Is Henri Fayol’s management theory relevant today?

Henry Fayol is seen as a French pioneer, an industrialist thinker who took the world by storm with his management theories. Throughout the twentieth century and to this day, his ideas and theories are still well known and are used by management text authors and teachers who strive to keep the heritage of management alive. They use his theories and keep teaching the same business morals and knowledge that was originally taught by Fayol and many others, but in revised ways so that it fits in with current day situations and scenarios.

The business world of today comprises of many factors that managers need to take into account before stepping up to the task of running a department, or an organisation has a whole. These factors control how well an organisation runs and operates, and over time managers develop skills and knowledge based on the work of theorists such as Max Weber and Abraham Maslow who were motivators and pioneers of management principles in the 19th century. Among these theorists you will also find Henri Fayol, a strategist who was responsible for the corporate turnaround and who founded the six functions of management and 14 principals of management. He was instrumental in demonstrating new ways for mangers to guide their employees towards being more efficient in achieving goals. These theories are still used today in contemporary management all around the world. Even though over the years changes have been made to the theories and so today we see original six functions of management have been modified to become the five functions of management. The classic theories have been adapted to suit the new class of workers and their needs in the workplace.

The studies of management based on Henri Fayol’s theories are still relevant in today’s society, and are evident in almost every organisation. In almost every job there is an employer who delegates tasks and an employee to complete them. Fayol’s principles are relevant to the way in which these tasks are completed and the communication methods used to delegate them. In present time, managers have become less authoritative and are moving towards a newer style of management that is based on more two-way, collaborative communicate to employees. In recent times employees are allowed to make a bigger contribution to how tasks are completed and are even allowed to make decisions on behalf of the management. This move is a result of adaption and modification of management styles over time. Although changes have occurred, Fayol’s teachings still have significant relevance in the work place today.

Segmentation, Targeting and Positioning Analysis - On Apple iPhone 6

The main benefit that apple products deliver is communication and the search and need for information. Apple is able to satisfy both of these benefits through the iPhone 6. They market the iPhone as a sleek easy to use accessory that can deliver benefits and fill such voids in their consumers lives, such as communicating through email, social media, texting and talking as well as internet based searching and overall providing entertainment to a consumer. These benefits all fall under the product and market category of smart phones. Apple main basis for the iPhone segmentation include behavioral and psychographic. They are segmented into those who want to use the phone for self expression, convenience and also those consumers who are geared toward the technological capabilities of an iPhone. Apple is able to capture these segments and markets the iPhone to satisfy all of these benefits.  Behavioral segmentation also ties in with that of the loyalty status that Apple has been able to achieve with their most loyal customers being referred to as “iSheep” for unquestioningly following apple (David Glance). Apple geographic segmentation involves retail stores in all highly populated cities around the world and 88 official country websites, therefore allowing for a global presence, though mainly metropolitan. 

The iPhone is generally targeted to almost every demographic, its ability to customize the apps to suit your needs and interests made it desirable to all genders, ages, ethnicities, occupations and financial statuses.  The iPhone 6 and iPhone 6+ are the first iPhone’s to be marketed differently, in regards to the buyer’s social/professional working needs. iPhone user’s and Apple fan boys, as they are called fit into a very wide and diversified group of people. The demographic of iPhone’s or the iPhone 6 in particular relate to the overall education and income of the person the most (See Appendix Table 3.1 for information on demographics of iPhone users).

The diversity of the product makes it hard to pinpoint a certain group or niche that just use the phone, as nowadays most people will have a Smartphone product like the iPhone 6. Apple products, including the iPhone 6 are carefully positioned in order to allow customers to migrate up the product chain (Kate MacKenzie). As new products are released, such as the iPhone 6, features are updated and technology advances, positioning in consumers’ minds that apple is at the forefront of innovation. It has become an essential lifestyle product although it still keeps that luxurious consumer product value through its higher price, therefore appealing to a wealthier and high socio-demographic market, and allowing for consumers to position it in such a way. Therefore it’s positioned to appeal emotionally and both functionally to consumers as it is often marketed presenting features that can be used in order to achieve day to day challenges (Strategyn). 

Marketing Mix Strategy Analysis - On Apple iPhone 6

Product 3.1

The iPhone in general offers a wide range of benefits to the consumer such as web browsing, access to your emails or even taking photos or recording moments of your life to share the experience with others.  In addition, the iPhone provides entertainment from listening to music or downloading apps (games, restaurant finders, productivity apps).  The iPhone 6 would be classified as a consumer specialty product, bought to satisfy an individual’s personal needs or wants.  The iPhone 6 having covered the personal need for social networking, personal and work organization make it convenient for the consumer.  It also provides simplicity and customization used to reflect the particular individual which makes it cater to all ages, ethnicities and occupations.  The quality has improved tremendously, from previous iPhone’s being created from plastics and infusing metal and glass, apple has deviated from that and shifted to a design that is pure of metal, (anodised aluminum and stainless steel), providing that smooth and premium feel.  

The iPhone offers consistency in its features, but what makes it differ from other smart phones is its exclusive IOS operating system and apps only accessible on the iPhone (iTunes and apple store).  The packing of the IPhone 6 is simplistic indicative of a Smartphone which has yet be customized according to the personality and lifestyle of that customer who purchases the item.  Apple’s product line consists of the iPhone’s, iPad’s and Mac books.  The product line is narrow to ensure exclusivity thus lower risk of alternatives.  Apple intends to only introduce the iPhone and its variants (modifications) in the Smartphone market to ensure that cannibalism does not occur.  Apple is the iPhone company, generating 53% of its revenue and 70% of its profits from the iPhone thus only focusing on the iPhone line due to its established reputation and potential for maintaining profits.  Therefore, apple seeks to expand in other markets thus the creation of the apple watch.  

Currently the iPhone life cycle has fallen between the growth stage and maturity stage.  In terms of its growth stage, the demand of the iPhone series is growing significantly therefore producing greater profits (See Appendix Table 3.2 for figures on sales for iPhone’s).  It led to greater global market share and net profit.  However it can also be said that the iPhone series has reached the maturity stage due to the annual product changes the iPhone undergoes which is more towards cosmetic changes than substantial. With the IPhone series, the diffusion of innovations is widely consisted of the late majority.  Consumers being influenced through word of mouth and social influence of friends or family who already own the iPhone. Apple had never intended to sell their iPhone’s at a low price.  The primary objective was to sell a phone which provided a great experience through differentiation and uniqueness.  Initially from a profit oriented pricing objective through selling a small number of products which were designed with innovation shifted to a more sales oriented pricing objective.  This allowed apple to focus on gaining market share regionally and globally.

Price 3.2

Apple uses a skimming pricing strategy. Selling the iPhone 6 at a high price attracts premium customers where they seek to be unique by purchasing products with the highest price and therefore gaining a status symbol.  Apple selling their iPhone 6 at a high initial price attracts first those who are willing to pay at a high price (innovators group).  Once the first set of customers are satisfied, the price is gradually lowered in order to making it more affordable and thus catering to a larger consumer base.  The disadvantages of the skimming pricing strategy, that if price were lowered abruptly, the innovators group will feel ripped off and therefore generate negative publicity hovering around Apple’s skimming pricing strategy; it may spark a pricing discrimination.  The objective of lowering prices of their iPhone’s after the first round purchases usually from the innovator groups may be seen as price discriminating.  Although the practice isn’t illegal, it may trigger a PR backlash.  As mentioned above, the first wave of buyers may feel rip off thus reflecting badly on Apple.  There’s a possibility that it may result in a negative image for apple (See Appendix Table 3. 3 for figures on capacity vs. price).

Place 3. 3

Apple Inc uses a number of suppliers and logistical components to get their final product to the consumer.  However, Apple uses a slightly different route than most companies.  Supply Chain Planning at Apple Inc is the classic example of New Product Development Process (NPD).  It's the integration of R&D, Marketing and various functions under supply chain management (Suplychainopz, 2015).  Apple uses a five stage model from the start of a product to completion.  The first is research and development, which Apple takes very seriously spending more than 2 Billion yearly.  Next is conceptual training which takes some time to get right, Apple focuses heavily on the design of the product to make it look its best.  The channel structure for Apple consists of two parts direct and indirect.  The direct channel is part of the online web store that Apple provides which customers can access and buy straight from their home and get the product delivered to their door (Supply Chain Picture See Appendix 3. 4).                                                                                         

Whilst the indirect channel consists of sourcing, manufacturing, warehousing, distribution and retail where customers can go to their nearest store and buy it from there.  More than 50 percent of their workers exceeded these rather low limits.  In fact, working conditions at Foxconn, Apple’s partner for final assembly and some core components, have been bad enough that Apple has gotten a bit of a black eye from press reports of accidents, suicides, and labour strife (Banker, 2012). The distribution intensity for Apple is very high as their products have a huge hype before they are lunched therefore Apple needs to produce the new product in large quantities before shipping so as not to run out in retail stores or online delays in shipping (See Appendix Table 3. 5 for sales figures for first quarter).  Apple has 93 suppliers; dealing with all of these is not an easy task however Apple manages to keep track of every stage of the process through to completion.  Some of Apple’s channel relationships are Foxconn who handle final assembly of the products and Elpida who create flash memory for iPhone’s (Banker, 2012).

Promotion 3. 4

Promotions and advertisement for the majority of Apple’s products, including each generation of the iPhone tend to follow a similar pattern that focuses on endorsing the latest Apple product as being ahead of the game, at the fore front of any brand new technology and the most streamlined, efficient and modern product on the current market place.  Apple’s leading objective in regards to promotion and advertising of the latest Apple product, such as the iPhone 6 and 6 Plus, is set it apart from other Smartphone’s, tablets or personal computers on the market by suggesting it’s superiority over competitive brands and products as “the next evolution of… phone” (Sloane 2014). Under the umbrella of ‘Promotions’, there are 5 elements that are used including Advertising, Direct Marketing, Public Relations, Personal Selling and Sales Promotion.  Advertising, in regards to the iPhone 6 and 6 Plus focused on how the iPhone can be used for all types of activities, such as photography, and not strictly as a mobile phone device, as seen in the “Shot On iPhone 6” advertising campaign, where billboards all over the world revealed stunning images that were taken by those who own an iPhone 6 (Apple Insider 2015).  

This advertising campaign concentrated on the idea that the iPhone 6 is a Smartphone for everybody, with unlimited options for your own interests. Direct Marketing when it was first introduced focused on sending brochures in the mail so individuals could send order forms in the mail, or later order products over the phone instead of visiting a physical store to purchase them.  Over the years this has naturally adapted to Direct Digital Marketing where individuals get emailed offers in place of traditional mail and purchase products over the internet instead of over the phone or via mail order (The Free Dictionary, 2015).  Apple has taken advantage of the online buyer/consumer culture by launching an online store where you can buy all of their products, including the iPhone 6 and 6 Plus (Apple Store 2015). The third element of Promotions is Public Relations.  As Apple is already a globally recognized brand, almost any new product they produce is guaranteed to be newsworthy, however Apple’s Public Relations team still ensure that what they want to be known about the product will be, for example the iPhone 6 and 6 Plus’ larger screens and different shape to the previous generations of iPhone’s.  

Apple’s outstanding use of the media, whether it be print (magazines, newspapers), electronic (TV, radio) or social media (Facebook, Twitter) helps attach the audience to the product almost immediately, communicating what they need and how the iPhone 6 and 6 Plus cater to those needs.  By connecting directly to the consumer, Apple’s Public Relations team promote all of the goals that are wanted within advertisings, such as portraying it as top of the range software and creating a hype for the product to be launched around the world (CP Communications, 2012).  Personal Selling, also known as face to face selling (Business Dictionary, 2015) is used by Apple, particularly in their Apple Stores when an employee doesn’t have brand competitor’s products within the store to contend with for the customers purchase. The last element of Promotions is Sales Promotion, one element that is not particularly used by Apple.  Sales Promotion refers to any deals, sales or discounts on products.  Apple uses a “no-discount pricing strategy” (Farfan, 2015), which means Apple products, tend to be the same price online, in an Apple Store or in a store with various brands no matter what.  Deals are generally only given to products when an updated version of the product is being released, for example the iPhone 5 going down in price slightly with the release of the iPhone 6 and 6 Plus.  The higher the price of a product generally exhibits an idea of sturdiness in regards to the product, and Apple has the backing power to use the no-discount pricing policy as it is their customer service after the initial purchase of the product that validates the hefty price tag to consumers (Brindha, 2014). Integrated Marketing Communications (IMC) is an approach to promotions where different forms of marketing are used separately, but support the goals and objectives of the other marketing campaigns (Business Dictionary, 2015).  Apple uses IMC exceptionally due to their attention to detail shown within their products, and advertisement campaigns.  Apple focuses on things becoming simpler, not more complicated, which is seen in their minimalistic product design and marketing campaigns (Brindha, 2014).  All aspects of marketing the product are seen as individual strategies, however all work together to support one another, for example the App Store supports the iPod app, which in turn supports the iTunes store.  Integrated Marketing Communications adds another level to Apple’s promotions and marketing, which is what they aim to show within their campaigns for their many products including the iPhone 6 and 6 Plus.  

Origin Energy - SWOT Analysis

Strengths

‘Origin Energy has a strong presence within Australia and New Zealand; their permits allow the exploration of new resources onshore in the Otway and Perth basin, whilst offshore Bonaparte Bass Basin, and the onshore Cooper/ Eromanga and Surat and Bowen Basins in Australia; and in the Taranaki, Northland, and Canterbury Basins in New Zealand’ (Origin Energy Limited SWOT Analysis, 2012).

‘Origin has production interests in the Cooper Basin, which is the principal supplier of natural gas to New South Wales, South Australia, and Queensland. It is one of the largest producers of coal seam gas (CSG) in Australia and has interests in major CSG fields at Spring Gully, Fairview, and Peat in central Queensland. The company’s major projects include Kupe Gas Project (New Zealand), Otway Gas Project (Victoria), and Spring Gully expansion (Queensland). As of June 2011, the company’s total 2P reserves amounted to 7,041 petajoules equivalent (PJe), reflecting an increase of 13% over that in the previous year. Origin Energy’s significant upstream activities strengthen its business (Origin Energy Limited SWOT Analysis, 2012).

Weaknesses

‘Whilst Origin’s Energy operations are booming in Australia they haven’t pushed the global barrier to push its operations elsewhere. The company generates more than 80% of its revenues from Australia. The company operates two power stations, a retail natural gas, electricity, LPG, and a coal seam gas plant in Queensland. It has oil and gas exploration and production facilities in Victoria and three power stations in South Australia. It also has oil and gas exploration and production activities and retail LPG in Western Australia.

Outside Australia, the company operates in New Zealand through its subsidiary Contact Energy.

The company's high dependence on Australia increases its business risk and also exposes it to local economic and operating conditions among other increasing business risks’ (Origin Energy Limited SWOT Analysis, 2012).

Opportunities

Over the years Origin Energy has strengthened its business platform through targeted acquisitions and strategic agreements. The company continues to enter into agreements and acquire companies to enhance its business portfolio.

‘In June 2014, Contact Energy reached an agreement to supply Fonterra with steam and electricity from the Te Rapa cogeneration plant for a term of eight years commencing 1 July 2015.

Further, in May 2014, Origin Energy, together with Sasol, signed a conditional farm-in agreement with Falcon Oil & Gas Australia Limited (Falcon) for three onshore exploration permits in the Northern Territory's Beetaloo Basin. Upon completion of the farm-in agreement, Origin Energy and Sasol will each hold a 35% interest in the three permits and Falcon will hold a 30% interest. Located about 500 kilometers south-east of Darwin, the permits cover an area of more than 18,500 square kilometers within the Beetaloo Basin, which is highly prospective for shale gas and associated liquids (Origin Energy Limited SWOT Analysis, 2012).

These strategic acquisitions and agreements will provide a strong platform for growth for Origin

Energy across markets by expanding its business portfolio and also help in the long term growth

and sustainability of the company (Origin Energy Limited SWOT Analysis, 2012).

Threats

‘Origin Energy is facing increasing competition in New Zealand and Australian market. The company faces competition from AGL Energy, BHP Billiton, Caltex Australia, Country Energy, Delta Electricity, Energex, EnergyAustralia, Integral Energy, Santos, and TRUenergy. The increasing competition in these markets could lead to a decline in the company's market share’ (Origin Energy Limited SWOT Analysis, 2012).

‘The potential discovery of significant new gas resources in eastern Australia could have a significant impact on the supply and demand dynamics of the eastern Australian gas markets, resulting in changes in gas prices and therefore Origin Energy’s future revenues and purchase costs.Furthermore, Origin Energy’s customer accounts marginally declined by 3,000 accounts in FY2014.

The net position includes a reduction of 41,000 electricity customer accounts. This was due to restricted customer win and retention activities, as well as because of the increased competition in New Zealand and Australian markets. Thus, the increasing competition in these markets could lead to a decline in the company's market share and erode existing customer base’ (Origin Energy Limited SWOT Analysis, 2012).

Origin Energy Stakeholder Analysis

Trade Associations

The two biggest trade associations of Origin Energy include The Australian Service Union, and The National Electricity Market. The ASU is one of the largest in Australia in the energy/electricity industry. The ASU operate as an agency for Origin Energy and will outline certain standards for safety and fair work practice. This may include the conditions of employment, superannuation, wages and salaries, occupational health and safety. The ASU help to sustain a good working environment for all employees whilst also negotiating with companies to establish your benefits.

‘The National Electricity Market or NEM is a wholesale market that helps to deliver electricity to almost 10 million homes and business in Australia, the NEM is responsible for the buffer between energy companies like Origin and the consumers. The transmission of energy and its distribution networks deliver the needed electricity from power stations anywhere in the system at all times of the day and night. The NEM is a wholesale electricity market in which generators sell electricity and retailers buy it and sell it onto you. There are lots of generators and retailers participating in the market so it’s highly competitive and therefore relatively competitive electricity prices in the wholesale market. The financial market sits alongside the NEM and involves retailers and generators entering into hedging contracts to buy and sell electricity. These contracts set an agreed price for the electricity and help to manage the risk of price volatility’ (The Natural Electricity Market, May 2013).

‘So why does an energy company use the NEM? Origin uses NEM so that the electricity can be stored in these generators and that electricity is available when its needed, this is the most efficient way of producing electricity’ (The Natural Electricity Market, May 2013).

Employees

Employees of Origin Energy will need to be notified when there is a change undergoing within the company. The change that is going to occur, decrease in carbon emissions and moving toward a more sustainable future by the use of renewable resources will be driven by the employees. The employees will firstly need to be notified by a manger of this change and how it will affect them. Then the company as a whole will need to realign their goal and ultimately bridge the gap between senior executives and the day to day operations of the business. This is very time consuming as each person in the company needs to have an idea of the change occurring and also be able to motivate themselves enough for the change to become successful. The change from the company’s point of view needs to be sold to them employees of the business; the employees will need a monetary benefit shown or some other kind of benefit to them that will come about by the change.  Origin Energy could show that by making this change, not only will carbon emission decrease; escalating health but it will also boost sales by public satisfaction in the long run. Origin could also relate back to the employees and reward them for their change initiative.

References:

The Natural Electricity Market, May 2013, originenergy.com, viewed 1 April 2015,

<http://www.originenergy.com.au/resources/national-electricity-market-infographic.jpg>.

The Natural Electricity Market, May 2013, originenergy.com, viewed 1 April 2015,

<http://www.originenergy.com.au/resources/national-electricity-market-infographic.jpg>.