Strategy squared

September 26, 2007 - The UK’s commercial television sector learnt an important lesson today as Ofcom (UK communications regulator) fined GMTV an industry record $4 Million (£2M). This follows a spate of simular problems in the UK broadcasting sector.

Accused of “Gross Negligence”, GMTV (co-owned by ITV and The Walt Disney Company) were found guilty of keeping premium rate competition lines open even though winners had been selected, deceiving viewers (who paid an average of $4 per call whilst generating extra revenues.

The fine represents big business for GMTV and it’s parent companies as significant portions of revenues are now obtained from such competitions. Cumalitive losses by competition entrants were estimated at upto $20m a year, and as up to half of all callers had no chance of winning.

Whilst GMTV has begun a refund program, industry insiders state that GMTV had failed to treat competition entrants as customers.

With advertising companies traditionally treated as customers with viewers targeted as currency – the shift of viewers to customers had caught the organization without effective processes to ensure customer care. GMTV has admitted to “serious operational errors”, overhauled its systems, and terminated its contract with Opera, the company that ran the competitions.

With the importance of “phone-in” competitions to commercial broadcasters bottom line it’s likely that phone in competitions will return, however in a statement GMTV stated that it would not do so until compliance procedures were in place.

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25 September 2007 - While everyone knows recycling is great for the environment it seems it’s also great for business too. Sims Group, based in Australia, is on the acquisitions trail and is set to purchase US company Metal Management for $1.6bn.

The purchase is in support of Sims growth strategy for it’s metal recycling division, and follows several years of acquisitions.

Sims creates “economic recycling processes for industrial and consumer end-of-life products.” The company has benefited from the recent costs of iron ore as manufacturing looks to alternate sources of supply. The significant benefit for manufacturing is cost. As a rule recovered materials are more cost effective than new materials.

Recycling is big business and the new company looks set to have sales in the region of $7bn per annum. Sims currently aquires 70% of it’s revenue from global sales – pointing towards growth in a global industry. Sims may also be benefiting from the push in consumer demand as consumers request products that are environmentally sound.

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The last few days for Northern Rock, the UK mortgage lender, has been a whirlwind of damage limitation. In the 5 days since the story broke that emergency funds have been made available by the UK’s Bank of England to resolve “liquidity problems” – they have had more than a few headaches to manage.

5 days can be a lifetime for PR, for Northern Rock it’s been fairly catastrophic. On Thursday the 13th the BBC website breaks the story that the Bank of England have made emergency funds available to the building society . The following day saw an official statement appear and the stock value plummets – queues are seen outside the building society premises with nervous customers looking to withdraw their savings. As a result– Northern Rock’s IT infrastructure buckles and their website crashes continuously, inundated with customers using the online banking facility to withdraw their funds. The big media organizations were all over the story in a flash and the online community weren’t far behind.

While questions could be asked about how responsibly media organizations act in situations like this it is far more difficult to “contain” the news online – which can have much longer consequences. The statistics are fairly staggering - Google’s blog search shows 37,000+ posts in the last week alone regarding Northern Rock. Social network and bookmark sties (Digg, Del.icio.us etc) are awash with posts. Search for Northern Rock at Youtube and you’ll find video’s of the worried faces on customers queuing outside the banks branches. Wikipedia also covers the entry on Northern Rock (having been heavily edited during the period)

For Northern Rock these problems won’t go away over night. The internet being what it is the breadcrumb trail of negative PR will be around for sometime with the immediate impact tangible from the first SERPS page which includes the original message from the CEO, a BBC news story regarding the event and links to blog and google news posts. In hindsight it’s difficult to know what damage limitation exercise could be done online. The message is clear though – make a mistake and should the internet hear about it expect it to spread and spread wide and fast. Given the speed and depth to which this has spread – large organizations will no doubt be brainstorming what business practices are required to mitigate this is in the future.

Now a week after the initial murmurings and with comments made by the UK’s chancellor beginning to appease the situation (albeit after $5 Billion has been withdrawn) – it’s hard to know what the lasting impact will be on Northern Rocks PR. The trail left online will do little to entice potential customers or reassure existing ones – just how do you go about fixing such a negative event? While many PR firms have crisis management departments how these relate to the online world is not clear – it’ll be interesting to see how Northern Rock copes.

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A recent survey by IAB stated that US companies would spend close to $17 Billion on online advertising in 2007. Fuelled by aquisitions, the worlds leading technology firms iare spending big bucks in order to capitalize on this market. Microsoft, Google and Yahoo are all investing significant sums ($3.1 Billion in Googles case with the aquisition of Doubleclick) buying into the online advertising sector.

With schemes such as Google’s Adwords and Yahoo’s Searchmarketing - online classifieds and advertising are now the norm. However given this global market what is perhaps surprising is the big push to ensure that such products retain a local geographical target - with sites increasingly featuring customized and targeted content based on the users local.

For some time the major search engines have had a local presence - take Google - it currently offers local searches in a variety of countries - google.ca or google.co.uk for example - Yahoo is the same - Youtube is pushing this way to with international versions of the video site.

Venerable site Craigslist (Craigslist) is also getting in on the act - in September 2007 - the London based Sunday Times reported that Craigslist is about to relaunch its UK offering. An important aspect of regionalized web content is the cultural differences that need to ironed out - terminology perhaps the major component.

Regionally focussed content and complimentary local contextual advertising are clearly a winner and firms and it looks like the push to online advertising will be around for some time yet. The impact on traditional marketing channels remains unclear -a survey last year by http://www.kelseygroup.com/ discussed that online classified ads are expected to grow about 8% a year.

With many SME businesses beginning to understand the impact that local search marketing could have on thier bottom line - against traditional channels - online publishers will be increasingly pushed to offer targeted localized content to align online advertising and consumers. Consumers are increasingly requesting more flexability in order to take advantage of the globalization of the internet while keeping a local interest. There is no doubt that over the next few years technology will need to adapt to ensure that content, advertising, location, relevence and user experience combine providing value to both the internet user and the organizations spending thier marketing dollars.

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Suppliers can have a significant bearing on the success of an organization and businesses can introduce a number of problems through inadvertently using poor or inappropriate suppliers. Issues can include poor quality goods, ineffective delivery schedules and poor service levels which can all impact the procuring company in varying degrees. For many organizations protecting the supply chain through effective sourcing is a key task. The management of this is usually achieved through the implementation of an approved supplier list coupled with an effective appraisal system.

The reason behind an approved supplier list is simple enough, the list comprises the suppliers that are “approved” to be used and have passed through some form of assessment. The approved suppliers list acts a control for the buying community to ensure that only suitable suppliers are used. Evaluation therefore acts as the initial stage in identifying organizations with suitable controls and capacity that can supply the desired products or services.

Whilst there is no standard evaluation method there are several areas that should be considered, as a result supplier appraisal often includes criteria to ensure the supplier is:

• Technically sound
• Managerially competent
• Adequately resourced
• Financially stable
• Competitive (often in terms of price and availability)
• Reliable
• Provides goods of suitable quality
• Environmentally/Ethically sound

Each factor can be weighted according to their importance to the procuring company.

From time to time new organizations will need to be added to the approved supplier list and an appraisal is carried out. There are two typical methods of obtaining evaluation information:
• Questionnaire
• Supplier Visit

It should be remembered that obtaining accurate information can sometimes be tricky and due time and resource should be committed to the evaluation process. This should involve a range of personnel from the buying company who are stakeholders in the material being procured. This may typically involve the QA dept but should be extended to manufacturing and/or engineering teams. Another crucial aspect is that an effective process is required to capture new suppliers (prior to an order being raised) and to prevent use prior to appraisal.

While supplier evaluation should be seen as a critical process it is not without problems. Evaluation can be resource intensive and can create a bottleneck between the supplier and buyer this is especially true where evaluation data is difficult to obtain.

For most organizations appraisal is a continuing process and becomes part of an integrated supplier management process. Thus the appraisal process may be carried out intermittently, often on an annual basis to ensure that once a supplier is added to the approved supplier list to ensure its performance against the appraisal criteria is maintained.

The advantages to running an evaluation program are various and include –

1. Poor supplier are weeded out prior to use
2. Identified weaknesses of suppliers that are approved can be targeted by improvement programs
3. Each organization gains understanding over potential influencers of the relationship
4. Company spend can be leveraged on approved suppliers
5. Customer service levels are secured

Supplier appraisal is one activity which supply chain teams undertake that can have real bottom line fiscal impact. Get it wrong or have none at all and the business can find itself aligned with improper suppliers, ineffective goods and impractical delivery schedules – get it right and the organization can be positioned with suppliers who are focused and tuned alongside the needs of the business.

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Social Networking sites are having an increasing affect on staff productivity and organizations that fail to act with suitable policy are liable to increasing costs.

So says a recent survey by UK Law Firm Pennisula who found that upto 233 million hours are lost every month as a result of social networking sites. With many organizations already taking steps to filter content and internet usage - social networking sites are likely to be next on the hit list.

However not everyone sees social networking as a disadvantage – some UK unions including the
TUC have called for access to networking sites to be made available to staff citing that staff should be able to access such sites during work breaks.

Businesses should also look to the advantage that social Networking sites may offer – Search Engine optimization site Searchengineguide stated in a recent article that “user-generated content is just as important as traditional advertising messages”. Harbored correctly social networking sites can contribute to an organizations marketing plan.

However there is intrinsic danger hear regarding the actual content posted – whether it’s supportive or critical of the parent company. There have been a variety of legal cases where employees have been taken to court for defamatory comments made online. With the ability for blog postings to spread like wildfire, a suitable worded posting can cause serious problems for employers.

Without a doubt social media sites are hear to stay – businesses should ensure that a suitable policy is put in place and policed with organizations ensuring that the benefits that social networking sites offer can be capitalized upon.

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In light of globalization organizations can find themselves in an increasingly cut-throat trading environment, remaining competitive in such an environment is therefore a key strategy for many businesses. Supplier associations are increasingly becoming a key element of this strategy as various benefits can be realized including cost reduction and increased flexibility.

There have been a variety of studies into Supplier Associations over the years most notably Hines and Rich’s “Outsourcing Competitive advantage” and Ellram & Edis “A Case Study of Successful Partnering Implementation” as a result the definition of such associations are clear – Hines and Rich’s definition is a “group of a company’s most important suppliers bought together ton a regular basis in order to achieve strategic and operational alignment through the development of awareness, education and implementation programmes.

Supplier associations in themselves are nothing new having originated in Japanese manufacturing in the 1950’s through the principle of Kyorioki Kai. These associations were introduced to provide a method of improving the total end-to-end process and co-ordinating subcontractors in order to disseminate best practice – the motivational factors are clear – releasing benefits obtained through supplier collaboration. These benefits may commonly consist of:

Sharing Best Practice

Developing supplier associations can lead to continuous improvement benefits being cascaded through the supplier group. Sharing best practice can result in both reducing waste and increasing value. While many suppliers may not have the structure and tools to develop continuous improvement programs, within a supplier association innovation and training can be diffused from within one firm to the many participants. The overall benefit of improved processes is increased standard working practices and techniques whilst nurturing innovation.

Cost Reduction

A significant benefit that supplier associations offer is that through increased levels of communication waste within organizations can be reduced and with it operational cost. Communication through better forecasting is one way that costs can be reduced, supplier associations may facilitate the sharing of such data allowing for JIT methods to be developed reducing inventories through surplus buffer stocks. Cost reduction can also be targeted through the elimination of defects. Collaboration throughout the process can identify points and causes of failure which can be targeted by improvement programs – reducing rework and associated cost.

Security

Supplier associations are generally built on a principle of mutual trust. There is a predication that organizations can secure their market share over the long term through effective associations. There is also a perception that market share can actually be improved through participation and increased levels of communication between the organizations involved. Certainly a stable supply chain and early views of development schedules can facilitate a better understanding of the parent firm – the development of mutual trust and long term relationships better position collaborating firms against competitors adding greater value than the standard “price and availability” variables.

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