IB Business Management: Todos os Mercados Key Themes PDF

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Main menu Explore Business Search Business › Blog TEACHING RESOURCES & APPROACHES IB Business Management: Todos os Mercados Key Themes Jim Riley 18th May 2016 What are the key themes in the IB Business Management May 2016 case study Todos os Mercados? We've outlined below what we think is th...

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IB Business Management: Todos os Mercados Key Themes Jim Riley 18th May 2016

What are the key themes in the IB Business Management May 2016 case study Todos os Mercados? We've outlined below what we think is the key context from the case study which you may be able to use effectively where relevant to an exam question. Our IB Business Management Toolkit on Todos os Mercados contains answers to a comprehensive suite of exam-style questions on the case study and is the ideal revision aid as students prepare for this tough paper.

Unit 1: Business Organization and the Environment TM is a public company and its strategy is to a large extent influenced by its profitdriven objectives The most important point to remember about TM is that competes by trying to offer the lowest prices in the market. All aspects of its business management is organised to support this aim. TM is organised to achieve maximum efficiency and lowest cost. Some aspects of this are positive (customers enjoy the benefit of very low prices and wide product choice). Other aspects may be viewed negatively (key stakeholders such as employees and suppliers seem to be poorly treated) TM operates in an intensively competitive market – supermarket retailing. The competitive environment is likely to get even tougher as the effect of wider use of ecommerce is felt. The suggestion from the case study is that TM has not been as quick as other global competitors to embrace e-commerce. Is it too late? TM is big – and it seems to use its power and size to get what it wants! Just ask TM’s suppliers who seem to be under pressure to give TM the best possible terms. Just ask

TM’s employees who are paid the minimum allowed and no more. Perhaps it is no surprise that TM is increasingly under scrutiny from pressure groups who are pointing to its poor record on business ethics and social responsibility. Can a MNC continue to succeed globally if it does not act ethically or meet is broader social responsibilities? Like any MNC, TM is not immune from changes in the economic environment. The recent downturn in economic conditions in France is featured in the case study, although this seems to have had a broadly positive effect on TM’s business there. In a recession, consumers increasingly look for value for money, since disposable household incomes are under pressure. Will TM’s lowest-price positioning continue to be successful as economic conditions improve?

Unit 2: Human Resource Management Who would want to be an employee or manager working for TM? Financial rewards are very low, the workplace rules and procedures are strict, and the discipline is tough. So why would you work at TM? Because it is a major employer and it is a successful business that provides secure employment, provided you follow the rules. In many locations, the TM hypermarket will be one of the largest employers. The most important feature of human resource management is the organisational culture at TM. It is the culture that influences all aspects of how people are managed in the business and how decisions are taken. The culture at TM is all about command and control – from the centre. Centralisation is key – all aspects of the business are determined by the senior management team at TM in South America. Whilst there are some advantages to centralization for an MNC the overall effect at the TM hypermarket in St. Laurent appears to be negative. Employee morale at St. Laurent looks very poor. If Daniel Pink were to visit the TM hypermarket there he would find little evidence of his three intrinsic motivators autonomy, purpose and mastery. However, if he were still alive, motivational theorist Taylor would certainly approve of the autocratic, scientific approach to motivation being taken by TM. The one thing you can say about working at TM is that employees and managers know what is expected of them and where they stand in the organisational hierarchy. However, there is clear evidence that this “hard” approach to human resource management is building significant resentment. A key question to consider, therefore, is whether TM’s HRM strategy is increasingly becoming a significant weakness in the business.

Unit 3: Finance and accounts

We are provided with very little financial information about TM. Prepare for that to be provided as additional information in the Paper 1 exam. It is likely that you could be asked to look at some summary financial information for TM. Remember that lines [86-87] state that “the [MBA] case study contains financial information for TM, which Henri uses to calculate financial ratios. He is shocked.” Why might Henri be shocked? There are some possible clues in the case. Suppliers are said to have been persuaded to have given TM even more favourable purchasing terms. Might that be reflected in a very high creditor days figure, which, it can be argued, is evidence of TM not acting ethically with suppliers. Might Henri’s shock be related to TM’s liquidity ratios. Remember that large supermarkets often have a very low current ratio, since they have very few trade debtors (customers pay in cash); relatively low stocks, and very large amounts owed to suppliers (trade creditors). TM’s current ratio might be extremely low, but is Henri right to be shocked? Another possible cause of Henri’s shock may lie in the profitability ratios for TM. Perhaps the gross profit margin is much higher than he expected? Perhaps TM is earning extremely high overall profits, which might seem somewhat unfair to staff and management at St. Laurent who are paid so little.

Unit 4: Marketing It is often said that marketing success in retailing is all about three factors: location, location and location. However, for TM there is a different recipe for success – price Price is the dominant part of the marketing mix for TM and is the foundation for its growth so far. It has one, simple aim: to have the lowest prices in the market – and every aspect of the business (particularly operations and HRM) is organised to support that aim TM is a classic “low-cost” operator or “discount” retailer. Customers associate TM with value. So, in order to keep its competitive advantage, it is essential that TM operates as efficiently and cost-effectively as possible. In recent years however, another element of the marketing mix has started to become more important: product. Extending the product range first to a wide variety of nongrocery goods (e.g. automotive parts, office supplies) and then to a range of in-store services (e.g. pharmacy, banking) has enabled TM to make full use of its large hypermarkets. TM has aligned low prices with wide product range. No wonder that when a TM hypermarket opens in a new location, other local retail businesses suffer. They struggle to survive, let alone compete.

This powerful combination of low price and one-stop shopping might seem to be unbeatable. However, TM faces a threat from e-commerce which it seems TM has been slow to embrace. Where will future growth come from given that TM has already expanded its geographical reach outside South America (market development) and significantly expanded the product range (product development). The next phase of growth looks like it will come from a possible expansion into Asia. Depending on how TM decides to expand into Asia, this could be a high-risk strategy. Many MNC retailers have come badly unstuck in Asia believing that their marketing mix would work in markets that turn out to be much more competitive and harder to enter than they first thought. In the exam, make sure you are prepared, if asked, to analyse the different options open to TM.

Unit 5: Operations Management To understand TM’s approach to operations management you need to link it to its aim (lowest prices) and organisational culture (low cost). TM’s operations are managed in order to support operating at the lowest possible cost. Non-core activities have been outsourced (and no doubt those suppliers have been squeezed too). Lean production is the strategy, looking to cut out waste and minimise the amount of stock in the business. However, it is the scale of TM that is perhaps the most important factor in the business operating efficiently. There are clear economies of scale benefits to TM from being a market leader, not the least being the ability of the business to negotiate the best purchasing terms from suppliers. Henri’s MBC class study of TM suggests that customized production is a significant threat to TM. Really? To a hypermarket retailing business? No. Much more significant is the growing influence of e-commerce and the implications of that for TM’s operations. That is where the real threat (or opportunity) lies.

IB Business & Management: 2016 Paper 1 Case Study Brie;ng

IB Business & Management: 2016 Paper 1 Case Study Briefing

JOB BOARD

Teacher of Business and Economics King Edward VII School, Sheffield

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