Davos World Economic Forum business Summit 2014 on inequality
Davos World Economic Forum business Summit 2014 on inequality In the recently concluded world economic…
Any organisation, whether it be that of a profit or a non-profit one needs to evaluate the environment in which it operates and there are several models such as Porter’s five forces, swot analysis, PESTEL etc. which are being utilised by business organisations for an evaluation of the business environment, the competitive actions as well as the analysis of the sustainability of business operations and finally to develop a business strategy. The following report focuses mainly on the evaluation of the business environment of national history Museum which is a non-profit organisation, which gets funding from the government and voluntary donors in order to promote the cultural and historical heritage of the country. After the analysis of the business environment the stakeholder diagram is developed in order to identify the relative power of different stakeholders of national history Museum and how the actions of the museum will affect the stakeholders. Further on the report the key competencies of the national history Museum, the organisational culture and a comparison of the different issues faced by the national history Museum with that of a for-profit organisation such as the Grange hotels has been conducted.
The analysis of the business environment in which an organisation works can be analysed with the help of several models developed over the years. Two of these models are the Porter’s five forces which evaluate the external aspects of the business environment in order to develop a competitive strategy and the PESTEL analysis which provides for the external as well as the internal elements which are applying to the business environment in which the organisation operates. The SWOT analysis is included in the appendix.
Porter’s five forces model evaluate the business environment from the angles of the major stakeholders such as the customers, suppliers and the competitive forces which determine the intensity and attractiveness of the market (Hill and Jones, 2009). According to Ahlstrom and Bruton, (2009), an industry where a combination of these factors aims to bring down the overall profitability or the sustained business growth can be said to be unattractive. But several authors have ascertained that the Porter’s five forces model are normally utilised for evaluating for-profit organisations Kew and Stredwick, (2005), where they traditionally has customers and suppliers, competition from new entrants and substitution products, which provides to a competitive rivalry within an industry (Frumkin and Imber, 2004).
Figure 1 – Porter’s five forces model
But there are several cases where the Porter’s five forces model are also utilised to evaluate the business environment of non-profit organisations even though there is little competitive rivalry within a sector such as museums. In order to evaluate comprehensively the business environment of the national history Museum, it can be classified in the industry of creating knowledge and providing recreation although the visitors to the Museum cannot be directly attributable as the customers. Moreover for the national history Museum, there are no particular suppliers and the substitution effects of organisations providing knowledge about a particular area such as history of the nation along with attracting the customers are minimum.
When analysing the power of suppliers on the national history Museum, it need to be borne in mind that the Museum is self-sustained and does not require a continuous supply of products and services. Most of the suppliers of the museum are providing certain services and not products which go directly to the entertainment of the visitors. Taking an example there are caterers, florists and event management and production companies, which provide the services in order to manage the daily activities of enhancing the attractiveness of the Museum as well as developing new activities and attractions for the visitors based on the design provided by the experts in the Museum. Since there are no speciality suppliers except for some specialist in event management and production companies which provide certain specialised services such as the design of events, coordination of activities etc., the other suppliers such as the caterers and tourists etc. can be readily substituted. Hence in terms of bargaining power of suppliers it may be said that there are no suppliers who have adequate bargaining power over the national history Museum.
The customers of the national history Museum are the visitors who are coming to improve their knowledge about national history and also have some form of entertainment. One important segment of the customers or the visitors is the students of all ages for whom the tour of the Museum is contributing to their development of awareness and knowledge about national history in an innovative and recreational manner. One another important segment of the customers or the visitors are the international tourists who visit London and the location of Museum in the outskirts of London is an important advantage for the Museum as it is well-connected. Many tourists who visit the United Kingdom would like to know about the history and there is no other provider which can contribute to the knowledge of the international visitors about not only the national history but also several aspects. But from the case study it was analysed that the modern attractions which are coming up in London targeting the international customers or the tourists are reducing the number of visitors to the Museum. But since the entry to the Museum is free of cost and the special events and activities developed by the Museum are specifically targeted at certain segments, it is analysed that the bargaining power of customers or the visitors of the Museum is negligible.
In a traditional sense, when using the Porter’s five forces model, the threat of new entrants are considered strictly from the specific organisational point of view where another competitor is entering the market which provide similar kinds of products and services to the customers. When analysing from this perspective it can be said that due to the comprehensive nature of the services provided by the national history Museum, the threat of new entrants is very insignificant. In order to develop the Museum with the scale and scope of the national history Museum cannot be undertaken through a private sector model and moreover is the non-profit structure of the Museum is not easily repeatable. But there are some new entrants providing a differentiated level of service of such as the wax museum which provides much more entertainment to the visitors but not giving sufficient wealth of knowledge as provided by the national history Museum through the artefacts and special shows. In order to counter the threat of new entrants which are providing some form of differentiation, the Museum must develop innovative methods through which the visitors can be attracted and the utilisation of technology is an important factor in attracting the visitors.
The threat of substitute organisations and service providers who attract visitors mainly those of the international tourists are an important factor to be considered in the business environment. Since London is a tourist destination, new recreational and attractive options are coming up such as the wax museum, the London eye and all similar kind of attractions which are substituting the services in terms of recreations to the visitors. These new attractions are getting prominence in the marketing material developed by several tour operators and promoters of London at a tourist destination. A simple analysis of the website of several different tour operators will find that these new attractions are prominently categorised and they are used in attracting the visitors whereas a visit to the national history Museum is relegated to the secondary positions. Although several tour operators have the national history Museum in their itinerary, it is not prominently marketed or the services of the special characteristics of the Museum are not properly communicated. But it must be said that, the Museum is not only providing recreation to the tourists and visitors but also developing their knowledge and awareness of national history and the core or central segment of customers mainly the students and people who are interested in national history will continue to visit the museum. Another segment of the visitors are the people or interest groups for special occasions, activities and shows which are providing certain revenues because they are specific and time bound. The modern attractions and recreational facilities are certainly threatening the inability of the Museum to attract this segment of customers.
When considering the industry in which the national history Museum operates, it can be said to be in the area of providing the services of developing the knowledge as well as recreation. This event concept is not really replicated in any other areas or industry segments and hence museums are a specific industry in itself. The competition between the museums is negligible even though substitute museums which provide certain form of recreation such as the wax museum are certainly attracting more visitors.
Overall it must be said that, since the national history Museum with its non-profit structure is providing a differentiated level of services to the visitors, it is the threat of substitutes services and new entrants which are causing serious problems but even in these areas, the Museum has advantages and it is the improper marketing and the communication which reduces the attractiveness of the Museum.
The political factors which affect the business environment in which the national history Museum operates are the government in power, the view of the political parties, the view of the communities etc. The conservative government has a policy of reducing the budget spending on social welfare and community welfare activities and introduced the concept of “Big Society”. Although the Labour Party views that no spending cuts should be introduced for social welfare activities, the government in power decides the actual policy that will be enacted. The larger community has a benevolent attitude towards enterprises such as museums and other social and community schemes and they are stepping into the position of providing funding to the history Museum which will be of significant advantage.
The British economy along with the rest of Europe and the developed world are facing the prospect of recession with high government spending in social activities and large budget deficits. The government has cut spending to several social and community welfare activities which includes the spending cuts for the national history Museum. Even if the economic situation improves, the present government’s policy of reducing the spending and improving the budget deficits situation would need to go on for several years. With the recession, the independent donors and community associations are also facing difficulties in raising the funds. Hence it may be required for the national history Museum to adopt certain policies and practices which can develop some revenues.
The British people are highly traditional and are well aware of the historical perspectives. The community would want to preserve the historical heritage through organisations such as the national history Museum and is always a positive.
The improvement in technology which can be utilised for the development of various shows and activities by the Museum is evident through the website as well as the functioning of the organisation. Several technologically advanced concepts, designs and developments have been introduced and this will be one of the unique selling points for the national history Museum in the coming years.
There are no particular environmental concerns or factors which could affect the working of the national history Museum.
The government has considered amending the laws under which these social and communal welfare activities are working in order to make them self-sufficient. Although this intended changing legal structure has not been pronounced by the government, in the coming years there could be some form of changes in the governance of the national history Museum.
|Tour operators||National history museum – Stakeholders||Government|
|Researchers, Scholars, Historians|
Figure 2 – Stakeholder Map of NHM
The government and the donors have large power on the activities and the actions of the Museum because they are the providers of funding. The tour operators and media are also important stakeholders because they are able to publicise the importance and relevance of the national history Museum to the potential visitors. The employees are important from the perspective that in order to provide quality service to the visitors, the employees working at all levels are important. The importance of researchers, scholars and historians who provide value addition by developing new shows; activities etc. which can attract new visitors cannot be ignored. Moreover the activities of the community in maintaining the relevance and importance of the museums and in pressurising the government for continued funding is also important.
But from the relative power, it must be said that it is the government which is the most important stakeholders because it is providing the major form of funding to the Museum. But in the future, the relevance of government in the actions of the Museum will come down because of the importance to various donors and individuals who would be donating to the Museum. The relevance of the visitors would also increase because the Museum must improve their marketing and communication and also try to get some revenues from the visitors.
Figure 3 – value chain of NHM
An evaluation of the key competencies of national history Museum will indicate that the Museum has significant and unique competency as it is able to provide twin advantages to the visitors. The Museum is improving the knowledge and awareness of the national history and also is a form of recreation. There are no other similar organisations which are offering this level of service to the customers. Due to the importance of the artefacts and the political significance of the history Museum and also because it is a non-profit organisation, the key competencies cannot be classified based on a business perspective. The Museum is able to attract key talent such as the researchers, scholars and historians and individuals who are motivated to develop the awareness and knowledge of the visitors by designing new attractions. This is evident in the website of the Museum which has been designed in a manner to provide all kinds of information to the potential visitors.
The key competencies of the national history Museum from the perspective of the value chain will be the ability to provide several kinds of exhibitions, hospitality services and visitor services. The educational programs developed by the Museum are also one of the key competencies but needs to be considered under the supporting activities which provide value to the activities of the Museum.
Figure 4 – organisational structure of national history
When analysing the organisational culture, it can be seen that all the employees are selected based on the best talent available in the market and also based on the motivation to work for a non-profit organisation. The motives of profit are negated and importance is given for improving the levels of quality of the services provided by the Museum. The Board of Trustees and the higher-level officials are all either researchers, scholars or historians and are motivated in a special way without having the business motive.
The comparison with of the business environment factors affecting national history Museum with that of the Grange hotels in London indicate that the two organisations even though catering to similar type of customers are operating with different fundamental parameters. One significant difference between the two organisations is that the national history Museum is a non-profit organisation and getting the funding from government as well as donors in a voluntary manner whereas the Grange hotels is a for-profit business and all the activities are hinged on the profit generation capacity of the business. Since the non-profit organisation as evaluated in the Porter’s five forces, Pestel and swot analysis model does not need to bother too much about the external and internal factors to a great extent, because the business culture and the nature of the activity of the history Museum is to provide enhancement of the education and learning to the individuals who are interested in history. On the other hand the Grange hotels have a necessity to engage with the customers along with the other stakeholders of the organisation. There are the bargaining powers from the customers and suppliers along with their threat of new entrants and substitute services. The competitive rivalry in the hotel industry in London is high but is offset by the brand image of Grange hotels. Since the national history Museum does not need to consider the business elements in order to function and contribute to the society, it is having a different type of strategy in terms of continuing its operations. But due to the possible funding cuts and the number of visitors reducing, the national history Museum also needs to adopt certain strategies based on a for-profit model in the future. It might become necessary for the national history Museum to adopt certain profit generation activities in a strategic manner but not to the extent of the activities conducted by Grange hotels. The Grange hotels on the other hand has to concentrate solely on the generation of profit and for this it needs to assess the business environment in which it operates in a continuous manner. Several strategies need to be developed by Grange hotels in order to counter the bargaining power of the suppliers and customers and the threat of new entrants and substitution services. The Grange Hotel has to continuously monitor the competitive activities, evaluate the strengths and weaknesses identify the opportunities and try to negate the threats to the organisation.
The swot analysis looks into the strengths, weaknesses, opportunities and threats of an organisation and is a strategic planning method which identifies the internal and external factors that are favourable and unfavourable to achieve the objectives of the organisation (Phills, 2005).
Figure 5 – SWOT analysis
The strength of the Museum is because of its historical character and unique services provided by the Museum to the visitors. The Museum is able to provide knowledge as well as recreation to the visitors. Due to its importance as a national treasure for United Kingdom, the government is an important stakeholder which continues to fund the Museum even though in the future it may be reduced. The Museum is able to attract researchers, artists, scholars and historians who are best in the industry due to the brand and the privilege to work in such organisation.
The main weakness of the Museum is that it is a not-for-profit organisation, and is not charging the visitors even an entry fee except for special activities and shows. The cost of maintaining the Museum is huge and the funding opportunities from the government in the future is reducing. Due to the reduction in funding opportunities, the Museum is planning for redundancies which have significantly reduced the morale of the employees.
Due to the improvement of technology the Museum is able to add substantial innovations in attracting the visitors and is also able to design and develop new shows and attractions with the help of the knowledgeable and resourceful employees. It is in the areas of technology that the Museum is having enormous opportunities and it is able to provide the visitors and a unique experience of understanding about the history through modern and innovative methods using multimedia and information technology.
The threats to the Museum arrive from the substitute services which attract more visitors and also from the cut in the funding from the government. Due to the reduction in the funding, the problems are compounded because of the possible redundancies which the museum has to undertake. Due to this the employee morale has suffered which decreases the quality and level of services provided to the visitors of museum.