Introductory notes
The Housing sector is one of the most affected sector from the latest financial crisis in the United Kingdom. During the last decade or so it has been the focus even on many governmental policies. Customers also have had their eyes on it and it has gone through a strange cycle of boost and bubble.
Since the beginning of the last decade of the last century, the main principal idea driving the housing sector has been to deregulate and leave the market “take care of it”. In this respect the role of government has been seen as an actor, a participant, in the housing market. Governmental units, both central and local, were not the driving force of the sector, but one of the competitors in the market along with other private sector competitors. This was done in the effort to offer a better service to the people, to the customers. Competition would obligate the competing actor to raise their quality of product and service in order to attract the most customers they could.
In this respect, it was thought that the public sector, that run by different level of government (in our case the District Council), will be forced by competition to raise its quality of product offering and service for the clients. It will function like an autonomous private sector firm but on behalf of the government.
In this report, I will try to analyze this part of the public sector and try giving some advices and strategies on what to improve and how to improve it. For the public agency of housing sector of our District can become a leading actor in the market place by satisfying the most the needs and desires of consumers, the public, people living in this District.
Strategic analysis
It is the aim and principal role of governmental agencies to provide the best service possible to the general public. As it can be understood from the “Organizational Information” part of the Directorate of Housing report for the District Council, we have failed to provide our citizens with the highest quality possible of service and product. Thus, it is our duty as public servant to try and reach that level of quality service by implementing all the necessary steps required for the fulfilment of this goal.
The first thing we need to do is a strategic analysis of both, macro environment and micro environment. This will make us understand better the whole picture of the housing sector, not only within the jurisdiction of our District, because we cannot function as an independent unit without any contact with the other parts of the world surrounding us. First, we have to make a macro analysis of the environment surrounding us and the technological and managerial inventions that are available.
The Macro environment
This macro environment analysis refers to the situation of the housing around the entire country and even wider. It also refers to the technological and managerial innovations and techniques being used in this sector and that might influence the sector. This is the reason that a STEP analysis is the adequate way to proceed with this macro environment analysis (Eppink & de Waal, 2002).
The term Step analysis stands for social environment, technological environment or factors, economical situation and political conditions.
Let’s begin by this last segment of the analysis since it is the duty of governments in all of its levels to make the adequate policies in service of the public. Since the beginning of the last financial crisis and its impact on the real economy, and upon the housing sector in particular, the attention of the government (and its agencies) toward the housing sector and its consequent problems has been ever rising. It was the central policy of the first labour government of Tony Blair in 1997 that the housing sector, as every other major sector of the economy, should be let to the interactions between actors in the market. But it is the duty of government to become one of the major actors in the market by the creation of the public housing directorates around the different Districts of the country (Conway, 2009). These housing directorates had the duty to compete with the private sector in order to induce the market to raise its quality of service for the better of the public, of the consumers. As of a decade later these Directorates has turned to be inhibitors of quality increase instead of promoters of it (Conway, 2009). High level of bureaucracy and lack of motivation have been the principal factors that have caused this. Since the last housing sector crisis the government has turned once again its attention toward the implementation of the right policies in order to prevent another market crash and to resolve the current one. If we present the adequate plans we can benefit from the political moment in gaining more government grants for our district for the directorate.
If we pass to the economical environment we find that this is a very delicate moment for the housing sector not only of Britain but for all of Europe (Conway, 2009). The international market of housing is in serious difficulties and companies are struggling to survive. By implementing the adequate policies we can turn this in our advantage. In the pages to come I will try to explain how can we do this in the Directorate of our district.
The technological environment surrounding the housing market has been booming for the last decades. The perfect example for this is the wide spread use of VoIP and high speed internet connection in housing. It can also be coupled with cable or satellite TV. But the technology on which business is run and that help managers make better decisions for their company has also improved rapidly. The advent of knowledge management and, especially, business intelligence has made it easier for managers to implement new strategies in the benefit of their company and customers. We can take advantage by using this technology in our case.
And lastly, the social environment is also in a “crisis” over this market sector. In fact there is a widespread “loss of confidence” over the housing market and customers are very suspicious about the actors of the market (Conway, 2009). It will not be easy to attract them into your product or service again. You ought to have a high quality product and offer assurances for the future stability of your company. Below I will try to assess what can and should be done by the housing Directorate to re-establish itself as a leader in the housing sector of the district.
The above picture was that of the macro environment that we are facing in the country. Now let us see the micro analysis of our district.
The Micro environment
In the micro environment analysis we will take care of our “own house”, the district. As it can be understood from the Brief and Organizational Information, the Directorate is in a position of stagnation. The report shows that it manages a large number of dwellings, circa 12.000, and has a work force of around 300 employees with a low morale and incentive to give their best. In order to better comprehend the micro environment it would be adequate to use Porter’s Model of evaluation.
The first risk is that of substitute products which increases the propensity of customers to switch to alternatives in response to price increases or poor service (Grant, 2005). The Directorate of Housing has a poor quality of service due to high bureaucracy and low employee morale. this situation could easily lead to housing maintenance cost increase, which would in turn lead to rent increase. This could induce rivalry to take advantage of this situation.
There also exists the threat of the entry of new competitors. This new companies would increase and intensify competition for market share and market profits. At the present situation, the Directorate would be not in a strong position of competing them adequately. This will lead into a further lowering of revenues because this new companies would take “pieces of the cake” that were divided among the existing companies into the market.
The subsequent risk factor is the intensity of competitive rivalry. In fact for most companies, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. (Grant, 2005). The combination of a fastest and higher maintenance service quality from both the existing and new companies entering the housing sector in the district would seriously damage the market share and position of the Housing Directorate. Combined this with a lower cost for costumers would inflict a fatal wound to the Directorate. It is a necessity to act as soon as possible.
All what we have mentioned until now deal with the competitors on the market but we cannot forget about the bargaining power of customers. This is the ability of customers to put the firm under pressure and it also affects the customer’s sensitivity to price changes (Grant, 2005). This is also called market out-put. The reaction from customers could be more devastating than the competition. In order to turn a company in a very comfortable position of a “cash cow” you have to have a very positive image in the public. This is also called “brand recognition” (McGahan, 2004). But the poor service quality we are now offering makes us have a very low level of output. This situation would seriously damage the brand image and combined with the high level of bureaucracy it can lead customers to find other alternatives.
And the last of Porter’s forces and risk factor that could affect the Directorate is the bargaining power of suppliers also described as market of inputs (Porter, 1979).
These can be suppliers of raw materials, suppliers of components, and suppliers of labour and services (such as expertise). They can be a source of power that a company has over the competition. Suppliers may refuse to work with the firm, or, for example, charge excessively high prices for their service (Porter, 1979). In our case, the work force of 300 and the raw materials needed for the maintenance of the dwellings are the power of suppliers for the Directorate of Housing of the district. The present situation of poor motivation for both of them takes away a very powerful tool for competition from the Directorate. Ways to improve their motivation and work force morale should be found in order to regain this market-competition tool.
This was also the micro environment and the risks associated with the directorate within the district. Now let us pass to part two or strategy evaluation and selection.
Strategy evaluation and selection
The strategic decisions for the Directorate should be taken from the highest board of managers. These strategies define the policies and the way in which the company, in our case the Directorate, will pursue. Since the situation of the housing market is a nationwide crisis situation, there should be a strategic alliance between the Directorate of Housing of the district and the higher level of governments. I am especially talking here mainly not about other local governmental agencies rather than central governmental agencies. Since the central government (like many other governments around the world) is planning and implementing policies regarding the housing market, our district could benefit from those policies. The primary form of benefit would be that of grants from the government in order to pass this delicate financial situation. The other benefits from the alliance with the central government would be that of receiving cheaper supplier costs of raw materials from other governmental agencies, for example. A kind of receiving help like the American firms are receiving from the bailout plan of the federal government of the United States. This strategic alliance would guarantee a flow of cash for the Directorate that can be used to improve its current situation. But it is not just about financial aspects. Further staff training and help in expertise could be guaranteed from the government with a low cost. This would result in staff quality improvement that would benefit even more the Directorate.
If we have to evaluate why is it important to build alliances, in our case with the government, we would suggest that:
First, the goal of both units (the district and central government) is similar, i.e. to better serve the public, the consumers.
Second, it is in both interests to have a strong public sector that competes adequately with the private companies. This high competitive public sector would influence the market positively by “forcing” private competition to raise quality or introduce new innovations on the market for the benefit of the consumers (Doz & Hammel, 1998).
Thirdly, in our case, this would “ignite” a positive reaction from the consumer public that would bring back the “lost trust” in the housing market. This regain of trust would benefit both public and private enterprises and would let the cycle of the market flow normally again (Doz & Hammel, 1998).
Strategic implementation
The current situation of the housing Directorate is that he is managing 12000 dwellings of housing stocks. It is organized around two divisions; that of property maintenance and housing rent collection. The labour force is of 300 and consists of five levels of managers, who are spread throughout the borough in district offices. Unfortunately, the labour force morale is low and a reason for that is the missing of incentives. The first, thing to do is to change the work culture inside the organisation. It is proper that you award your subordinates for their hard work. Awarding incentives (cash incentives in our case) for their hard work will further motivate them and will ultimately benefit the company (Simon, 2006). The system of wage based on age and years of service should be abolished and replaced with a merit based one. The one that work harder will receive the most.
Another thing to do is to establish a 360 degree feedback program that invites all of the subordinates to give inputs for the strategies to be implemented. It is very important to have proper communication between staff members if we want that the strategy, any strategy, to be successful (Miller, 2005). Junior and middle level managers should be especially invited to give inputs.
When we want to launch a new strategy (or even product or service) we must realize that there are other parts of the company staff which are involved in it. The original idea may be of somebody but excluding others form bringing in new ideas, being those supportive or critical, regarding the strategy to be implemented would create psychological barriers between people.
Subsequently it will form stress between different levels of managers that will ultimately damage the Directorate. This is why it is proper to welcome ideas from others and make them feel inclusive not exclusive to the process of creation of a new strategy (Stroup, 2008). This would create a situation where all the levels of staff would feel inside the strategy forming process and not just merely implementers of it. This will be a tool for rising morale among the work force.
Another important point to be recognized is that when you became CEO of a company it would be better if you listen to the voice of those “below” your management position. By granting to the managing staff of the company greater policy flexibility you make them feel more included in the process of decision making. By doing this you also make them feel more responsible for that process and company’s ongoing (Gomez-Mejia et al, 2006). If you grant to lower level managers the possibility to be more flexible in their decisions, you have granted the possibility to be more creative. This way you are presenting them with a creative challenge that will influence positively their attitude toward their work and the company.
References
Conway, E. Britain’s housing market reignited. The Daily Telegraph Newspaper, On-line Version. 2009. Web.
Grant, R.M. Contemporary Strategy Analysis. Blackwell Publishing Ltd., Oxford (U.K.), 2005.
Eppink, J. and de Waal, S. “Global Influences in the Public Sector”, in Johnson’s, G. and Scholes, K. (eds). Exploring Corporate Strategy. Pearson Education, Harley. 2002.
McGahan, A. “How Industries Evolve – Principles for Achieving and Sustaining Superior Performance”. Harvard Business School Press, Boston, 2004.
Porter, M.E. “How competitive forces shape strategy”, Harvard Business Review, 1979.
Doz, Y. and hammel, G. Alliance Advantage. Harvard business School Press. 1998.
Simon, H. Administrative Behaviour (4th edition). Blackwell Publishing: London. 2006.
Stroup, J. Organizational leadership. The Managing leadership On-Line journal. 2008. Web.
Gomez-Mejia, Luis R.; David B. Balkin and Robert L. Cardy. Management: People, Performance, Change. 3rd edition. New York: McGraw-Hill. 2008.