Business analysis is a specific protocol when it comes to understanding the needs of a business set-up and tackling the problems that come along the way. Throughout this procedure one has to under take many tasks including various strategies and policy planning.
Business analysis, is effectively conducted, plays a vital role in the operations of the business by deciding upon the procedures of activities and how their processes will be used to achieve the desired results.
The changes that a company undergoes during its analysis are regularly monitored and it is made sure that these changes are interpreted to give a clear reflection of their efficacy. These changes are of many types, ranging from planning, managing, validation or communication.
These changes are further supported through the implementation of technical procedures which include workshop facilitation techniques and analysis and organization of requirements.
Outsourcing is an act of subcontracting an activity of a business by delegating and hiring a third party to carry out all the necessary operations of that particular activity. This process reduces total production or other related operational costs of the business. The decision regarding outsourcing of activities is very critical and is taken on the basis of many variables. These include labor and technology, lowering production costs or even making efficient use of energy sources available.
When the outsourcing procedure’s necessary requirements and further details are established between the two parties, they sit down to bring it on paper and conduct a proper and legally binding contract. The contract for outsourcing contains how the raw materials will be obtained, what machinery will be used and the labor requirements. When the third party settles agreement with the original company, the process begins.
Now this agreement is applicable to a number of actions, like for example information technology, accounting and real-estate management. A common practice in today’s time is the out sourcing of Customer Support Centers or Call Centers in many countries.
Another type of out sourcing has seen a remarkable on-set with the turn of this decade is known as offshore out sourcing. In this we transfer an ‘organizational function’ to another country regardless of the fact that the work generated stays within the same company or out sourced. India has been known for its companies which are involved in outsourcing for years with many US and UK companies.
Often companies rely on “advisory services of outsourcing consultants” or “outsourcing intermediaries” to help them give a clear picture for evaluating such an important task. One has to keep in mind, the nature of work, the Research and Development Program, the manufacture and information flow when deciding on an outsourcing plan.
An Exogenous Variable is an independent variable which is defined as a variable which affects the process it is involved in while not affecting itself with any change. Thus, it has no explicit causes within the model system it has been applied on. Outsourcing is very common in the airline companies. When we talk about the working of exogenous variables in airline industry, we can say that these may include security screening, provided by the Globe Aviation Corporation at most airports, pilot training, maintenance, food service, and fueling. These variables may alter from now and then affecting the functioning of the airport but they remain intact under various conditions. Here we will be talking about an example of Boise airport for Airport Baggage Services. The following is an account of a worker at the Airport Baggage Services:
On-site assistance to the passenger on the Boise Airport is provided and along with this also to perform curbside check-in for passengers with disabilities. What amazes me is that could these two services are outsourced and not provided by the airlines themselves (Academic Reed, 2009).
Another example of such a variable would be when the companies outsource the security staff of the airport. Airport Security vests itself with international standards. There is a comprehensive need for quality security measures. During such an outsourcing a part of the organization or even all its responsibilities are transferred to another body, This increase is will increase the physical security of the area, induces it will induce contingency planning, as well as makes way for project management and technology transfer. Recruiting personnel from outside the usual circle of selection ensures airport security standards to meet the internationals standards. There is another end to this string, which is an Action Variable; this is simply defined as the contingency plan that we perform during an analysis to find out where we stand in the market. In such a scenario we have to transfer these practices such as surveys, questionnaires and help desk to another party to cut down on total costs.
Advantages and Disadvantages of Outsourcing in Airport Security
- The biggest benefit of outsourcing is the saving of money. When it comes to talking about the airline industry, with the recession affecting the world tourism, this is a great way to cut down on overall cost.
- Another added value advantage to this expenditure cut down is the fact that the money saved can be used to build new wings to the airport, hire IT specialists for technology transfer etc.
- An often neglected pro in regard to outsourcing is the expansion of expertise and knowledge acquired that comes with a diverse group of minds working together on a project like for example when accessing intellectual property of different ethnic and religious people for developing an on-board menu.
- We can also count the efficiency of a system that increases to unfold as an advantage of outsourcing; there would be a change of quality results. Transferring the entire ticketing system onto the electronic system results in higher proficiency as in the case of e-ticketing as well as cuts down the aggravating procedure of purchasing tickets from hand and paying in cash. The e-ticketing system not only removes the intermediates between the passenger and the airline but also helps in efficient monetary exchange.
- Now, coming to the disadvantages, we see that the major risk involved in outsourcing is the element of ‘trust’, putting your company in the hands of an outsider may not always result in a greener patch. You may also consider this as a threat to confidentiality and security.
- Along this disadvantage comes another concept of ‘Loss of Managerial Control’. No longer will a part of your company be driven on the standards that you initially set up. Taking out case of study in view, we can state the example of the Fueling Service; it will be now their authority to regulate fueling as per their policies and no longer your considerations will be given priorities.
- Loss of control will also result in ill will of the stakeholders, bad public perception and quality problems. In regard to our caste study, if outscoring does take place on airport, it will result in a problem very common since the dawn of civilization called ‘Language
Problem’. This is often witnessed at Check-in counters, Help Desks and Customer Support Centre. What happens here is that people often find it hard to understand the different accents and this lead to misunderstandings and miscommunications as the visual face-to-face encounter is also not present in call centre. (Cfo, 2009).
- Since you have handed over one part of the airport to another body for its functioning, you are now tied to the well-being of the company as well, and their image and financial value will affect your company as well. For instance handing over the Pilot Training for your Airline to another body may result un-appropriate candidates for the aircraft or if choosing an inferior brand name for your airport security system decrease the trust value of the passenger and also may harm national security itself.
SAS is a leading airline group in Northern Europe, flying to over 150 destinations across the world. Due to the growing economic disaster the company had to take certain measures in order to survive the current turbulent cooperate world. SAS developed a new strategy known as the ‘Core SAS’ to prop up a fresh, rationalized structure for the company. Following are some of the actions that SAS under took to achieve the above stated goal.
- The company decided to focus on the Nordic Areas (Denmark, Finland, Iceland, Norway and Sweden ) and excluded the following Air Greenland, Skyways, BMI, Estonian Airways, Spanair, airBaltic, Spirit, Cubic and Trust (SAS, 2009). These countries share much common history as well as common traits in their respective societies as well as have a common platform as the ‘Nordic council’. Thus in this way SAS was able to cater a large number of people using only a small number of specific tools due to the similarities of the regions.
- Next in line, they carried out the often applied practice of outsourcing, they did this by outsourcing different operations for instance like The Cargo Department and with this also discontinued certain technical services that will not directly have any effect on the Company’s production value. This also enhanced their relations with as there was an increase in the contacts.
- They targeted a certain class of frequent travelling business men that need faster means to travel within this region. Thus, they downsized on more profitable routes rather than the previous ones.
- They cut down their expenditures, perhaps like limiting paint jobs on aircrafts, excluding lavish on-board menus and perhaps by switching to e-ticketing. If the choices were made correctly, they would have directly benefited the company’s turn over.
- They followed this concept called “Service and Simplicity”, which helped them in gaining wider acceptance by the crowds due to their availability.
- When dealing with their customers, they generated a customer oriented culture that aided in the process of customer loyalty and customer satisfaction.
Relationship among the Quality and Profitability
It is not mandatory that the relationship between quality and profitability will always be a linear one. The quality of a product or service directly affects the profits that your company anticipates. Thus, in order to successfully establish such a relation one must lay strict emphasis on improving and maintaining quality standards. For a multi-national company like SAS this means to create the perfect image in the eyes of their customers and make certain that this image stays the same in the long run.
There can many possible such relations and each has its own implication on quality management in the company, a few possibilities are as follows:
- One very important relation that can exist in the case of SAS is the Punctuality Factor that is necessary for any good and acceptable airline. They need to ensure on time departures, arrivals, check-in, and baggage claims, immigration and even taxi hire will directly affect the profits of the company. This factor is made attractive by offering flight informative services via SMS, to let the customer know that their time is valued by the company
- The pricing in case of SAS’s new strategy will also benefit them, as the miles within the region are limited and people will be ready to pay the named prices for faster.
- SAS aspires to promote traffic growth and reducing environmental impact simultaneously, it plans to do so through the following strategies: 1) 20% lower emissions by 2020. 2) 50% lower emissions/unit by 2020. 3) Likelihood to fly with 0% greenhouse emissions by 2050 (SAS, 2009).
- Another unique feature that gives SAS an added value benefit is its alliances and partners. Association with well-known airlines, cargo partners and investors will ultimately promote favoritism and popularity among the masses thus proportionally increasing the sales. With SAS' association with the multilateral cooperation within Star Alliance, SAS has also had tactical alliance with Lufthansa for over the 13years (2009).
Strategic positioning influencing design choices of a management control system
The strategic positioning may and can influence the pattern of how a control system may be developed.
- When talking Nordic Focus, the management will definitely lay stress on hiring people with knowledge of the region and prefer people with fluent regional languages.
- Let us now talk about a bit on the outsourcing, of various operations, during such a transfer SAS will take into consideration the security and confidentiality of their company, an improper transfer of information technology or personnel will result in chaotic situations like, security breech, miscommunications and leakage of vital facts/figures.
- When cutting down expenditures are involved, it will lead to the most evident changes in the management control system. The company will have to design a work force that will carry out the same work previously done but in half the price. SAS will have to propose such a structure that will not let the down seizing affect the quality of the service. Using tools and analytical methods to derive fruitful results excluding the monetary halt.
"Beyond Budgeting" is a headship attitude based on an integrated, coherent set of alternative processes underpinned by a number of key doctrines. Compared with the conventional management model, it has two elementary differences: First of all it is more adaptive and Secondly, this model facilitates a more decentralized way of managing (MetaManagment, 2009).
Introducing beyond budgeting in the SAS Group can have many valued pros. As mentioned above it is a ‘coherent model’ thus all the elements involved in the system work in harmony giving a more successful and prolonged result. Next comes our case study of SAS, we have seen how SAS has developed strategies to overcome its economic challenges, now the question comes; can beyond budgeting increase insight into connections between strategy, quality and profitability and it can then to what extent it should be incorporated in the management process?
The answer is simple, in a number of ways beyond budgeting can offer its assistance in the company’s success provided the employees learn to quickly adapt to this new system and abscond the conventional budgeting based on ‘command’ and ‘control’.
SAS can use beyond budgeting to:
I.Make the company and the employees more adaptive to change.
II.Eliminate processes that are expensive.
III.Maximize value for customers.
IV.To release energy and enterprise of all the people. (cited in Revelwood, 2009).
SAS can benefit using this new model system in the following way:
- Beyond budgeting helps to set certain goals for the company and the people working. This will create an agile environment, unique ideas would be generated and commitments at the local level will be established.
- Planning and forecasting is a backbone of an airline company, using this mode system will help in forecasting for up to 12 months.
- Having a resource management helps in implementing the actions immediately without any delay of planning, perception or procuring (Va-intreactive, 2009).
- The system works together, reporting changes is easier, there is no centralized hierarchy thus there is devolved network.
Ferry Traffic between Bergen and Denmark
a) As a product account displays the value of any production and its total output, we may use the route account for a route between Western Norway and Denmark as centre point to see if the prices were actually set too low.
The following are some of the factors that would be assessed as to whether the ticket price was indeed set too low:
- One very important factor in today’s time could be the inflation or a recession, we know that people are not going to pay more for such luxury in such times, thus making them consider price cuts through this rough period.
- Another reason for them to choose lowering their prices could be the possibility of excess capacity, we can simply defines this as a means of generating supplementary income that was not possible even with increased sales efforts.
b) The economist from Color Line was to calculate the total investment that was put in for MS Ragnhild in certain specific intervals. Yes, I do support the above mentioned proposal but there are other alternatives to such a scenario like for instance If the owner of the ship gives out a certain amount for a specified time period to see if any profits are made, and if not the owner stops the investment. A substitute for this could also be the open excess to an account with currency that could be taken out as per requirement by the authorized personnel for immediate paint or repair job after corrosion etc.
c) A customer profitability analysis is basically a logical deduction of the revenues earned and the total investments involved. This analysis can give us a clear picture of the customers that the ferry caters to, so they can set up a standard of living and luxury. It will help them find out, the needs of their customers and things that will attract them and compel them to use the ferry in future. This will also assist in developing a segmentation system by which the ferry can distinguish between the various customers on the basis of many factors like Ethincity, Environment, Culture and Leisure Needs. For example: Segmentation would allow the ferry to distribute their customers according to High Elite Class, Upper Middle Class, Lower Middle Class etc when decorating the suites/cabin and arranging various deck activities. One can also divide the customers according to the preferred choice of meal like serving vegetarians or making sure the ferry does not ignore the religious implications for certain customers. This will also make certain that the ferry will not end up attacking a certain sect or an ethnic group during on board attractions and competitions.
d) The turning point of profitability indicates the point when the value of money invested is crossed over by the earnings made in a certain span of time. The Stobachoff Coefficient is the substituted border line between profit and loss it acts as a standard in a CPA Curve.
e) As indicated by the data, the total number of passengers travelling form Western Norway was 350,000 and each passenger paid an amount of NOK 1,000/-.
The data showed that 1% of the passenger count that is equal to 3500 customers was the most lucrative segment of the entire ship; even so there number was less than any other segment. 5% - 10% of customers contributed towards an average of 25% of total revenue earned, when we compare this to the previously descried most profitable segment, we see that the amount earned is not very high even though the number of customers is. We then come to the next segment of 40% of passengers which is a number of 140,000 on board; this seems to be the average revenue
earned. In the matter of 80% - 90% of passengers on board, accounted for 99% of the total returns generated. This is the major part of the customer distribution and gives a fairly acceptable amount of profits earned.
If we graphically simulate the data recorded in which the number of customers and total revenue takes place, we observe that there are two key measures that relate the above mentioned components together. The two measures required will be ‘Number of Customers’ and ‘Value Margin to Ferry’. A ‘Current Value Margin Profile’ must be made to segregate the profits earned by the different percentages of the customers. Here the measure value margin to ferry describes the difference between the capital and revenues earned.