Singapore Airlines Business And Management Strategies Tourism Essay

Singapore Airlines Business And Management Strategies Tourism Essay The purpose and objective of this report is to look into the business and management strategies of Singapore Airlines. Thing that I will be looking into would be the different challenges and threats that Singapore Airline face and also I will be sharing on how and what kind of strategy they used to survive and be on top of the competition. I will be using SWOT analysis to analyze Singapore Airlines strategies, to give an in-depth understanding on what are the contributing factors that helps or cripples the company. Table of Contents Introduction 3 Strategies of Singapore Airlines Service strategy 4 Human Resource Management and Marketing strategies 5 Competitive challenges faced by Singapore Airlines 6 How did Singapore Airlines outstand their challengers 7 Star alliance 7 Cargo alliance with Lufthansa 7 Cost reduction 7 Problem Singapore Airlines might face in the future 8 SWOT analyze of Singapore Airlines Strength Branding 9 Quality of services 9 Weakness 9 Opportunity 10 Threat 10 Analysis of SWOT 10 Recommendation/conclusion for the report 11 References 12 Introduction A brief introduction to Singapore Airlines on how it is form and what difficulties the company faced at first. Singapore Airlines was found in 1947 with Malaysian Airlines (known as Malayan at that time), it was a joint venture between the Malaysia and Singapore government, placing their service mainly in the South East Asia region. Singapore Airlines is considered one of the worlds best airlines travelling up to 93 destinations and 38 countries. After Singapore Separated from Malaysia in 1965 and both governments coincide to set up different airlines. Thus, Singapore Airlines was born in 1972. Different from most other airlines, Singapore Airlines was at a disadvantage position as compared to them. What causes this is because it is due to that Singapore Airline is not given the choice of domestic routes to serve, as Singapore itself it too small, so Singapore Airlines is force to compete with international airlines for routes the moment it starts its business. The things to compete for are like getting access to terminals, securing flights slots and landing rights, and also trying to draw in a new customer base. Not like most state-owned entities, Singapore Airlines was force into to massive competition from the start of its business. Using this as motivational factor, it led and brings Singapore Airlines competitive spirit to an incomparable level and also the dedication to make a good branding of Singapore Airline be better than every service sector. These factors have stayed within the company acting as the core and since then, it has shown to serve the airline very wel l, allowing them to overcome any challenges. It was shown that Singapore Airlines earned a profit of $253 million in April to June 2010. This was a complete change of $560 million from the loss of $307 million recorded in the same quarter a year ago. [1] Strategies Singapore Airlines used to achieve success Service Strategies Singapore Airlines is known as one of the greatest and popular brands in the international business world. Singapore Airlines is also well respected as an airline that capable of providing one of the best flight services in the world. They are not only well known for its brand but also on its service quality, beating other famous airlines such as Fly Emirates, Qantas and British Airlines The first aspect that I would share on is about the service process. This is a factor which has always has been presenting at its best by the entire cabin crew for the passengers up till present. The service is being personified in the Singapore girl figure, which is the air stewardess of the airline. The Singapore girl consistent visual advertising slogan applied to depictions of stewardesses of Singapore Airlines dressed in distinctive our Malay ethnic costume sarong Kebaya. This has been representing as the icon of the service guarantee and the exciting and unforgettable flight experience. Secondly, what contributes to the Singapore airlines glory is their strategy where they are always keeping the innovative edge particularly on the in-flight services. The Singapore airlines is the first airlines that brings in the personal system of the entertainment system and video on-demand for every seat. It is called the Krisworld. Apart from that, they are also the first airlines who introduce the seat configuration that brings maximum comfort to the passengers. Recently, they also introduce the first suite class in the commercial airlines which is the A380, a class that designed exactly as the five star hotel room, completed with the private compartment which also brings the comfort level even higher. Thirdly, Singapore airlines consistently use new airplanes for one purpose. It is to enable a lower cost of operational as it is cheaper and more efficient to maintain younger airplanes as compared to older airplanes. This helps in cutting down the cost for Singapore airlines in the financial aspect. Using those three strategies point, the excellent service, the continuity innovation, and the technology superiority, this is why Singapore Airlines is always remaining as one of the best airlines. Human Resource Management and Marketing Strategies   The Singapore airlines make use of a Human resource management policy where productivity is closely related with motivational policies for employees to provide better service and productivity. It is to say that higher income particular are more likely than lower income particular to report them at higher sense of satisfaction. This practice is found in Singapore airlines where human resource management in Singapore airlines approaches viewing performance management as to further improve the particular performance through assessing past performance and rewarding them in purely financial terms. The most important and different marking strategy exploited by Singapore Airlines is based on their quality of image and service of Singapore girl. The Singapore Girl is essential part of this brand image. One of the Singapore Girl core value is having the mindset of approachable customer orientated staff delivering better quality of customer service. This has become the most important competitive advantage for Singapore Airlines, because Singapore Girls can be considered as the frontline behind the success of the achievement. In order to retain its customers, staff trainings and development programs have been implied to the employees. To ensure the professional service amongst employees, they also have to attend language courses and attitudinal programmes. Global customers are high due to the awareness of the Singapore Girl image. The effective marketing strategy helped Singapore airlines to reduce their cost pressures in order for them to compete in the airline industry through value adding targeted market division. Using the Singapore Girl as an icon for Singapore airlines has boost Singapore Airlines competitive position in the industry. Competitive challenges faced by the Singapore airline Airline industry has seen many changes and competition are stronger and fiercer than ever. Ranging from business and economic class flights to low-cost flights and the coupled with economic downturn, the competition between the airline industry is remarkably high. Some of the low-cost flights operators such as Ryanair, an Irish low-cost airline, are more flexible in responding to increase the cost pressure on profitability which set a threat to Singapore airline operations and growing. Singapore airlines acted to these pressures and thus invested in newer technology in order to maintain its cost levels while trying to not sacrifice any customer service quality in order to achieve profitability. One concern caused at this stage in considering changing the consumer behaviour and attitudes towards flying in Singapore Airlines are related to what extent Singapore Airlines will be able to preserve and enhance its brand image of customer service. Continuous cost pressure such as increased in fuel prices as well as operational costs related to enhanced security will continue to be a challenge for Singapore airlines in preserving profitability in competing with budget operators. If budget operators to date have been either locally or regionally based should operators like Ryanair by expanding to provide international journeys, this will create huge threat to Singapore airlines in terms of competition for long-haul passengers. Due to the economic downturn, consumers are leaning towards the area of low pricing of low-cost flights. Some notable competitors that Singapore Airlines are facing would be Cathay Pacific, Ryanair and the Malaysian Airlines. How did Singapore airline outstand their competitors? Singapore airlines increased its network via code-sharing with members of Star alliance marketing partnership including Lufthansa and united airlines. Code-sharing allows airlines to sell tickets on one anothers flight and this will offer service to additional destinations. Star Alliance: Partnership with star alliance allows Singapore airline to develop and improve operations, facilitates and processes and able to provide access to new capabilities as well as new knowledge and new technologies. The major airline part of star alliance marketing partnership which includes Lufthansa, united airlines, Thai airways and Singapore airlines. These legal agreement linkages are designed to meet the different needs for expanding worldwide through marketing linkages, without acquiring the costs involved in major fleet investments. Cargo alliance with Lufthansa: Partnership between Scandinavian Airliness cargo, Lufthansa and Singapore Airlines where this operation marketed under the brand name WOW. Expands are made including the carriers services as well as information technology and cargo handling. This alliance will help both airlines to expand their market to even wider area over the world where they did not have it earlier on. Cost Reduction Singapore airline has been seeing an increasing of its profit by starting new alliances with more other airlines. SIA has benefited in three ways. The first would be the success of getting the economies of scale through the joint operations of air and ground services. Secondly, scope which is through increased reach and efficient connections and lastly, the increased in traffic density through network expansion and additional traffic feed. Problems Singapore airline might face in the future Singapore airlines have an alliance with united airlines where it is now operating under bankruptcy protection. This alliance may face difficulties in the future and also have a reduction in the market share in the US sector. If something happen to the alliance, it will affect Singapore airline greatly. And there will also be bigger carriers that will be developing from each group of alliances. Big giants of the airline industry are combining and this will soon become a threat to other airlines. Lack of clear goals and objectives Singapore Airlines might also face the problem of having a partner who lack of clear goals and objective. It had faced similar problems with the American carrier delta and Swiss air, thus had to leave the tri alliance. Reasons for such failure are mainly is because of different objectives, inability to share risk and lack of trust towards the different companies. SWOT analysis of Singapore Airlines Strength Branding: Singapore airline is well known for its branding from all over the world. Singapore airline is the one that has the most profit internationally. It is the strong brand management that driven primarily by its top management. Singapore airlines brand is unique in the way that the boardroom takes commitment of leadership of the brand strategy unlike many other airlines. The Singapore Airlines keeps enhancing innovation as an important part of the brand, and the ambience and experience are key factors of their success today. Quality of service: The quality of service of Singapore airline plays a very crucial part in the strength of the company. Behind the professional performance of cabin crews, Singapore airline gives their entire cabin crew rapid trainings to maintain their high quality of service. They constantly educate their cabin crew including Singapore girl, in order to fulfil the world class airlines service standard. This is why Singapore airlines is always at the top at customer satisfaction survey about in-flight service observed by the independent institution. Weaknesses Heavy, on-going investments and high costs. Singapore airlines has dedicated itself strongly to positioning branding name and quality of services, and in order to maintain the high standard, it is of a high financial costs. By purchasing of new and young aircrafts, it proves to have a bigger fleet space and thus will create a high parking and maintenance cost. All these expenditure will be a weakness in down times. Opportunities The expansion into key aviation markets has provide Singapore airline to break through its limited space as compared to before, and this will increase market shares worldwide. Alliances, code-sharing with other aviation company increases Singapore airlines opportunity to provide better services and also to cut costs. Threats After terrorist attack on September 2001 in united state, it has been confronted with a tremendous decline in international tourism. The airline industry became more competitive in Asian region as there are more than thirty country operate around thousand of airline company. Singapore airline is one of the operating Asian region as well as in Europe and American region. This has affected the travel density for Singapore airlines. The outbreak of H1N1 is also a huge threat to Singapore airline as people are in fear of travelling overseas due to the infection rate and highly contagious nature of the virus. And to add on to the bad news and misfortune, one for our Singapore airline flight attendances is also first cabin crew to be contracted with H1N1. This has tremendously affected the airline. Analysis of SWOT Opportunities of Singapore airlines can help to overcome their weaknesses. Their weaknesses is mainly high costs and heavy, on-going investments. By having the opportunity to partnership with other companies this help to cut cost. Alliances, code-sharing with other aviation company increases Singapore airlines opportunity to provide better services and also to cut costs. Singapore airlines threat can also be overcome by the company strength which is quality of service and branding. The competitive advantage of Singapore airline has achieved sustainable competitive advantage. Singapore airlines have consistently outdo its competitors since the time it was born, and still retaining high standard and services for customers. The major factor of Singapore airlines competitive success that it managed to drive skilfully between poles that most companies think of as different. This includes delivering best service in a cost-effective way, at cost levels lower that they are comparable to budget airlines in the world. Recommendation/conclusion for the report What recommendations I have for Singapore airlines are as the following. I think that Singapore can make use of the most number of benefits by the existing alliances and equally contributing to the partners by services or other benefits. If not, Singapore airlines can also prefer to have fewer partnership in the industry and add more to the destination, more aircrafts and customer service which will make them sustain their position of being the best. I believe that they should continue working on its branding and providing excellent service which is meant to maintain customer satisfactory level, and continue having strong workforce at the expense of costs. They should maintain what they are now like their branding name and quality of service and if they were to switching to different market, this would provide risky results if their strategy fails. This will prove fatal to the company as there are also other companies that are also have established their names in the market. Through researching on Singapore airlines, it seems to me that the core of their success in the near future would be dependent on their innovativeness, this is because it has come to a point where all the airline are providing almost the same thing. Things like technology can be easily obtain by any other different companies.

Body Language

Body language means communication with the movement or position of the human body. It can be conscious – or unconscious. It is something that is noticed by everybody but is not always given enough attention. A way to learn the secrets of body language is to watch television with the sound turned off and try to interpret what is being said simply from reading body language. You will experience that humans say a lot with their mouth which is contradicted by their body, gestures and other channels of communication.This makes it easier to tell whether a person you are talking to is happy, sad, sullen or irritated. Or whether he or she is lying to you, or is impatient, or bored. You should also be able to register whether the person appears to like you, agrees or disagrees with you, is aggressive to you, or is suspicious, angry or worried. Body language is the movements of arms and legs, body posture, the manner in which you sit, facial expressions, gait, eye movements and regular gestures such as stroking your hair, touching your nose, etc.Tilting your head signals that you are not dangerous. Perhaps you hold your hands close to your face when you talk – generally, this is a sign of insecurity. The same is true if you roll a beard or moustache with your hands or fix your hair, perhaps pushing or curling it behind an ear. The way that people sit in chairs is not coincidental. If you are lounging with arms and legs dangling, it is probably a sign that you are relaxed and feeling comfortable.If you are positioned on the edge of the chair with you legs stretched before you and your feet crossed it can signal indifference. Someone going to the dentist or waiting for a job interview might be seated on the edge of the chair with his or her feet together. If it's a woman she'll probably be hugging her handbag, or clutching a hanky. Body tension spreads to the respiratory system, forcing your breathing and making you sound short of breath. When you are in such a position it is easy to lose your head and simply run away if things take a turn for the worse.We do not believe that you can teach people to control their body language completely; they will lose control at some point or other – when they become too eager or too angry. When you try to interpret body language, you must interpret in relation to what is being said with words In order to reach your conclusion you must also pay attention to facial expression, the mouth's position, eye movements and pupil dilation and retraction. Research has shown that the speaker's face is the most reliable source of information about the mood of a person.Eyebrows that rise up and down rapidly signal acceptance of social contact. If you raise your eyebrows and keep them raised for a while it signals surprise and astonishment – perhaps even indignation. When the raised eyebrows are used along with a wink you are flirting. This can cause problems. For example, in Japan where it is conside red very inappropriate, practically improper, to use eyebrow raising at all. Tears and laughter are forms of expression that we think are fairly easy to interpret. Body Language Body language means communication with the movement or position of the human body. It can be conscious – or unconscious. It is something that is noticed by everybody but is not always given enough attention. A way to learn the secrets of body language is to watch television with the sound turned off and try to interpret what is being said simply from reading body language. You will experience that humans say a lot with their mouth which is contradicted by their body, gestures and other channels of communication.This makes it easier to tell whether a person you are talking to is happy, sad, sullen or irritated. Or whether he or she is lying to you, or is impatient, or bored. You should also be able to register whether the person appears to like you, agrees or disagrees with you, is aggressive to you, or is suspicious, angry or worried. Body language is the movements of arms and legs, body posture, the manner in which you sit, facial expressions, gait, eye movements and regular gestures such as stroking your hair, touching your nose, etc.Tilting your head signals that you are not dangerous. Perhaps you hold your hands close to your face when you talk – generally, this is a sign of insecurity. The same is true if you roll a beard or moustache with your hands or fix your hair, perhaps pushing or curling it behind an ear. The way that people sit in chairs is not coincidental. If you are lounging with arms and legs dangling, it is probably a sign that you are relaxed and feeling comfortable.If you are positioned on the edge of the chair with you legs stretched before you and your feet crossed it can signal indifference. Someone going to the dentist or waiting for a job interview might be seated on the edge of the chair with his or her feet together. If it's a woman she'll probably be hugging her handbag, or clutching a hanky. Body tension spreads to the respiratory system, forcing your breathing and making you sound short of breath. When you are in such a position it is easy to lose your head and simply run away if things take a turn for the worse.We do not believe that you can teach people to control their body language completely; they will lose control at some point or other – when they become too eager or too angry. When you try to interpret body language, you must interpret in relation to what is being said with words In order to reach your conclusion you must also pay attention to facial expression, the mouth's position, eye movements and pupil dilation and retraction. Research has shown that the speaker's face is the most reliable source of information about the mood of a person.Eyebrows that rise up and down rapidly signal acceptance of social contact. If you raise your eyebrows and keep them raised for a while it signals surprise and astonishment – perhaps even indignation. When the raised eyebrows are used along with a wink you are flirting. This can cause problems. For example, in Japan where it is conside red very inappropriate, practically improper, to use eyebrow raising at all. Tears and laughter are forms of expression that we think are fairly easy to interpret.

Bride Wars and Year One

The American film Bride Wars was released in 2009, it is an example of a typical modern romantic comedy. It is about two best friends Liv and Emma, who have grown up together planning their â€Å"perfect† wedding. They both get engaged at around the same time, together they go shopping for everything needed for a wedding, both looking to create their perfect wedding day. They get the wedding planner of their dreams, Marion St Clair who turns out to be the wedding planner of their nightmares and accidently books their weddings on the same day! Neither of them will agree to change their date, so they become enemies. As the tag line quotes â€Å"Even best friends can’t share the same wedding day. † The cake knives are out, but how will everything turn out? â€Å"Year One† is an American film also released in 2009, it is an example of a romantic adventure comedy. It is about two accident-prone Palaeolithic warriors. Jack Black who plays â€Å"Zed â€Å" is a prehistoric would-be hunter he gets kicked out of the tribe in the forest for eating the forbidden fruit from the tree of knowledge of good and evil. His side kick, â€Å"Oh† played by Michael Cera is a gatherer and turns up to â€Å"try† and save him. The film is about their adventures set in the prehistoric era trying to save their two friends Maya and Eema. Both girls are from their former tribe and have been captured and sold into slavery, on their travels Zed and Oh meet Biblical characters on route to the city of Sodom. Do they succeed in saving them? Although they are of the same genre they couldn’t be more different films. â€Å"Bride Wars† is set in the 21st century, whereas â€Å"Year One† is set in Palaeolithic era, this means there is a very big contrast between them. Bride Wars gives the impression of being a comedy from the expressions on both the actors’ faces. They are both looking straight into each other’s eyes showing a devious look with a comic smirk, in a horror film there would be no trace of a comic smirk. â€Å"Year One† has the aesthetics of a comedy with Jack Black’s expression being apprehensive and confused, his eyebrow is raised. Michael Cera’s facial expression is one of worried eyes which suggests he is just merely a side kick, and doesn’t really have a say in what Jack is going to do next! â€Å"Bride Wars† gives the impression of comedy on the poster, you would never expect brides to have a â€Å"war† or the weapons to be cake knives. Year One† suggests that it is set in prehistoric times, the first year of man, but the title doesn’t really have a comic sense about it, I believe this is why the director cast Jack Black to star in it, he is a very well known for his comedy roles. People will know that a film with Jack as the main character is going to be entertaining and funny so will choose to see it on that basis. The advertising poster for â€Å"Bride Wars† implies some type of confrontation in the plot. In â€Å"Bride Wars† the actors Kate Hudson and Anne Hathaway have a look in their eyes of pure distain. Anne Hathaway is a popular actress with female audiences of all ages. She has featured in many other films such as Princess Diaries, Ella Enchanted, Devil wears Prada and Brokeback Mountain, again she has a good following. In the poster both young ladies are dressed in wedding dresses this helps to emphases the term â€Å"bride† to look more potent, The actors have their hair down, which suggest a fight is about to break out, as brides nearly always have their hair up in an â€Å"updo†. The poster for â€Å"Year One† doesn’t imply a lot, being dressed in animal cloth relates to the title of the film and lets the audience know that this movie is set in pre-historic times. This leads me to think they might have gotten lost in an adventure, their body language looks like they have just seen something that is confusing or worrying to them. The colours used in each poster have soft tones, nothing potent or eye catching. Except the titles as this is what grabs the audience’s attention as they walk past. â€Å"Bride Wars† uses the colour theme of white and cream, these colours are usually associated with weddings e. g. purity, virgin brides, and wedding dresses, this again emphases the term â€Å"Bride. Year One’s theme is a desert landscape with a blue sky, this suggests it’s a hot day and they might be lost. The actors are the main focus of these posters; this suggests that the films revolve around them. The tag lines are intriguing, the tag line for Bride Wars suggests a confrontation within the film, and the tag line for â€Å"Year One† doesn’t give any clues to the plot of the film. This makes the person reading the poster want to learn more about these tag lines and what happens in the film, these help to grab the audience’s attention to hopefully go and see the film to find out more about them. The bold text in the â€Å"Year One† poster against the desert background makes the text stand out in the poster and catch people eye as they see it. The â€Å"Bride Wars† text on the word bride is similar to the text used on wedding invitations and further relates back to the film title. I think both posters have a target audience. Bride Wars is aimed at female teenagers and also would be appealing to female adults as it is about love and marriage. It is a feminine film, these are sometimes referred to as â€Å"chick flicks. † Year One is more of a teenagers film, not quite as girly as Bride Wars so might appeal to a wider audience. Teenagers are big fans of comedies and new movies that have just been released, they feel they can relate to them as they are light hearted and not serious. These posters inform their intended audience about the film, they try to entice them with intriguing tag lines that make the reader interested and wanting to see the film, and as they say â€Å"curiosity killed the cat. † They also inform people about the name, age certificate, genre, actors, and director, trying to persuade them in every way they can to see their film, to make it a success. In conclusion the posters are about as different as the films, â€Å"Year One† gives very little away about what is going to happen in the film so people will be curious to find out more, and perhaps research the film or discuss with friends what it’s about. Word of mouth is the best advert so getting people to talk about the film is a main goal for the poster. On the other hand the poster for â€Å"Bride Wars† lets you know the plot of the film, so when people see it they can make an instant decisions whether it interests them or not. Seeing two brides holding knives makes your imagination run and you just want to know what is going to happen. Both posters have a different target market, which explains why they are so different as they are tailored to appeal to different audiences. The posters have to grab and get the attention and curiosity of the people that they are aimed at and ultimately encourage them to want to go and see the film. Hopefully after seeing the film they will relay their experiences and enjoyment to other people and that will entice them to see the film too!

Case study growing and strengthening market shares - Free Essay Example

Sample details Pages: 6 Words: 1650 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Brief 191630 Scenario Background Don’t waste time! Our writers will create an original "Case study: growing and strengthening market shares" essay for you Create order Serene Hall is a health spa resort located in the centre of England. It provides a range of health and beauty services and comes under leisure industry. Looking Ahead The management is desirous of the following: Ascertain and guide the company to Plc status within the next two years. Sustain growth and strengthen its market share. Dimensions Proposed by Directors of Serene Hall Growth can be achieved by looking at business opportunities along several dimensions. Dimensions proposed by the directors of Serene Hall are: Finance Director: reduction in companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s debt Marketing director: better marketing to boost profits Operation director: controlling expenses Options for Growth Under Consideration Option 1: Acquisition of à ¢Ã¢â€š ¬Ã‹Å"New Youà ¢Ã¢â€š ¬Ã¢â€ž ¢ Option 2: Upgrade Serene Hallà ¢Ã¢â€š ¬Ã¢â€ž ¢s facilities Option 3: Withdraw from the market Analysis of the proposed growth strategies should be done taking into account: Operational skills or core competencies of business Privileged assets held by the business that are hard to replicate by competitors Growth skills Special relationships that can open up new options Analysis of Option 1: Acquisition of New You Option 1 is a clear case of acquisition. Acquisition approach appears provides all the benefits with a few shocks. With the right acquisition an organisation can solve its current resource limitations. Bringing à ¢Ã¢â€š ¬Ã‹Å"New Youà ¢Ã¢â€š ¬Ã¢â€ž ¢ into Serene Hallà ¢Ã¢â€š ¬Ã¢â€ž ¢s business portfolio through acquisition will have its instant benefits. It will: Provide economies of scale by reducing duplicate departments or operations and lowering the costs of the company. Serene Hall is expected to have cost savings on amalgamation of up to  £4m in both years 1 and 2. Increase capacity and market share through the control of a major competitor. Serene Hall has a market share of 21.2%. It is expected to get a projected market share of 49.2% through acquisition of New You. Serene Hall will have more than 50% market share in all three services: health and fitness, body treatments, natural healing and alternative therapies. Post acquisition, the projected status of competitors will be: Leisure Industry à ¢Ã¢â€š ¬Ã¢â‚¬Å" Health Beauty Sector Major Competitors Projected Market Share 2004 Company Name Health Fitness Body treatments Natural Healing Alternative Therapies (includes detox) Market share % Serene Hall 66 65 70 49.2 Old Hag 12 4 27 8.6 Rags2Robes 10 10 10 8.6 Good Looks 4U 13 18 12 10.0 Other 30 30 23 23.6 % of total sales 47 25 28 100 Increase revenue by doubling its power by capturing increased market share to set prices. It will lead to improved market prices due to the reduction in competition producing additional cash inflows of up to  £10.6m annually in years 1 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 5 inclusive. Make cross selling possible. As Detox treatments are complementary in markets to other beauty treatments, Serene Hall will have the cross selling options where goodwill exists and the cost of sales is much less. Reduce the number of competitors and thus reduce the risk of competitive margin erosion. Enable geographical diversification. Through acquisition of New You, Serene Hall will be able to start to expand throughout England à ¢Ã¢â€š ¬Ã¢â‚¬Å" to an already existing market. Prevent merger or acquisition of New You by any other competitor. This becomes especially relevant given that the market is already shuffling with rumours of a New You à ¢Ã¢â€š ¬Ã¢â‚¬Å" Old Hag merger. If the merger happens the market share of the merged company will be 36.6%, far ahead of Serene Hallà ¢Ã¢â€š ¬Ã¢â€ž ¢s share. If the acquisition does not happen and the NewYou- Old Hag merger happens, the projected status of competitors will be: Leisure Industry à ¢Ã¢â€š ¬Ã¢â‚¬Å" Health Beauty Sector Major Competitors Projected Market Share 2004 Company Name Health Fitness Body treatments Natural Healing Alternative Therapies (includes detox) Market share % Serene Hall 32 37 10 21.2 New You à ¢Ã¢â€š ¬Ã¢â‚¬Å"Old Hag merger 46 32 87 36.6 Rags2Robes 10 10 10 8.6 Good Looks 4U 13 18 12 10.0 Other 30 30 23 23.6 % of total sales 47 25 28 100 However, acquisition will also have its drawbacks. Acquisition will help Serene Hall hedge against competition. However, Serene Hall can achieve the objective of hedging its investment at less cost through diversification rather than acquisition. Acquisition may make an Serene Hall unmanageable It will involve some rationalisation of the office facilities and the possible redundancy of some staff. However, there may be job / training opportunities if Serene Hall decide to adopt the increasingly popular Detox services provided by New You. Require massive initial investment ( £60 million in year 0). The organisation may have to borrow funds for investment and thus increase its debt. The following table indicates the financial implications of acquisitions. Financial Implications of Acquisition Year 0 1 2 3 4 5 6 7 8 9 10 Cash Outflow / Inflow (in million  £) (40) 20 20 20 20 20 20 20 20 20 20 Cost savings (in million  £) 4 4 Additional Cash flow from sales (in million  £) 10.6 10.6 10.6 10.6 10.6 Cash flow from sale of assets of acquired company (in million  £) 30 Cash from sale of stock (in million  £) 5 Cash expenses on acquisition (in million  £) (20) Redundancy relocation provisions (in million  £) (5) Other contingencies (in million  £) (3) (3) (3) (3) (3) Research Development costs (in million  £) (4) (5) Cash Flow before Tax (60) 57.6 26.6 27.6 27.6 27.6 20 20 20 20 20 Tax (25%) (14.4) (6.65) (6.9) (6.9) (6.9) (5) (5) (5) (5) (5) Cash flow after tax (60) 43.2 19.95 20.7 20.7 20.7 15 15 15 15 15 Assumptions: Year 0 is year 2003 There will be no cost savings after year 2 Purchase price is take at the higher amount of  £40m ( on a conservative side) As annual cash inflow is expected to range between  £0 to  £40m beginning year 1, average cash flow is taken for analysis purposes. Average cash flow is  £40m / 2=  £20m All the cash flows are expected in real terms. (i.e. after allowance for inflation). In other words, the cash flows do not need to be discounted. Cost savings on amalgamation of up to  £4m in both years 1 and 2 does not mean increase in cash flows but indicates saving in cost and therefore increase in profits. This increase is also taken into consideration for calculation of tax. Total Net Cash flow after taxes =  £140.25 m Serene Hall will be able to recover its investment cost within the first 2-3 years. Analysis of Option 2: Investment to Upgrade Facilities Option 2 is a clear case of organic growth through upgrading. Organic growth is growth that comes from a companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s existing businesses as opposed to acquisitions. It does seem to be the most perfect way of growth of Serene hall as demand for simple relaxation and beauty enhancement is rapidly increasing and at the moment demand is exceeding supply. Organic growth will prove to be a less cost burden per year (  £60m spread over 3 years as against  £60m in the very first year under acquisition), highly controlled and least risky option. In addition, it will not involve issues that arise when there is amalgamation of management teams. Serene Hall can use its existing facilities and can get into Detox business where it is lacking behind (has only 10% market share) its competitors. Perhaps Serene Hall can invest in for 24 x 7 facilities for Detox services and build in clientele as even New You that specialises in Detox services does not have 24 x 7 facilities. This becomes even more relevant given the findings of the market research suggesting that the demand for such facilities is likely to carry on increasing over the next 10 years. However, even though the option is attractive, organic growth is undoubtedly fraught with risk of narrow vision . This option will offer a poorer cash flow position. If Serene Hall choose this option then positive cash inflow will only begin in year 3 at the earliest and will be around  £18m. If the current year is 2003, Serene Hall will only be able to recover the investment cost of  £60m in the first three years sometime in 2009-10 as against around 2005-06 in the case of acquisition. This will also not help Serene Hall get Plc status within the next two years. Though the annual burden of investment will be lower than that under acquisition, the total cost of investment is the same under both options ( £60m). Option 1 gives additional benefit of increased sales revenue, cost savings and almost double market share. Analysis of Option 3 : Withdrawal and Closure This is essentially a retreat strategy in the face of competitive pressure. Businesses may benefit from a retreat strategy only when the demand is falling and market research does not indicate a positive picture. Neither of the two is happening in the current scenario. The sector is functioning comfortably and enjoying increasing profits, as the population becomes more and more health and appearance conscious. Even though competition is looming, so is demand. This is clear from the fact that Serene Hall itself is operating with a full order book and little if any slack. Withdrawal from business will generate a net cash flow of  £49 m ( £63 m  £14 m) over the next three years. This is a myopic view and it does not make the option any attractive. In addition, acquisition option is generating a higher cash flow plus other benefits. However, while analysing the strategy  £50 m on the Hall in the last 10 years may be ignored as they amount to sunk cost. Conclusion: Given that the management of Serene Hall is desirous to sustain growth and strengthen its market share and also ascertain and guide the company to Plc status within the next two years, growth through acquisition seems to be the best option. This is especially true when the Health and Beauty sector in which Serene Hall is existing is likely to grow in the years to come. Neither Option 2 nor option 3 will not help Serene Hall in either ensuring a sustained growth or acquiring plc status in the next two years. Therefore, Serene Hall should opt for acquisition of New You as the advantages of acquisition outweigh its drawbacks. However a decision should only be reached after an in-depth analysis of the following issues: How will the acquisition affect Serene Hallà ¢Ã¢â€š ¬Ã¢â€ž ¢s existing and future business? How is it going to affect sales and revenue, the engagement process or brand collateral? What will be the impact of bringing together two markets, revenues and skills banks? Page | 1