Greyhound
Corporate Culture Problematic
Goals of the Business Unclear
Lack of Competitive Advantage
Integration of Businesses Ineffective
Responsive not Proactive Approach
Alternatives
Conduct Comprehensive Analysis on the Organization
Continue With Current Strategy
Separate Business Units
Decide on One Business Unit and Sell Off the Remainder
Move Into New Area
Scenarios
Implementation
This paper presents a study into Greyhound, a company that initially found success in the bus transportation industry but has since diversified into a wide range of industries. At the current time, Greyhound is encountering problems with the obvious symptoms being ineffective integration and management of diverse business units and a responsive instead of a proactive approach to changes in the environment. Behind these symptoms three base problems can be identified: a problematic corporate culture, unclear goals and a lack of competitive advantage.
After analyzing the problems, several alternative solutions and future scenarios, it is recommended that Greyhound conduct a full analysis into both its internal environment and its external environment. It is also recommended that Greyhound reduce its assets and focus on developing in one specific area, namely healthcare, diversifying by increasing its product line and increasing its global markets, rather than diversifying into various industries. It is recommended that the analysis be carried out so that Greyhound has full knowledge of itself and its environment and is able to produce an effective plan for its expansion exclusively into healthcare. It is also recommended that this analysis be used to determine a specific mission, backed up by a suitable culture that will allow Greyhound to effectively work towards its new goals.
OVERVIEW
As companies grow they expand, with this expansion intended to improve the situation of the company. Greyhound is an example of a company that was initially successful and has since used its success to expand into diverse markets. This expansion, though, has not been successful for Greyhound. The main problem we see is how to integrate and effectively manage many different functions that have little relationship to each other. With Greyhound, we also see an example of a company that has not responded to the environment, but has maintained a culture and goals that may have been successful in its beginnings in the 1930’s but are not successful in the current environment. We see a company that has no clear mission, has a corporate culture that does not match the current environment and is based on finding markets where there is no competition, rather than finding ways to compete. Essentially, Greyhound is a company that has not changed as the environment has changed. The reality is though, that the current environment is very competitive and is likely to only increase in competitiveness. There is a need then for Greyhound to reassess its position and use its assets to move in new directions.
PROBLEM DEFINITION
Five main problems have been identified. The problems have also been prioritized. The priorities have been assigned based on how important the problem is and whether the problem impacts on other problems.
The five problems noted and justification of their priorities are:
1. Corporate Culture Problematic – this problem is ranked first because it impacts on all other problems, corporate culture is at the heart of the problem. Fixing other problems without being aware of the problems of corporate culture will not allow the other solutions to remain effective.
2. Goals of the Business Unclear – this problem is ranked second because the goals of the business must first be understood before any actions can be taken to reach them.
3. Lack of Competitive Advantage – before deciding what action Greyhound should take there is a need to understand itself, this involves knowing what competitive advantage Greyhound has so it can make fulls use of its competitive assets.
4. Integration of Businesses Ineffective – this is one of the major problems. It is ranked fourth because the first three problems all impact on this area and so looking at this problem without looking at the others first would be ineffective.
5. Responsive not Proactive Approach – this is another of the problems but is symptomatic of the other problems, rather than being a base cause. This ranking does not mean that it is unimportant, but it is expected that looking at the other problems will largely solve this problem.
The five problems will now be described and discussed in turn.
1. Corporate Culture Problematic
Greyhound developed as a company in the bus transportation industry and enjoyed quick success since they were the only ones in the market. This led to cash excesses which the company used to expand into other areas. Greyhound became a leader in this industry, but now no longer operate in this sector. There is evidence thought, that Greyhound retains the same culture from this time. Firstly, the idea is evident that Greyhound are seeking a high cash-flow source, just as their bus network once provided. In the changing environment though, it must be recognized that this is not a feasible goal. Greyhound also operated in a market with little competition and moved out of the market when deregulation brought in competition. We also see that Greyhound continue to seek easy markets with little competition. It appears that the culture persists, with Greyhound being unable to cope with competition in the market. For Greyhound to be effective, they must become better able to cope with the modern environment where competition will be a factor. They must also become better aware of the reality of modern business and seek profitable businesses but not excessively profitable businesses requiring little input. In the beginning of Greyhound’s history these businesses may have been available but in the current environment they are not. Overall, there is evidence that Greyhound continues to strive for what it once had in the bus transportation industry, high income and no competition. This is likely contributing to the managers seeking quick fixes rather than taking action to better their businesses. It is suggested that for Greyhound to develop and be successful, this culture will need to evolve.
2. Goals of the Business Unclear
The goals of the business are variable and appear not to be very well understood. The only goals appear to be profit. While this may be a reasonable goal, it gives no direction to the organization.
It is not clear what the overall goals of Greyhound are, or that this has been fully considered. They appear to change depending on who is the manager and the current environment. Before the other issues can be dealt with there is a need to define what the company wishes to achieve. This information can then be used to tailor organizational function to achieve these goals. The first thing this would require is definition of the mission of the company. This mission would then give direction to the company in allowing it to define its purpose and its values. Vision also becomes important. With a highly competitive and rapidly changing business environment there is a need to always look forward. Few companies can afford to reach their goal and then stop, they must constantly adapt to the marketplace. Greyhound shows that it is willing to adapt but does this by reacting, not by striving towards its own goals. The vision can give the company direction in striving forward. In combination with knowledge of the market and the consumer it can ensure that the company remains competitive as the market changes. It should also be noted that the companies intentions are of use to consumers. As a marketing tool, a companies intention can be important. Company missions are rarely used only inside a company, they are also communicated externally. This gives the general public and the consumer an image of the company. For example, the company may make use of the current trend of environmental friendliness and target their product as such. The intentions are therefore important in designing the company, in relations with partners and in relations with consumers and the general public.
3. Lack of Competitive Advantage
The majority of successful organizations base their continued success on something that gives them a competitive advantage over the rest. For example, 3M focuses on continued innovation in developing new products, Microsoft focuses on their technology. Greyhound however, is not basing their operations on anything that they do better than the rest. This leaves them open to competition. We saw this in the example where the large healthcare companies were able to eat into Greyhound’s profits by creating rival products at lower prices and by creating effective marketing campaigns. Faced with this competition, Greyhound has nothing that they do better than the competition to secure their position. Greyhound recognize this and prevent problems by focusing on niche markets where competitors will not react strongly. With the increasing competitiveness of the business environment, this is not likely to be an effective strategy in the future.
4. Integration of Businesses Ineffective
Greyhound now consists of a range of businesses that have little in common. The majority of these have been bought or developed because they were thought to be profitable, but there is little link between them. It appears that one manager is responsible for overall operations of all these separate businesses. The problem with this is that these separate business are not integrated and there is difficulty in managing these varying businesses effectively. The theory behind this is that this variety of businesses will even out any loss from any individual business. However, a loss in one cuts into profit from the other, so that overall the company is not able to grow as long as all these business are not being managed effectively. There is a need to focus on maintaining the effectiveness and profitability in all these business units. From a resource point-of-view these varying businesses do not allow for effective use of resources. Having similar businesses would allow for Greyhound to make use of informational and human resources for more than one business, thus allowing an overall cost saving.
5. Responsive not Proactive Approach
One of the major problems seen is that the business responds to changes rather than predicting them and taking action in response to them. This is related to the business environment. An organization has two choices in regards to responding to changes in the environment. The first is to predict the changes and alter the organization to respond to the changes. The second is to attempt to change the environment. Greyhound, however, does neither of these. Instead, it waits for problems to occur and then responds to them by selling off businesses that are struggling. This problem has two probable causes. The first being that the organization is not aware enough of its external environment and of factors that may effect it. The second being that Greyhound does not have a forward-thinking philosophy, but instead focuses largely on quick fixes. While these quick fixes may seem like a suitable solution, in most cases they lose the company significant amounts of money. A better solution to these problems would be prevention. Prevention can be achieved by being aware of environmental factors and predicting how they may change so that action can be taken to lessen the effects.
ALTERNATIVES
Combining the five problems identified, several alternative solutions can be described.
Included in the description will be an explanation of which problems the solution is intended to solve. It is also noted that these solutions may be feasible in combination with other solutions. Each solution then is not necessarily a solution to all the problems but may be a feasible solution in combination with others.
Solution 1 – Conduct Comprehensive Analysis on the Organization
We have noted that the organization does not appear to have a clear understanding of itself or its environment. One solution is to conduct a comprehensive analysis with the aim of restructuring the organization. This would involve determining exactly what the company wishes to achieve. It would also involve analyzing the internal and external environment. This would provide the organization the opportunity to better understand itself and to better select appropriate action. The goals of this would be to recognize the culture, the goals and the competitive advantage of the organization. This would then be used to create a defined plan for the organization that incorporates these things. This solution would be a solution to the first three problems noted: corporate culture problematic, goals unclear and lack of competitive advantage.
The problems with this solution is the time it would take to conduct and the lack of immediate financial benefits. The benefits are that it would be a long-term solution that would effectively get to the heart of the problem and allow the organization to proceed on the right track. This solution may be combined with all other solutions.
Solution 2 – Continue With Current Strategy
The second solution is to continue with the current strategy, which involves buying and selling suitable businesses and seeking to purchase profitable businesses. One of Greyhound’s advantages could be that they have experience in buying and selling businesses and in diversifying into different areas. Greyhound could make use of this ability, by focusing on making the most of it and continue not to pursue particular areas but just to pursue the purchase of profitable businesses. The advantage of this solution is that it makes use of Greyhound’s experience and is an immediate solution. The disadvantage is that Greyhound’s businesses may always be threatened by businesses focusing on specific markets that are able to produce cost savings by operating more efficiently. This solution could be combined with solution one, with the analysis focusing on making Greyhound’s goal ‘purchasing diversified business to increase profit income.’
Solution 3 – Separate Business Units
The third solution is that Greyhound operate its different businesses as separate business units. This would involve having managers responsible for each business unit individually. Each business would then develop its own individual goals, competitive advantage and culture. This solution would mean that individual businesses would be more closely managed and so predicting environmental changes would be improved. This would result in each business operating to its potential, where future problems would be predicted and rectified rather than being reacted to.
The advantage of this solution is that it allows Greyhound to continue with its practice of having varying businesses that reduce its risk, while ensuring that each business has the maximum opportunity to remain profitable. The advantage of this solution is that it would be an immediate fix that would likely please shareholders. The disadvantages are that it would result in control problems and would also mean less efficient use of resources, as the resources of each business unit would be independent of each other.
Solution 4 – Decide on One Business Unit and Sell Off the Remainder
The fourth solution is to retain one business unit and focus on expanding it, rather than focus on expanding into others areas. Based on Greyhound’s current situation, it is suggested that the healthcare until would be the most suitable unit, as there has already been a focus on developing this area. The income derived from selling off other businesses would be used to develop and expand this unit. This focused approach would allow for Greyhound to compete more effectively with the larger organizations in the market. The main advantage of this is that it would reduce the problems of integration and would allow for Greyhound to perform to their potential in this market. Expansion in this market would be essentially unlimited due to the number of healthcare products and global expansion is also feasible. This solution allows for Greyhound to develop a distinct competitive advantage. The problems with this solution are that Greyhound would have a new focus on creating value in a business, rather than just purchasing already valuable businesses. Their is also a higher risk with a downturn in this one market having greater effect.
Solution 5 – Move Into New Area
The fifth solution is for Greyhound to move into an area that will meet its requirements. This would involve specifically seeking a market that has the qualities the original Greyhound had in having little competition and an excessive profit margin. This solution focuses on finding a business that suits Greyhound rather than suiting Greyhound to a business. Considering that Greyhound became successful in the beginnings of the transport industry, one possibility is for Greyhound to move into current beginning markets, possible computer or Internet related. The benefits of this solution is that it allows Greyhound to continue with its current culture and goals. The disadvantages is the uncertainty in moving into a new market.
SCENARIOS
1. Environmental – High Likelihood – Global Competition Increases
With the current trend towards reducing trade barriers, increased global competition is almost a certainty for the future environment of business. This will mean that many firms will be better able to expand into new markets instead of expanding into new industries. The end result will be large firms focused on one particular area. With a focus on this one area, they will be in a better position to compete, making full use of their resources.
2. Organizational – High Likelihood – New Management
There is no doubt that in the future the management of Greyhound will move to someone else. We have seen how the organization changed with each manager. With a new manager, new ideas would be implemented and these may focus on a very different aim than the current manager.
RECOMMENDATIONS
The recommended solution is that Greyhound carry out solution 1, conduct comprehensive analysis on the organization and solution 4, decide on one business unit and sell off the remainder. The first part of the solution is a thorough analysis of the company. This analysis would be focused on fully understanding the organization and the environment. This analysis would be done with the understanding that Greyhound would move completely into the healthcare market. The analysis then would have outcomes of providing a focus for Greyhound in the form of a mission that can be communicated to all. This would also involve finding the best way to succeed in the market and ensuring the company is able to know the environment so it can preempt changes and take action before they have negative effects. It would also involve a specific plan for the changes. Also important is recognizing the competitive advantages of Greyhound and developing them so that Greyhound is able to compete effectively. This focus would also mean a change in culture. The move into healthcare would mean that Greyhound could begin to use its information and human resources in one area, rather than in many. Diversification could still be achieved by diversifying into different healthcare products and into different global markets. This would reduce risk while still ensuring effective use of resources. Within the company there would still exist various sections and products, such as soaps, haircare and herbals, but these would be in a similar area so would reduce the problems caused by lack of integration.
IMPLEMENTATION
The implementation would take place via the following steps:
1. Initiate Research Study Into Greyhound
The research study would look at the organization itself, including its strengths and weaknesses.
2. Initiate Research Study Into Environment
This research study would involve clearly defining the environment Greyhound operates in.
3. Decide Course of Action
Based on the two research studies the best course of action would be decided on. This step involves deciding exactly how Greyhound is best to operate. This also includes deciding on the mission of Greyhound.
4. Develop Plan for Change
The plan for change would involve using the defined mission and the required operations of Greyhound and putting in place these actions.
5. Communicate Strategy
This would involve communicating the exact strategy to Greyhound and to externals such as shareholders. This would include which units are to be sold and which are to be developed.
6. Put Strategy in Place
This step involves selling off assets not related to healthcare. The income produced is then used to improve and develop healthcare products.
7. Feedback
Feedback would be built into the strategy with market and environmental analysis used to determine future changes. Feedback would be used to assess the effectiveness of the strategy.
It is expected that this solution would not produce high profits in the short-term as money will be spent developing products as well as developing marketing campaigns and developing the organization. The profits will however, appear in the medium term and can be expected to increase, with the focus on good management, rather than buying good assets. The income produced by the sale of assets will compensate for the immediate downturn in current profits.
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