Unit 4: CSR - the Essential Economist Podcast

This podcast is a couple of years old, but frankly it is so good that I think it ought to be essential listening to every colleague and student preparing students for exams which feature CSR…

The podcast is streamed below.  

I have jotted down some summary notes further below which you are free to use as required.

NOTES


Interview with Daniel Franklin (2008)


The sceptics about CSR - their battle has been lost.
Focus now is what companies are actually doing, not whether it is a good or bad thing


Two good examples of CSR best practice: 

- M&S Plan A - lead from the top, but not trying to get too far ahead of customers
- GE - Ecomagination - investing in green technologies


Why has CSR become mainstream? 

- Expectations of companies have risen
- Consumers much more aware of the actions of firms
- increased scrutiny by NGOs and pressure groups
- Business reputation is at risk if they are found to have behaved inappropriately
- Environmental concerns - state of the planet
- increasing focus on risk management


How are companies getting CSR wrong? 

- Many firms make a lot of noise about CSR, but dont think or act deeply
- CSR located in the PR/marketing department
- Phrase CSR covers such a wide area of activities; companies are too scatter-gun rather than focusing on the benefits that matter to the business, shareholders and society


Can CSR be a bad thing? 

- If it is not good for the business, then it is no good
- Well-intentioned activities can end up damaging businesses (e.g. regulations, laws)


Resistance to CSR 

- Several reasons why firms ignore CSR
- Ignorance of potential pressures (may be surprised in the future)
- Deliverately ignoring CSR - can’t see the benefits or operating in a sector that is not really under pressure


CSR as an opportunity for business 

- Attracting, motivating and retaining the best people
- Need to be an organisation which top people want to work for
- Green agenda: opportunity to reduce operating costs as well as innovate to create new products and services
- A mindset of being closely attuned to changing customer and market needs



Measuring CSR 

- Difficult to measure / quantify?
- Output side: how much good is being done?
- Various rankings and reporting initiatives (but are these box-ticking exercises) + potentially provide a form of cover for firms who are not really taking CSR seriously


CSR as a global concept 

- CSR is undoubtedly spreading through the global economy
- Globalised supply chains (e.g. multinational supply chains)
- E.g. toy industry & product recalls from Chinese factories
- Firms within emerging markets increasingly looking to expand globally - now coming under scrutiny
- Growing awareness/appreciationg of CSR in China, albeit from a low-base
- Pressure/conflict between growth & CSR


Relationships between Business & CSR activists 

- Changing relationship between business & NGOs
- Less confrontational and more partnership based
- Some NGOs still very suspicious of / hostile to business
- Collaboration between the two helps develop the relationship
- Helps business reach consumers in poorer countries


CSR and the Economic Downturn 

- Is CSR a discretionary add-on or is it here to stay?
- A test of how serious businesses value CSR
- Management under pressure to justify the benefits 

Unit 4: Stunning Video - CSR, Ethics and Milton Friedman (Must Watch)

I put a Milton Friedman video on a few weeks ago. I found these two clips of Milton Friedman being questioned by a University Student on Profit and Self interest (its the same video but split into two). Its so good, it is a must for both Economists & Business Students


In the first clip the student questions him on a case whereby an old man couldnt afford to pay his electric bill. Subsequently he was cut off and dies as a result. In the second clip, he discusses the Ford Pinto scandal.
Amazing, amazing stuff.

The first clip;



The second clip;

Unit 4: CSR - BBC One Planet on Coca-Cola & Sustainability

This podcast from a special edition of BBC World Service’s One Planet makes ideal listening for students researching corporate social responsibility. The opening 8 minutes of the programme features an interview with John Brock, Head of Coca-Cola Enterprises in Western Europe, where he talks generally about the role of CSR in Coca-Cola’s strategy. Well worth a listen…


You can hear the podcast here

I have highlighted what I think are the key points from the podcast below:

BBC One Planet - a great resource we should listen to more often

John Brock - Head of Coca-Cola Enterprises:

Coca-Cola - a global brand with global profits

The world’s most iconic brand - sold everywhere

The world’s most valuable brand, but part of a brand portfolio

Sustainability - why?

The right thing to do

Makes good business sense

Three environmental focuses:

Energy conservation

Pacakaging resuse/recycling

Water stewardship

By pursuing all of these sustainability, you:

Reduce costs

increasing innovation

Becoming more efficient and effective

The reason for Coca-Cola to exist - making money ("creating value for shareholders")

So why does sustainability fit in with this objective?

Good for:

Image & reputation

Relationships with suppliers

People - employees want to be part of a company focusing on sustainability

A marketing ploy?

Why should customers believe that sustainability is anything other than a marketing ploy?

Coca-Cola

Product range includes many low or zero calorie products

Why is sustainability so popular?

Companies recognise that is simply makes good business sense - good for society; good for the profit and loss account

Swap for Swag Project

Recycling project - swapping packaging for new Coca-Cola branded merchandise

Unit 4: Critical Path Analysis notes

Critical Path Analysis Notes

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Unit 4: Decision Trees Notes

Decision Trees Notes

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Unit 4: CSR - Comic Relief, Crisps and Cause-Related Marketing

There is a telling phrase in the current series of commercials for Walkers Crisps which are being run as part of Walkers’ (Pepsico) support of Comic Relief Day 2011. In the video clip below, Gary Lineker explains that “whoever sells most, wins"…


In fact, what Lineker really means is that, whoever sells most, Walkers Crisps wins. That is not to decry the worthy efforts and support of the brand for a great cause. But the appealing truth about the Walkers Crisps campaign is that, like other successful examples of cause-related marketing, there are two winners. Cause-related marketing should be a win-win. Great for the cause (usually a charity or other not-for-profit organisation). And a win too for the brand concerned.

Cause-related marketing is a good example of one part of CSR (corporate social responsibility) in action. It is widely acknowledged that a successful campaign can have significant marketing benefits for the brand concerned. In a survey conducted by BITC in 2004, the research found that, for example,

• 88 per cent of all consumers were aware of a cause-related marketing programme.

• 80 per cent felt more loyal and more positive about companies that chose to work with charities in this way.

• Almost half (48 per cent) said they actually switched brands as a result of a cause-related marketing programme.

• 2 out of 3 consumers said want more businesses to run cause-related marketing programmes.

There are lots of examples of this form of CSR - click here for a good resource from the Breast Cancer Campaign which describes how it has worked with a variety of firms and brands. As the campaign reports:

Breast Cancer Campaign works with a diverse range of brands and companies helping them to reach new target markets, increase awareness, grow market share and launch new products while raising money for the charity.

Comic Relief 2011 might be a good introduction to some of the issues surrounding corporate social responsibility for students researching the AQA BUSS4 paper in June 2011. The corporate part of the Comic Relief site can be found by clicking here. As the site says:

“The benefits [for Comic Relief’s corporate partners] don’t just end with boosted sales and increased exposure from the fantastic marketing opportunities we offer your brand. Oh no. Being a partner will also make your employees proud that you want to make a difference, and they’ll have a great time fundraising for us too!”

...and here is that Walkers Crisps Comic Relief campaign launch…

Unit 4: CSR at the Movies - Supersize Me in 7 Minutes

This now infamous movie clip might be a useful lesson stimulus for colleagues and students examining the issue of rising adult and childhood obesity in the context of corporate social responsibility. The movie in question is Super Size Me, a documentary film directed by and starring Morgan Spurlock, an American independent filmmaker. Spurlock’s film follows a 30-day period from February 1 to March 2, 2003 during which he eats only McDonald’s food.


The film documents this lifestyle’s drastic effects on Spurlock’s physical and psychological well-being, and explores the fast food industry’s corporate influence, including how it may encourage poor nutritional habits in return for generating higher revenues and profits. The film makes pretty uncomfortable viewing and it may put you off fast food for a while!

Here’s how the experiment behind the film took place. Spurlock dined at McDonald’s restaurants three times per day, eating every item on the chain’s menu. He would always choose to “super-size” his meal if he was offered by a McDonald’s employee. Spurlock consumed an average of 5,000 kcal (the equivalent of 9.26 Big Macs) per day during the experiment. As a result, the then-32-year-old Spurlock gained 24½ lbs. (11.1 kg), a 13% body mass increase, a cholesterol level of 230, and experienced mood swings, sexual dysfunction, and fat accumulation to his liver. It took Spurlock fourteen months to lose the weight gained from his experiment. [source: wikipedia]

Here is the edited seven-minute excerpt of Morgan Spurlocks’ supersize-me experiment.

Unit 2: The Worst Hyperinflation Situations of All Time - CNBC

Click on the link below to access a slideshow showing the worst cases of inflation from around the world. It's an interesting piece highlighting the problems that inflation can cause!!! (it makes the UK figure og 3.7% seem a little trivial!!!

The Worst Hyperinflation Situations of All Time - CNBC

Unit 4: CSR - Lesson Video: Child Labour in Bangladesh

In this poignant 7 minute clip from the 2010 BBC series Tropic of Cancer, Simon Reeve travels to Dhaka, the capital of Bangladesh where he meets some of the millions of child workers there.  A moving and thought-provoking video for students (including you Ozzy!) researching the issue of child labour use by multinationals.

Unit 4: CSR - Lesson Video: Primark on the Rack

This now infamous BBC Panorama programme from 2008 highlights the supply chain issues of fast fashion, focusing on the ethical practises of Primark. A classic clip, to illustrate the issues of losing control of the supply chain and therefore corporate social responsibility…

Unit 3 & 4: CSR - Avoiding the child labour hotspots

This article is useful when discussing issues with emerging markets (Unit 3) and CSR (Unit 4)

Several prominent businesses have been caught out when investigations have highlighted the exploitation of child labour in their supply chains. Primark and Apple are great examples.

So the latest Child Labour Index will probably be required reading for businesses keen to avoid the reputational damage that can arise from being seen to profit from extremely low pay. As this Guardian article explains, the worst-offending countries include many of the emerging markets which have provided the source of low-cost supply for many multinational brands. India performs particularly badly. A good quote in the article from risk management specialists Maplecroft who produce the index makes an important point:


“These large emerging economies are essential to the strategic interests of multinational business. Not only is child labour wrong but the existence of child labour within a company’s value chain can have significant impacts on reputation and profits and it is critical that companies undertake stringent monitoring of all suppliers.”

Unit 4: CSR - Apple audits the supply chain

This is one for you Ozzy!!!

The headline in the Telegraph today doesn’t read well for Apple, but I wonder whether the underlying story is actually good news for the firm and enhances its reputation for CSR?


Apple is the only major technology company to audit its supply chain and publish the results. The latest Apple Supplier Responsibility Report (2011) is now available and it provides a fascinating insight into the issues raised by an audit of Apple’s supply chain.

Apple has been able to increase the number of supplier factories audited - and the results make somewhat uncomfortable reading. For example, Apple said that 91 children under the age of 16 were discovered to be working in 2010 in ten Chinese factories owned by its suppliers. By comparison, in 2009, Apple said eleven underage workers had been discovered.

The use of child labour is not the only problem. So too are long working hours. Two-thirds of the factories which supply components for Apple’s range of products, or who assemble them, make their workers work for more than 60 hours a week and do not give their workers one day of rest per seven working days.

Hazardous working conditions also feature in the report. Apple reports that 137 workers at Wintek, another supplier, had been poisoned by n-hexane, a chemical used to clean the screens of iPods and iPhones. Apple said it had asked Wintek to cease using the chemical.

The findings are hardly surprising given the bad publicity that Apple has received for its record on CSR and its supply chain. The Foxconn suicide issue was a classic example of this. But at least the Apple Supplier Responsibility Report provides stakeholders and shareholders with some assurance that Apple is addressing the issues.

DBS Factor in the news!

Click here to access the 'Gulf News' article about the DBS factor.

Unit 4: Shared Value and the Limitations of CSR

A narrow view about how to create profit has created a disconnect between businesses and society. This needs to change according to Harvard Business School Professor Michael Porter. In a revealing interview with Peter Day as part of the In Business series on Radio 4 last month. It is a superb programme and one that might be useful for teachers and students looking at the limitations of corporate social responsibility as an approach to the conduct of business activity. (click here to listen)


“A growing number of companies known for their hard-nosed approach to business—such as GE, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Wal-Mart—have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance.”

Creating shared value

Shared value is creating economic value by creating social value

How is the business community thinking about how to create economic and shareholder value? How can companies take their engagement with the world further?

According to Porter there is now a widespread view that driving profit has been increasingly at the expense of meeting social needs. The legitimacy of business as an institution is being challenged and the global financial crisis has intensified the belief that business values and strategy need to evolve - perhaps s nee form of capitalism less concerned with narrow conceptions of shareholder value and more in tune with “shared value”.

In recent times, creating value has tended to focus on short termist thinking - namely the urge to engage in out-sourcing and off-shoring as global supply / logistics chains are established. Businesses have been long on driving huge sales and output volumes, downsize and de-layering inefficient management and generally responding to pressure from financial markets to delver immediate results through cost-cutting, dynamic pricing and increasingly tough marketing that can often persuade people to buy things that are not good for them.

Corporate social responsibility or CSR has become a buzzword phrase - showing greater concerns for supplier base in their region, for employees, giving to charity and serving poorer communities. But according to Porter, CSR is a distraction ...... a way of ticking the relevant boxes that check the social issues of business impact .... A logical and intermediate step to better more ethical business practices but not a solution to genuinely reconnecting the values of business with the values of the community at large.

What is the purpose of a business? To scale and grow a business and make profit and generate shared value.

Porter argues that we need to widen the perspective about how to create value and profit and look towards shared value rather than shareholder value

This involves a recalibration and a rethinking about what a product really is and what needs a business is meeting, for example in the food industry, products that are nutritious and healthy rather than focus on volume, lower unit costs and higher profits. He notes to increasing prominence of genuinely social entrepreneurs with revenue generating business models. This rethinking will be the biggest driver of innovation and this will involve a move away from the comfortable CSR / ethical business mindset

Consumers looking at the world differently and expressing their preferences in strong ways - this is already having a direct effect on supermarket behaviour.

So too are the new generation of business leaders and some bell cows - in the interview Porter mentions Nestle which has incorporated creating shared value into its mission statement

Shared value and the capital markets

Will stock markets evolve to reflect a shift towards shared value as a way of valuing a business? In the medium term stock prices do tend to reconnect with the economic value of a company and the strength of growth trajectories.

Porter argues that changes to business taxation might accelerate the progress towards shared value as a business strategy. Capital gains tax might be lowered for the gains from long term investment e.g. Only allow tax breaks for 3-5 minimum investment projects.

Unit 4: McDonalds and KFC go head to head - who will chicken out?

Is this an example of product innovation, or a simple example of copying a competitor product to take them on in a battle for market share?


Brand Republic (an excellent site of marketing news stories) reports that McDonalds UK is about to enter a new segment of the fast food market. It is a segment which is dominated by KFC (and perhaps Dominos UK for pizza) - the shared meals segment. Click here for article

The 20-piece Chicken McNuggets ShareBox has now been launched, priced at £3.99. How does that compare with a bucket of chicken from KFC? Perhaps your students can report back after some quick market research.

The marketing strategy behind the product launch is described as follows:

“The company intends to take market share from fast-food rivals, such as KFC, which offers shared chicken buckets, and Burger King, which sells its Chicken Bites in boxes of seven and 14.

Attracting a high number of families through the doors is key for fast-food outlets, which are battling against customers’ tendency to eat at home in the current straitened economic climate.”

Will it work? - You decide!

Unit 4: Investment Appraisal Presentation

Click here for the link to Investment Appraisal presentation.

Miss Meeajan's weekend away....

Unit 3 & 4: UK firms & international strategy

Here’s an interesting stat which students might use in an exam answer on growing a business through international trade. 70% of UK businesses don’t export - and nearly all of those have no intention of trying!

The data comes from a survey of 8,000 UK firms reported by the Telegraph. According to the article, most of the firms which have rejected exporting explained that their products and services were unsuitable for consumption overseas, while a fifth were quite happy living off their existing sales (i.e. demand from the domestic market).


The survey indicates that a reluctance to export might also be a cultural issue for the Brits. That suggests an inertia that is harder to change. With the government trying (and needing) to encourage an export-led economic recovery, the survey findings must be disappointing news.

Unit 4: Nokia: a business culture problem?

There’s plenty of material in Nokia’s recent announcements to keep business students busy. I’ve picked up on a link (Click here)  that looks at their problems and presents them as a case study in a failing business culture.

The recent “burning platform” memo outlined the serious challenges that the business faces. But a report from the BBC claims that insiders have long known what’s wrong, and that it lies at the heart of Nokia’s corporate culture.

Some of issues include:
- A local Finnish culture, insulated from outsiders

- Managers who have worked for the business for their whole careers

- A masculine culture, with deals brokered in the sauna (the firm’s offices from Afghanistan to Zambia have been fitted with steam rooms)

- A lack of innovation and lengthy product development times

- A lack of focus, with too many products on the market

One of the challenges the new boss faces is tackling this culture and implementing change. This is doubly difficult for a firm that is one of the mainstays of the entire Finnish economy.

It would be wrong to overreact, and the article quotes a former Nokia executive who is now a consultant and author, saying that critics ignore the fact that the company has a greater share of the worldwide phone business than anyone else. “If you lead the market and are twice as big as your nearest rival, that is something any market leader would desperately wish for,” he says. “Ask Toyota or Coca-Cola or Airbus.”

In fact, there is a direct counterattack: too many other firms, he argues, are driven by the “voracious” nature of the stock market – and are often focused on short-term domination and quick results.

“The culture is radically different, and this may explain why Nokia is seen to be struggling so much more than it actually is struggling,” he says.

Whoever is right, it’s interesting that Nokia have employed an outsider (a Canadian) to map the route from here. Sony, another giant who lost their way, employed an American to try and turnaround their fortunes.

You all need to get into this!!

Unit 4: CSR; links to business csr reports

Click here for a link to several companies CSR reports. It's deffo the in topic in Business at the moment!

Unit 4: CSR - Branson, Paphitis and Meaden Turn into Eco Warriors

If Theo Paphitis, Deborah Meaden, Richard Branson, Sainsbury’s CEO Justin King, outgoing M&S CEO Stuart Rose and Pepsico’s CEO Indra Nooyi are prepared to appear in a video like this, then you know that the issue of CSR (and specifically sustainability) has truly risen to the top of the hierarchy of corporate objectives!


The new ‘Eco warriors or business leaders’ video is all part of Prince Charles’ Accounting for Sustainability initiative, which is ‘bringing organisations together to develop practical tools to enable environmental and social performance to be better connected with strategy and financial performance, and thereby embedded into day-to-day operations and decision making’.

The video is a bit cheesy. But it’s a perfect one to show you guys just how important CSR is becoming in the business world.......

Unit 4: CSR - Salad Slaves - Supermarkets and Corporate Irresponsibility?

A terrific and detailed video resource here from the Guardian - perfectly timed for students wanting something substantial to discuss as part of their research into corporate social responsibility…


The exploitation of tens of thousands of migrants used to grow salad vegetables for British supermarkets has been uncovered by a Guardian special investigation into the £1.6 billion hothouse industry in southern Spain.

Charities working with illegal workers during the 2011 harvest claim the abuses meet the UN’s official definition of modern-day slavery, with some workers having their pay withheld for complaining.

Unit 4: CSR - Charities hit by corporate stinginess

A timely article (click here) in the Telegraph for colleagues and students researching corporate social responsibility. The UK government wants to make 2011 the “year of corporate giving”. But evidence suggests that corporate philanthropy is on the decline. Some good examples are quoted and comparisons with the US are also illuminating. US firms are more generous than their British counterparts. The average FTSE 100 donation is less than 0.2 per cent of profits: many US companies donate 5 per cent!


An interesting example quoted in the article is that of Vodafone: “Vodafone, the £93bn mobile phone group, runs the world’s largest network of charitable foundations – 27 bodies in countries where it operates – but it cut its support sharply last year, reducing payments to its charities from £24m to £18m”

Unit 4: CSR Video - Everyone’s talking Corporate Social Responsibility

A terrific four-minute introductory video here on CSR featuring Michael Hastings of KPMG. Hastings provides brief, but useful answers to these questions:


- What is CSR?
- How can CSR find me a job?
- Does the credit crunch mean the decline of CSR initiatives?
- What does the future hold for CSR?

Here is the video. Here is a link to KMPG which is widely acclaimed for its approach to CSR.

Unit 4: CSR Video - Business Benefits of Corporate Social Responsibility

Here is a terrific UK-focused video that considers the business benefits of having a CSR programme. It features an architectural practice which has won awards for employee engagement in CSR. A great example about the people management benefits of CSR…


Here is the video. (You can find out more about Bailey Partnership here..)

Unit 4: Counter argument to CSR.

At the moment we are researching the issues surrounding corporate social responsibility. You need to understand and be able to articulate the counter argument to CSR - namely that firms primary responsibility is to shareholders not to stakeholders or society at large. 

The most famous proponent of this “shareholder perspective” was Milton Friedman whose seminal work was published almost 40 years ago. In “The Social Responsibility of Business Is to Increase Its Profits”,

Friedman argued that business leaders “had no responsibilities other than to maximise profits for the shareholders”.  It will be interesting to see how many of you will refer to Friedman in the unit 4 paper.

The famous video clip where Friedman argues his case for the profit motive can be seen below…

Unit 4: CSR - Pepsico Performance with Purpose

Check out this excellent video that explains Pepsico’s strategy for CSR.  The video features Pepsico’s CEO Indra Nooyi,

Unit 4: CSR - keeping a CCTV eye on suppliers!

Another good resource for CSR here, but one which some students may not want to watch due to the gruesome nature of the topic.

The Guardian reports that leading supermarket chains are demanding that CCTV systems be fitted in the stunning and killing areas of all abattoirs that supply them with meat, as they move to reassure consumers that animals are not being cruelly treated. 

Morrisons, M&S, Waitrose, Co-op and Sainsbury’s have also promised that CCTV images will be independently monitored - as called for by the charity Animal Aid, which ran a campaign last year involving undercover filming of alleged brutality.

Its a good example of how retailers need to take great care with all aspects of their supply chain, and how pressure groups are becoming increasingly influential stakeholders in key retail sectors.

Unit 4: CSR - Greed is Good!!!!

Businesses exist to make money.  The pursuit of profit is a noble cause.  Gentlemen - greed is good.  It must be - Michael Douglas says so…

Michael Douglas won an Oscar playing a fictional character called Gordon Gekko - main antagonist of the 1987 film Wall Street who appeared again in the film Wall Street: Money Never Sleeps. 

The character of Gekko was said to be loosely based on a real-life Wall Street trader called Ivan Boesky.

Gekko’s “Greed is Good” speech in the film has come to be associated with one side of the corporate social responsibility debate. 

The full text of the Gekko speech is as follows:

“Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A” [source Wikipedia]

Unit 4: Corporate Strategy

Much debate in the UK currently about the media ownership interests of Rupert Murdoch and News Corporation.  And now you can add a new newspaper title to his portfolio - The Daily.  

What sets The Daily apart is that it is an iPad-only newspaper.  The Daily will cost 99 cents (60p) a week and will be sold exclusively via Apple’s iTunes store. The paper will initially only be available in the US. News Corp has hired about 100 journalists to work on it.But, will it work?

This BBC video takes a brief look at the new digital newspaper:

Unit 4: Ansoffs Matrix & Stella

Something big is brewing in the UK drinks market.  For the first time, a leading lager brand has decided to attempt a brand extension by entering the cider market…

Called Stella Artois Cidre, Stella is aiming to exploit the opportunity of capturing a share of the fast-growing UK cider market. The new product will be available from Friday 29 April 2011 (the same day as Prince William gets married to Kate Middleton) and will be promoted using a “multi-million pound promotional campaign”.

Cider sales in the UK have risen 46% to 840 million litres over the last five years, according to consumer research experts Mintel. The organisation also says pear and fruit ciders are attracting a new type of cider drinker, mainly women aged between 18 and 24.

Where does this new product launch sit in the Ansoff Matrix?  One for your students to attempt...and also perhaps consider whether Stella’s move is likely to prove successful.

Click here for the link: Stella Artois Cidre

Unit 4: Business Strategy: next steps for the budget airline industry.

It’s amazing to think how over just 15 years, Europe’s budget airlines have soared to account for a third of all air travel in the region. But their growth is slowing. Here are a few ideas and a link to an article which outlines some of the approaches the industry might take in the years ahead.


The Economist points out that it’s hard for the airlines to achieve rapid market growth in the near future as the opening of the market means that the low-cost carriers are left with few new places to explore. Market share is harder to grab too: national airlines such as British Airways and Lufthansa have tried to defend their business by offering stripped-down service and cheaper fares on more short-haul routes. “The low-cost carrier market used to be about fast growth and uncomplicated strategies,” says one consultancy. “Now it is about slow growth and complicated strategies.”

Take a minute to see if you can think how the “uncomplicated” strategy works.

The basic budget aviation model is to hold down maintenance costs by using just one kind of aircraft, bought in large numbers with bulk discounts. The next part is to charge for, or do away with, frills like meals and drinks. It helps if the aircraft fly back and forth along a single route, often between quiet, out-of-the-way airports, rather than using busy hubs which allows for faster turnarounds. Bookings take place online, with savings passed on to customers.

But slowing growth has forced the industry leader, Ryanair, to drop ultra-low fares on new routes and may move some flights to primary airports, which are attracting low-cost carriers to boost their own flagging growth. Ryanair has already moved into one in Barcelona. In future it will concentrate less on increasing traffic and more on extracting larger amounts of money from each passenger. EasyJet is also offering greater frequency on its routes and makes more use of primary airports such as London Gatwick and Paris Charles de Gaulle. It is also targeting cost-conscious business travellers. The firm recently smartened up cabin service too.

The European sky used to offer a stark choice between full-service and budget airlines. It is increasingly crowded with options of all shapes, sizes and costs. Take your pick, and hope your luggage arrives.

Unit 4a: Business Objectives - Homework

Below is the case study, with mark schemes........there is also some other questions which I don't require for homework but you might want to have a look at....

4a Topic 1 Business objectives

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