategy:

3.1 Research Target Customer Expectations and Perceptions -----------5

3.2 Using Customer Research ----------------------------------------------------6

3.3 Commitment to service Quality----------------------------------------------9

3.4 Give information and Training----------------------------------------------10

3.5 Provide instrumental and Emotional Support --------------------------12

3.6 Improving internal Communications -------------------------------------12

3.7 Empower Store Employees---------------------------------------------------13

3.8 Providing Incentives ----------------------------------------------------------13

3.9 Develop Solutions to service Problems ------------------------------------13



4. How the target customers are actually getting affected by these strategies-14

- How Starbucks increase customer satisfaction -------------------------------------14

- Customer Evaluations of Service Quality --------------------------------------------14

a. The Role of expectation -------------------------------------------------------14

b. Perceived Service ---------------------------------------------------------------15



5. Conclusion ----------------------------------------------------------------------15

6. References ----------------------------------------------------------------------16

7. Appendix 1--------------------------------------------------------------------------17















1- Introduction :



The main objective of this report is to study Starbucks Customer Service Strategy , and how it used to keep up with today highly competition in UAE and how Starbucks use Customer service to setup activates and programs to differentiate it self from other retailer to make the coffee experience more rewarding for their customer , this report explain how activities increase the value that customer receive from the Service , built customer loyalty and develop sustainable competitive advantage .



Starbucks category based on competitive and marketplace strategic , The product itself is derived from actual Starbucks Coffee: More than 30 blends and single-origin coffees. Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso . Merchandise: An exclusive line of Starbucks Barista home espresso machines, coffee accessories, and assorted gift items. Fresh Food: Baked pastries, sandwiches and salads. Starbucks Entertainment: music, books and film , Global Consumer Products: bottled Starbucks Frappuccino , Starbucks Card. (Starbucks, 2007).



Starbucks is the leading retailer and roaster for brand specialty coffee in the world ,Starbucks open first store in the U.A.E at Dubai International Airport on 17th April 2000. There are currently 46 stores in the U.A.E. operating in leading shopping malls and other commercial locations. Starbucks employs around 1,500 people across the Middle East including 370 in the U.A.E. (ameinfo UAE ,2006)

Starbucks mission statement :Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow(about Starbucks, 2007) .We are going to see how Starbucks using one of the most effective weapon in marketing today and how they are using free advertisement like word-of-mouth though excellent customer service strategy to generate positive communications to attract new customers and build competitive advantage using customer service.













2- Starbucks Customer Service Strategies



a- Strategic Advantage through Customer Service :



One of the best marketing weapons today is to build Strategic competitive advantage through Customer Service, there is many organization factors that contribute to customer service either direct or in direct Starbucks believes Good Service keep customer return to Store , one of theirs factors as example product , employees in Starbucks store contribute to customer service by making sure the products is available when needed , in addition to that factor location and design contribute by increasing the customer convenience . one big company as Starbuck know well that providing high quality service is difficult for retailers , the solution is automated manufacturing makes the quality of most Starbucks product consistent, but still the quality of service can be vary from store to store , the real challenge of providing consistent high quality service offers an opportunity for a retailer to develop sustainable competitive advantage for example :Starbucks much time and effort to developing an organizational culture stimulates and support excellent customer service



Customization and Standardization are two approaches Starbucks use to develop sustainable customer service advantage , the real success behind this relies on the degree to which customer interaction can be customized , Starbucks use customized approach to make their service much the needs of there individual customer, the customized approach typically results in most customer receiving superior service . The standardization approach on starbucks relies more on policies and procedure and store design and layouts .



b- Starbucks as Service Provider:



* Provide a great work environment and treat each other with respect and dignity.



* Embrace diversity as an essential component in the way we do business.



* Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.



* Develop enthusiastically satisfied customers all of the time.



* Contribute positively to our communities and our environment.



* Recognize that profitability is essential to our future success (4).





c- Setting Service Goals



high quality service required goal setting , Starbucks develop customer service based on their believes about proper operation of the store. Employees are good in achieving service goals, when the goal and objective are specific measurable search as Starbucks approach customer in store area or respond to order , email or enquires ASAP. Starbucks uses Customization Approached on its service to meet each customer needs, in addition , Starbucks approach standardization to make sure rules and procedure at each store are same and consistent with each other however , I found that Starbucks stores at UAE still follow the global Starbucks structure to allow its employees to participate in service setting by giving them space for creativity, which lead to great work environment to treat each other with respect and dignity.



3- Strategies employed by the retailer to achieve business objectives:



-The Gaps model for improving Starbucks Service strategy

just 16 percent of traditional, retail store shoppers are extremely satisfied with their most recent customer service experience. (Retailing Management ,Levy) , lets keep this level of satisfaction in mind while study the following model .



The Gaps Model (Fig1) indicates what Starbucks need to do to provide high-quality customer service. When starbucks customers' expectations are greater than their perceptions of the delivered service they are dissatisfied and feel the quality of the Store service is poor. Thus

, Starbucks need to reduce the service gap to improve customers' satisfaction with their service.



Fig1



Four factors affect the service gap at Starbucks :

Knowledge gap is the difference between expectations from visitors and the Starbucks perception. while Standards gap is differences between Store perceptions and the Starbuck guest, then comes Delivery gap which is differences between the store service standards and the actual service provided to guest & finally comes Communication gap which is difference between service provided and the service promised in the Store promotional campaign.

These 4 gaps all together increases the service gap. Starbucks objective is to reduce the service gap by reducing each of the 4 gaps. Starbucks improving its service quality by :

- understand the level of service customers expect,

- set standards for providing customer service,

- implement programs for delivering service that meets the standards.





3.1- Research Target Customer Expectations and Perceptions



The most critical step in providing good service is to know what the customer Needs. Lack of information can result in poor decisions. for example, a Starbucks might hire extra people to make sure the Products and store layouts as organizes so customers will always find what they want, but it may fail to realize that customers are most concerned about waiting in line to order. From the customer's per­spective, the Store service would improve if the extra employees were used to serve individual guest lines rather than to working in the backroom.

Starbucks can reduce the knowledge gap and develop a better understanding of customer expectations by undertaking customer research, increasing interactions between Store managers and customers, and improving communication between managers and employees who provide customer service.

Market research also can be used to better understand customers' expectations and the quality of service provided by starbucks in UAE. Methods for obtaining this infor­mation range from comprehensive surveys to simply asking customers about the store's service.

Question:



**For the full survey see Appendix 1



Starbucks can track service performance, determine whether it is improving or declining, and identify opportuni­ties for improving service quality, in the above questionnaire the customer was somewhat satisfied with 50% which means there is a lot to do to make customer satisfied



Gauging Satisfaction with Individual Transactions Another method for customer research is surveying customers immediately after a retail transaction has occurred. For example, Starbucks employees who service customer at store ask you guest to fill a short survey which describing how helpful, professional, and organized the customer service employees were. Customer research on individual transactions provides up to date information about customers' expectations and perceptions. The research also indicates the Store interest in providing good service. Because the responses was higher and linked to “very satisfied “, which means they work to satisfy the .in some case ,this research like this can provides a method for rewarding employees who provide good service and correcting those who exhibit poor performance.



Customer Panels and Interviews I have surveying many customers, with help of Starbucks employee panels of 30‑ customers to gain insights into expectations and perceptions. Another example in how this can be done internally , some store managers might meet once a month for an hour with a select group of customers who are asked to provide information about their experiences in the stores and offer suggestions for improving service, I have choose the first method to go with.



Interacting with Customers Owner managers of small retail firms typically have daily contact with their customers and thus have accurate firsthand informa­tion about them. In large retail firms like starbucks , managers often learn about customers through reports, so they may miss the rich information provided by direct contact with customers.



Customer Complaints complains allow retailers to interact with their cus­tomers and acquire detailed information about their service and merchandise. Han­dling complaints is an inexpensive means to isolate and correct service problems. In starbucks case when I asked the following question to its customer , I got 50% of them “once “ and 33.4% twice , which still show that starbucks here dose not have good customer complains system as in USA.

Question :



Using Technology New, affordable information technology packages are en­abling even small retailers to improve their customer service by maintaining and providing customer information to sales associates. The Customer service staff at Starbucks in U.S. uses a clientele applica­tion with its customer database to track the buying history of its B2B customers and provide customer service. . in addition its applied to B2C in small Scale . in Emirates its not implemented yet .



Feedback from Store Employees: Customer Service ,sales and other employees in regu­lar contact with customers often have a good understanding of customer service expectations and problems. This information can improve service quality only if the employees are encouraged to communicate their experiences to high‑level managers who can act on it.

Some retailers regularly survey their employees, asking questions like,



I. What is the biggest problem you face in delivering high‑quality service to your customers?



2. If you could make one change in the company to improve customer service, what would it be?



3.2- Using Customer Research



Collecting information about customer expectations and perceptions isn't enough. The knowledge gap is reduced only when retailers use this information to improve service. For example, store managers should review the suggestions and comments made by customers daily, summarize the information, and distribute it to store employees and managers ,see the Starbucks customer survey Appendix1 .

Feedback on service performance needs to be provided to employees in right time. Reporting the March service performance in next year January makes it hard for Store employees to reflect on the reason for the reported performance. Feedback must be prominently presented so service providers are aware of their perfor­mance, this leds to if starbucks care about customer they need to take the survey into account now not later .



3.3- Commitment to service Quality



After retailers gather information about customer service expectations and perceptions, the next step is to use this information to set standards and develop systems for delivering high‑quality service. Service standards should be based on customers' perceptions rather than internal operations. For example, STARBUCKS manger might set an operations standard of a customer service every day which leads to Service excellence which occurs only when decision maker provides leadership & commitment. And they need to be able to increase the expensive with high quality service Targeted ,This commitment needs to be demonstrated to the employees charged with providing the service. For example in my research I found customer has 44% vary satisfied and 33% about average starbucks in UAE , at lease of this what they are thinking , may be because of one of previous 4 Gap explained before., but this show that the quality of product is not fresh at all especially the food



Question:









3.4- Give information and Training



Starbucks store employees need to know about the retailer's service standards and the coffee product they offer, as well as their customers' needs. With this information, employees can answer customers' questions and suggest products. This knowledge also instills confidence and a sense of competence, which are needed to overcome service problems. For example,: in the question about Starbucks- UAE- Store service employee are well trained., 50 % average agree , this mean the customer perception need to be changed by train the real employee to show that they are well knowledgeable.

Question :

Question :



In addition, store employees need training in interpersonal skills. Dealing with customers is hard‑particularly when they're upset or angry. All store employees, even those who work for retailers that provide excellent service, will encounter dissatisfied customers.





3.5- Provide instrumental and Emotional Support



Service providers need to have the instrumental support (the appropriate sys­tems and equipment) to deliver the service desired by customers. For example, starbucks chain installed a computer system to speed up the order and track process.





3.6- Improving internal Communications



When providing customer service, store employees often must manage the con­flict between customers' and the Starbucks needs. For example, many retailers have a no questions asked return policy. Under such a policy, the retailer will pro­vide a refund at the customer's request even if the products wasn't purchased at the store or was clearly used improperly. From customer side its was fantastic because of most of customer believes that starbucks has good return policy !



3.7- Empower Store Employees



Retailers use message boards, chat rooms, and blogs on their Web sites to provide a valuable service by enabling customers to communicate with one another. Message boards are locations in an Internet site at which customers can post comments. Chat rooms are locations at which customers can engage in interactive, real time, text based discussions.







3.8- Providing Incentives



many retailers use incentives, like paying commissions on sales, to motivate employees. But retailers have found that commissions on sales can decrease customer service and job satisfaction and motivate high-pressure selling, which leads to customer dissatisfaction. However, incentives can also be used effectively to improve customer service. For example, in one retail chain, managers distribute notes to store employees when they solve a customer's problem. The notes can then be converted into a cash bonus. This program was particularly effective because the reward was provided at about the same time the appropriate behavior occurred





3.9- Develop Solutions to service Problems



The previously discussed approaches for closing the service gap rely on informing, empowering, and motivating store personnel to provide better service. Starbuck also use systems and technology to close the delivery gap.









4 - How the target customers are actually getting affected by these strategies :



- Starbucks increase customer satisfaction , Service problems give chance to Starbucks to show its commitments to Provide high quality customer service in the store , by encouraging customer complaints , starbuck has the opportunity to strengthen its relationship with its customer , start bucks has very effective way for handling the problems which summarized on the following three points :



1. Starbucks employees listening to customer, give chance to customer to be the king , listen to them and allow them to speak without interruption .

2. Starbucks Providing s fair solutions to customer and during the problem Store employee try to get the customer back

3. Starbucks resolving problems Quickly because store customer satisfaction is effected by time.

- Customer Evaluations of Service Quality: When customer try to evaluate Starbucks as they compare the perception of the service they receive with their expectation , customer used to be happy when perceived service meet or exceeds expectations



a- The Role of expectation : Starbucks customer expectation comes from their knowledge , expectation and brand awareness , they donot expect to get repose on telephone call same as email , technology is dramatically changed the way in which the customer or the retail store interact , for example using high tech equipment at starbucks store has followed with great customer satisfaction referred to as customer delight , making free parking space has been widely expected from store you need to spend long time on it (second home)

Starbucks spend up to 30% of their operating budget to meet customer satisfaction .

b- Perceived Service

Based on research one quarter of customer unsatisfactory service as more likely to drive customer away from store permanently than any other aspect of the visiting experience , its very hard for starbucks customer to evaluate intangible service based on unsystematic way ,there is five key used to guide the customer in their evaluation : reliability ,assurance tangibility , empathy and responsiveness .

1. Reliability :accuracy of accounting system , meeting promised delivery dates for some coffee machine as example.

2. Assurance : trust and return policy for some purchased item

3. Tangibility: appearance of store and employee

4. Empathy :personal service and email , phone and call by name.

5. Responsiveness: returning the call service using email or telephone or massage .







5- Conclusion to UAE Starbucks .



My conclusion based on the survey , Starbucks is bag U.S retailer chain has more than 44 subsidiaries in UAE , still the UAE branches has no strategies on some area , others they follow the mother company , Starbucks in UAE from customer service point view need to Know what they want. Talk to customers to know about their preference to help them choose Starbucks product that satisfies them . Sell for the whole week. 24hour 7 days in some selected locations. Build their knowledge in store. Use point-of-sale material to educate consumers about coffee characteristics. Encourage alternate usage ideas. They need creative preparation ideas to encourage consumers to try something new. Help them learn more. Direct your consumers to local web site for recipes and more information about Starbucks products and service in UAE











9. References







1- Philip Kotler ,2006, 12.th edn, Marketing Management, Prentice-Hall



2- Roger D. Blackwell, Paul W. Miniard, James F. Engel ,2006, 10.th edn, Consumer Behavior, Thomson, South-Western



3- Blackwell,R D, Miniard,P W and Engel, J F, 2006 , 10thedn ,Consumer Behavior, Thomson, South-Western.



4- Kotabe, M. and Helsen, K. 2001, 2nd edn, Global Marketing Management, Wiley



5- Schneider, S.C. and Barsoux, J.L., 1997,1st edn, Managing Across Cultures, Prentice-Hall



6- About us, “Starbucks coffee company” ,2006 , http://www.starbucks.com/aboutus/default.asp?cookie%5Ftest=1 (15 june 2007)



7- Abigail Mathias, Gulf News Report.” Ah! that perfect brew” , 2005 , http://archive.gulfnews.com/supplements/cafe_culture/main_story/188968.html. (15 june 2007)



8- M H Alshaya ,”Address for Starbucks Coffee in United Arab Emirates” 2006 , http://www.alshaya.com/showstoresdetail.jsp?ctryid=7&brandid=22 (16 june 2007)



9- Wikipedia,” Strategic management” 2006 , http://en.wikipedia.org/wiki/Strategic_management (20 june 2007)



10- Czinkota, M.R., Ronkainen, I.A. and Moffett, M.H. 7th edn ,2005 International Business,Thomson/South-Western.



11- Emerson,” Starbucks History and Timeline: ” 2003 , http://pages.emerson.edu/Courses/Fall03/IN115A/Assignments_In/midterm/vendriger/coffee_culture/page7.html (25 june 2007)



12- Guardian Newspapers.” Starbucks breaches Great Wall of China” , 2005 , http://blogs.guardian.co.uk/news/archives/2005/09/20/starbucks_breaches_great_wall_of_china.html. (27 june 2007)



13- Power of attorneys,” Starbucks Takes To The Courts In China” 2004 , http://www.power-of-attorneys.com/starbucks_china_lawsuit.htm (29 june 2007)



14- Gprussia,” Strategy” 2004 , http://fac-staff.seattleu.edu/gprussia/web/mgmt380/Strategy.ppt (1 june 2007)



15- MTVnews,” Starbucks Coffee - Executive Summary: ” 2003 , http://www.echeat.com/essay.php?t=28401 (16 june 2007)



16- McGraw-Hill Companies,” Starbucks Corporation:Public Company 1992 : ” 2003 , http://www.mhhe.com/business/management/thompson/11e/case/starbucks-2.html (16 june 2007)





















































































Appendix

Sony Betamax failure By Ehab Abusabha

Sony Betamax 1975- 2002

History of Sony:

The VISION: to give shape to the future, The COMMITMENT: to create new technologies, The INSPIRATION: to fashion a new lifestyle, The CONVICTION: to launch the digital era, The COURAGE: to achieve the digital dream.

SONY. DOING WHAT OTHERS HAVE NOT.
1- How It All Began
In a burnt-out department store in Tokyo in May 1946 just after World War II, Masaru Ibuka and Akio Morita founded Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering Company), with the aim of developing products and technologies

In 1950, Ibuka and Morita created Sony’s first hardware device: a tape player/recorder called the G-TYPE recorder. Materials were in such high demand that the first tapes were made of paper with hand painted magnetic material applied by Sony’s first engineers.
In 1953, the company earned licensing rights to the transistor from Western Electric.
In January 1958, the company name was subsequently changed to Sony Corporation. In 1955 they introduce electric rice cooker, followed by Betamax in (1975) , Trinitron color television (1968); Walkman personal stereo (1979); Compact Disc player (1982) ; Betacam for broadcast use (1982); Floppy Disk (1983); Handycam (1985); MiniDisc (1992); PlayStation (1994); DVD (1997); Memory Stick (1998); AIBO (1999); PlayStation 2 (2000) and CLIE, Sony's personal entertainment organiser (2000)

2- Betamax

During the 1970s, Sony developed a machine designed to deliver home video-taping equipment. The machine used Betamax technology, and hit the stores in 1975. In its first year, 30,000 Betamax video recorders (or VCRs) were sold in the United States alone. But a year later Sony’s rival JVC came out with the VHS – short for ‘video home system format VCR.
By January 1977, there were four more Japanese electronics companies manufacturing and marketing VHS-based machines.
At the same time only Sony manufacturing Betamax which has tape quality superior to its rival at that time consumers were forced to decide between them, from 1981 onwards Betamax-based machines were rapidly losing popular favor and owners were becoming increasingly aware of one serious failing. Whereas VHS machines could record for a considerable length of time, Betamax machines could only record for one hour (football matches couldn’t be recorded)
Actually, Sony focus on enhancing sound and picture quality (took as many as three cassettes to show an entire movie) , This caused frustration both among video owners, who had to swap tapes over, at same time VHS succeed was that you could get a whole movie on a tape and consumer came to know that VHS delivered value on a dimension that mattered to consumers which lead to Sony lost market share but the number of units sold still continued to rise in 1984 with peaking of global sales of 2.3 million units, three years after in 1987 VHS had gone way beyond the tipping point with a 95 per cent share of the market.
On 22 August 2002 Sony finally announced it would be discontinuing Betamax products
And they introduce the first Sony VHS player at the same time of this announcement, now, of course, VHS itself is under threat from the rapid rise in digital versatile disc (DVD) players.

3- The reasons of Sony Betamax failure
The reasons of failure will be explained from two points of view:

3-1-The Market Researchers View:
• Sony researchers focused during their research only on what the market need not the customers need which explain the failure by Sony to appreciate the advantage in consumers' minds of extended taping time versus reduced tape.
• Sony refused to license its format or technology with other companies which will directly affects the win or loss risks.
• Betamax VS VHS: in 1976 Matsushita developed new product called VHS which is bigger in the size, Shared by 4 companies, Had extra features & less in price.
• in 1979, Universal Studios and Disney took legal action against Sony, claiming VCRs were infringing the copyrights of movie producers.
• Sony researchers do not segment their market, but they used the mass marketing strategy.
• There were no plans to collect customer’s feedback to do the necessary modifications needed on their product.
• MRs has no alternatives plans to cover the risk of loss such as they can develop the VHS to create new product (Super VHS) to help establishing a broadcast-quality picture(which is better in Sony-Beta) also as a new standard home video format.

Marketing Mix Element Sony
Product Product technology did not meet consumers’ needs
- Could only record for one hour
- Superior band width and resolution (opportunity for differentiation) but viewers couldn’t perceive a difference
Price - Skimming strategy conflicts with mass market approach
Promotion - Pitched the product to the mass market
- Did not promote product’s superior features to back-up technophiles
Distribution - Missed prerecorded tape distribution (very important to VCR owners)

Refused license to Hitachi
Targeting - Did not target early adopter categories; focus was on the mass market
Timing of market entry - Commitments to production of U-Matic design delayed entry to home market for VCRs
- Refused to delay entry to establish relations with Matsushita

3-2- Our Opinion:

• Sony failed to recognize that many consumers buy such items on impulse.
• Sony sells back on word of mouth advertising.
• Sony competitors (Toshiba-NEC-Sanyo-Zenith-Radio Shack & Aiwa) also sell back; this was a painful for Sony because it’s the only company, which produced Beta VCRs in the decline period of sales.
• Users & video shop owners where more likely to buy VHSs because to its recording time (2-6) hours which allowed them to store a full movie in one cassette, Saving shelf space, No need to arrange extra cassettes or to follow the recording timing when they need to record un attended movie or to copy it.


4- Sony from Failure to success:

All market indicators are showing that Sony has:
• Redefine the problem.
• Analyze it, by take a close look at the causes. And they know now what consumer want.
• Depersonalize it. While Sony must analyze their mistakes, you won't learn anything if you're too busy beating up on yourself.
• Change it. OK, they now know what went wrong. And change their Product strategy.
• Get over it. Sony has Move on, they start manufacturing VHS player,

5- Lessons from Betamax

1- Don’t go alone. ‘Contrary to popular belief, what would help every category pioneer is competition,’ says Al Ries. True, providing the competition isn’t pushing a format incompatible with your own.
2- Let others in. Whether Sony refused to license its format or not, there is no question that the company would have had a better chance if its rivals had adopted Betamax.
3- Cut your losses. Sony’s decision to ignore VHS until 1987 was, with hindsight, an undeniable mistake.
4- Supply equals demand. When the manufacturers of pre-recorded tapes decreased their supply of Beta format tapes, demand for Sony’s Betamax recorders inevitably waned

STRATEGIC DECISION MAKING : GlaxoSmithKline by Ehab Abusabha

STRATEGIC DECISION MAKING

"GlaxoSmithKline "

Prepared by:
Ehab Ahmed Abu Sabha





Table of Contents

1. Executive summary

2. A brief description - history of the organization.

3. SWOT analysis:

a) External analysis

b) Internal analysis of the organization.

4. Distinctive competencies and capabilities.

5. Differentiation strategy.

6. Strategic alliances.

7. Globalization approach.

8. Major problems / opportunities Glaxo Wellcome and SmithKline Beecham
9. Recommendations



























1-Executive Summary

GlaxoSmithKline is one of the best five pharmaceutical organizations in the world. GlaxoSmithKline has used process of growth via acquisitions & mergers as a general strategy, the principal activities of GlaxoSmithKline are manufacturing, developing and marketing of pharmaceutical and consumer health-related products. The company operates in two segments area: Pharmaceuticals and Consumer Healthcare, Major markets include Japan, France, UK, the USA, Germany and Italy. Pharmaceuticals accounted for 84% of 2001 revenue and Consumers healthcare, 16%. The company earns more than half of its sales revenue from US market only.
Concept
The concept of causing Relief is about using humors and innovation to help others.

Mission:
“Our global quest is to improve the quality of human life by enabling people to do more, feel better and live longer” 1.

Vision:
“GlaxoSmithKline’s Environment, Health and Safety (EHS) and Employee Health Management (EHM) Visions align with GSK’s strategic intent: to become the indisputable leader in our industry by helping people do more feel better and live longer”.2

Products & Services
GlaxoSmithKline's broad pharmaceutical product line includes antibiotic, antidepressant, gastrointestinal, dermatological, respiratory, cancer and cardiovascular medications. GSK has a wide variety of vaccine products, including hepatitis A and B, diphtheria, tetanus and whooping cough and influenza.
Bringing oral healthcare, over-the-counter medicines and nutritional healthcare products to millions of people.3


2- A brief description - history of the organization :

GlaxoSmithKline is the best world research pharmaceutical organization with high level combination of resources & skills that provides strong growth in today fast change healthcare environment market
The company was bourn in 1999 and is headquartered in London. In 1988, SmithKline Bio-Science Lab acquires International Clinical Laboratories Inc., increasing the group size by half. In 1989, SmithKline Beckman and The Beecham Group plc merge from Beecham plc & SmithKline. In 1994, SmithKline Beecham acquires Diversified Pharmaceutical Services Inc., a pharmaceutical benefits manager, and Sterling Health. This makes SmithKline Beecham the third-largest over-the-counter medicines company in the world and number one in Europe and the international markets. Focusing on human healthcare, SmithKline Beecham sells its animal health business. In 1995, Glaxo and Wellcome merge to form Glaxo Wellcome. Glaxo Wellcome acquires California-based Affymax, a leader in the field of combinatorial chemistry. In 1998, Glaxo Wellcome acquires Polfa Poznan and becomes the largest pharmaceutical company in Poland. In 1999, further sharpening its focus on pharmaceuticals and consumer healthcare, SmithKline Beecham divests SmithKline Beecham Clinical Laboratories and Diversified Pharmaceutical Services. In 2000, GlaxoSmithKline is formed through the merger of Glaxo Wellcome and
SmithKline Beecham. 4




3- SWOT analysis:

A- External analysis with Four Building Blocks
Strengths
• Greater financial resources (Glaxo Wellcome)
• good competitive position (Glaxo Wellcome & SmithKline Beecham)
• strong R&D department (Glaxo Wellcome) - quality
• product/service innovation abilities (Glaxo Wellcome & SmithKline Beecham) innovation , quality
• proven management -customer responsiveness
• market leader (Glaxo Wellcome)
• access to economies of scale (GSK) - efficiency
• Management corporate culture (SmithKline Beecham) quality
• strong science (Glaxo Wellcome)- efficiency
• charismatic leadership (GSK) -
• Monopoly Power (GSK) - customer responsiveness
• Fully independent, with world leading marketing capabilities (GSK) customer responsiveness.
• Acquisition - efficiency
• Ability to modify the strategy - customer responsiveness
• Cost efficient research - efficiency

Weaknesses
• too narrow a product service/line - customer responsiveness , quality
• weak marketing (Glaxo Wellcome) customer responsiveness
• laissez-faire (Glaxo Wellcome) innovation
• Development of a world-leading oncology franchise – customer responsiveness
• Working to improve pipeline productivity with the introduction of genomics to the drug discovery process - customer responsiveness


B- Internal analysis of the organization with Porter Five Forces
Opportunities & Threats

Competitive Rivalry
• Very strong competition (price, coverage, customer services, new product & services - technology) . its also Threat
• Very big competitor like Pfizer, Novartis AG , Schering –Plough Corp . its also Threat.
Buyers Bargaining Power
• less bargaining power of large buyers since other products are less attractive. .its also Opportunity
• Very strong Byers with low price , high quality, variety of choices can be Threat
• Buyer volume is very big which make them very important to the company . .its also Opportunity
• Buyer switching costs is less relative to firm switching costs which make buyers less power its also Opportunity
• Availability of existing substitute products in the pharmaceutical industry. its also Threat
• Buyer price sensitivity is reasonable with quality Glaxo is offering which makes buyers less power . its also Opportunity

Suppliers Bargaining Power
• Increasing the number of licensing agreements. its also Opportunity
• Increasing other supplier power due to Merger . its also Threat
• Adverse government policies . its also Threat
• British and European Complex regulators . its also Threat
• Supplier switching costs relative to firm switching costs . its also Threat
• Degree of differentiation of inputs that Glaxo use makes it difficult for suppliers to have power. its also Opportunity
Threats of new Entrants
• Low due to enormous entry cost and could be high due to expensive R&D wanted (Threats)
• The existence of barriers to entry like British and European Complex regulators ,government policies. (Threats)
• Economies of scale increase the quantity of all input factors by some amount , if costs increase proportionately, there are no economies of scale . (Threats)
• Switching costs is very less , but for unique product will be very high (Threats)
• Access to distribution due to big geographical markets . (Threats)
Threat of Substitute
• US Smoking-cessation has caused strong barriers to Substitute (Threats)
• Slow market growth or market decline may make customer to Substitute to different solutions (Threats)
• informational complexity and asymmetry may cause a strong reason to switch to other products. (Threats)
4- Distinctive competencies and capabilities.

5- DIFFERENTIATION STRATEGIES

GlaxoSmithKline objective start with differentiating features to cause customers to prefer the company product and service over rivals’ brand. They concentrate on differentiate them self by saying people to do more, feel better and live longer (Glaxo mission). The Keys to Success at GlaxoSmithKline was finding ways to differentiate and create value for customer that are NOT EASILY COPIED by rivals in addition , GlaxoSmithKline was Not spending more to differentiate than premium price to be charge , this was supported with Cost efficient research .
The Successful differentiation allows GlaxoSmithKline over their competitor to Command a premium price witch result great Financial position , on other hand ,they Build brand loyalty over time by producing stable medicine, customer can trust which positioned GlaxoSmithKline away from their competitor , Strong R&D department , Strong science with charismatic leadership has been great value to create different product , have different cost with unique quality ,important use differentiate GlaxoSmithKline on the pharmaceutical industry which help them to produce over 1,400 different brands which make them different .
They also has APPROACHES TO DIFFERENTIATION to improve human life by encouraging people to do more, live longer and feel better, While GSK Vision has identify and understand its relationship to society and the environment
6- Strategic Alliances

In GlaxoSmithKline case, it was Cooperation amongst pharmaceutical firms aimed to achieve a common goal using merge strategy. These taken cross licensing of technology, sharing of production, marketing, R&D facilities which was basically combining of two or more entities from GlaxoWellcome and SmithKline Beecham in to one, through a purchase acquisition.
Glaxo aimed from Alliance to cover the High cost of R&D , reduce the High cost of market diversification ,Technology , Economies of Scale ,Rapidly globalizing market Convergence of Consumer needs and preferences.
GlaxoWellcome and SmithKline Beecham used Strategic Alliances to expand R&D cooperation , acquires more Licensing and target more Sales for Cooperation which aimed to enhance the quality of human life
GlaxoWellcome and SmithKline Beecham choose the Merge alliance to include one of the most important type of alliance R&D activities in this field to Sharing Technology Resources to maintain cutting edge which is result in good output by Accelerating Technology Development ,share of High Development Cost and Short Product Life Cycle which Benefits the new organization to have Ease of market entry , reduce entrenched competition , Shared Risk ,Synergy and competitive advantage , Shared Knowledge and expertise
After GlaxoSmithKline was born, the new company start to do many type of Strategic Alliances to enhance there position the world wide, the strategy was successful and as example : MedImmune and GSK agree on strategic alliance on research and development activities to developing a vaccine against human papillomavirus and this was Under the terms of the 1997 agreement.5


7- Globalization approach

The globalization of markets, products and businesses has been a driver of major change over the past years6, Given the enormous costs of developing new products like drugs ,single model development in each category or single centers for the development of ethical pharmaceuticals in particular disease categories seem very attractive as we see this in GlaxoSmithKline , with many alliances achieved by GlaxoSmithKline they has reached the globalization GSK R&D is based at 24 sites in 11 countries. The company has a leading position in genomics/genetics and new drug discovery technologies all over the world
GSK has 80 manufacturing sites in 37 countries with around 35,000 employees , with is big number of world wide capabilities GlaxoSmithKline able to exceed the maximum number know of alliances in the pharmaceutical industry to Enabling Work in the Networked World and as evidence to can see “ Every SECOND...
more than 35 doses of vaccines are distributed by GSK all over the world ,Every MINUTE...
more than 1,100 prescriptions are written for GSK products. ,Every HOUR...
GSK spends more than £277,000/$450,000 ,Every DAY...
more than 200 million people around the world use a GSK brand toothbrush or toothpaste. ,Every YEAR...
our factories produce 9 billion TUMS tablets, 6 billion Panadol tablets and 600 million tubes of toothpaste.” 7

8- Major problems / opportunities Glaxo Wellcome and SmithKline Beecham

One of the big opportunities in The merge between Glaxo Wellcome and SmithKline Beecham that created the world leading pharmaceutical organization with largest R&D organization . The merger represented an opportunity for both organizations
in addition, merger was the opportunity to provide and produce an R&D organization fit for the 21st century and take a good opportunity of Increasing number of licensing agreements, expand more and make sales more during geographical explanation which has become more one of the major problem was Very strong competition in this industry from Pfizer, Zeneca, Astra and Roche which was making good environment Availability of existing substitute products in the pharmaceutical industry ,from other side the government policies and British / European Complex regulators was one on the major problem faced Glaxo Wellcome and SmithKline Beecham after merge , it was about to destroy the deal because it was against the monopoly in the market as they thought . one more major problem faced is to seeking to recruit R&D staff , which was less in the market due to the large demand on the UK for R&D activities but No surprisingly the slowdown in new drugs coming to market was a major concern.


9- Recommendations


reduce the increasing cost complexity of pharmaceutical R&D through more mergers are to be the future of GlaxoSmithKline , seek to build more effective R&D operations. the UK is well placed as a result of its long tradition of scientific and technological , however GlaxoSmithKline need to take advantage of successful worldwide globalization . try to do more strategic alliance to jump to the market leading position to expand the market share more and expand the R&D units which will lead to large Product diversification with in the near future , in addition they need to do more deployment of improved and innovative technologies within GSK which will improve process efficiency and this will come from Better process design via innovation and science


**word count 2205

10- References

1- GSK.2005 .”About GSK” ” [online], September 6, 2005 .Available: http://www.gsk.com/about/about.htm, [Accessed 3 November 2005].

2- GSK.2005 .”GSK Vision” ” [online], March 24, 2005.Available http://www.gsk.com/corporate_responsibility/cr_issues/ehs_mf_vision.htm , [Accessed 4 November 2005].

3- GSK.2005 .”Our Heritage” [online], February 3, 2002.Available .http://www.gsk.com/about/background.htm , [Accessed 6 November 2005]

4 - Rachel T.A. Croson, Armando Gomes, Kathleen L. McGinn, Markus Nöth. 2004. ‘ Mergers and Acquisitions: An Experimental Analysis of Synergies, Externalities and Dynamics’ , Review of Finance, , [online], Vol. 8, No. 2. P.481 Available: Proquest 5000, [Accessed 11 November 2005].

5- Hill, C.W.L. & Jones, G.R. ,2001.” Strategic Management: An integrated approach “ 5th edn. , Houghton Mifflin , Boston.

6- Johnson, G., Scholes, K, & Whittington, R. ,2005, “Exploring Corporate Strategy, Text and Cases” 7th edn, ,NJ,Prentice Hall .

7- Bruce W. Piasecki, Kevin A. Fletcher, Frank J. Mendelson .1999, ” Environmental management and business strategy : leadership skills for the 21st century” 3rd edn, NY ,John Wiley.

8- Access Czech Republic Business Bulletin. Bethesda, 2005. “GlaxoSmithKline begins buying biotechnology firms” , Review of Finance, , [online], Vol. 3, P.20 Available: Proquest 5000, [Accessed 11 November 2005].

9- “UK pharmaceuticals; [LONDON 1ST EDITION]”, Financial Times. London (UK): Oct 28, 2005. p. 18 “


Ehab Ahmed Abusabha