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STRATEGIC MANAGEMENT CASE STUDY ON RODGER’S LIMITED

INTRODUCTION

Rodger’s Limited is a proprietary business that runs two public houses and a hotel in Ireland. The stakeholders of the organization are limited to family members and therefore the external liability at present is nil. The strategic management of the organization at present is also therefore bounded by the idea to run the present business only and not to go for an expansion because of the unprecedented future. However, there are some stakeholders of the organization, who are keen to go for this expansion and own 5 more hotels in their business portfolio contradicting with others. Therefore, it seems that this seeks for an overhaul in strategic management with the present business. In this study the main aim has been to know whether this acquisition will be viable or not and in order to get a hold onto it, the researcher has managed to conduct several analyses, like PESTLE, SWOT, financial position, Stakeholders’ decisions etc. The final conclusion has only been generated by obtaining the result of these analyses.

Current Strategic position of Rodger’s Limited:

The present strategic position of Rodger’s limited is to maximize the profit and to make the returns highest for its stakeholders. With two pubs and one hotel in the business portfolio the organization only operates in the Northern Ireland’s capital region Belfast. However, in respect to its business activities, the organization is having two different market segments. The hotel is aimed at to contribute in the tourism industry, whereas the pubs are local market and to operate in the Bar and restaurant industry. Though geographically being in the same market place, the organization is generating its profit from both the properties.

The organization is not having any kind of international business activities and is sticking to only the local market of Northern Ireland. However, with the hotel it has been able to be in the hospitality industry, where tourists from different countries come and enjoy their stay. The cross border activity is nil at present and however, it will also remain null after the expansion, if it happens.

Strategic Capabilities:

The strategic capabilities of Rodger’s Limited in respect to expansion of the business can be present with the SWOT analysis.

Strengths:

The major strength of the organization is that it is run by an experienced in the field. The everlasting spontaneity of its current managing director Mr. Patrick Rodger and his experience in the public house industry is what makes the Rodger’s Limited one of the mains in the industry.

The organization as is having a hotel is experienced in the hospitality industry. Therefore, it can be said that if the purchase is made of the new hotels, it will not be a total failure.

Weakness:

The major weakness of the Rodger’s limited is its paucity in the strategic skills. The organization does not have major manpower required in the case and is also inexperienced with this kind of huge operation. In addition to this, the present hotel is mainly operated by one member of the organization and though he is totally devoted in the business, the saturation level has been reached. Therefore, the new purchase will need extra manpower and as others of the organization is quite unaware of the operations required in the hotel industry, to some extent the new purchase may be problematic for Rodger’s limited.

Opportunities:

The market in which Rodger’s limited is operating has a huge demand. Therefore, many hotels have already been opened. In addition to this, these hotels are also merging pub alike restaurants within the hotel. Therefore, the consumers are only heading towards these type of hotels instead of visiting each singularly. Hence, as the Rodger’s limited has had experience in both the sector, a huge opportunity awaits them.

Threats:

The financial condition of the Rodger’s limited is not very proficient at present and the obligation to purchase the new hotels is high. Therefore, any kind of miscalculation will lead to a huge blunder. They may face bankruptcy if the purchase become a failure. In the present scenario, this is the most threatening factor towards the managers of Rodger’s Limited.

There are some other factors that have been cited by the informer, that the present turmoil in Britain of exiting the Eurozone. The current status that the Britain enjoys is hassle free transportation of the goods and services. Any person being the citizen of Euro zone member countries are free to migrate in the Great Britain. Therefore, the supply of labor is high and as the Rodger’s limited will need huge manpower to run the new hotels, any kind of disruption in the process will hinder the growth and may also fail the new business endeavor. Therefore, the political effect on the new purchase should be considered here.

Another factor that has been coined is the currency value of the GBP against the Euro. The latter has been gaining power and therefore, the purchase cost of raw materials getting higher. In this context, the new purchase is needed to be appropriate with proper monetary valuation assessment. A slight fall from the actual may lead to a huge financial loss for Rodger’s limited.

Diversification:

The diversification between the business portfolios is already present for the Rodger’s Limited. The organization is the owner of two public houses and a hotel is Northern Ireland. Presently, it is being aiming to buy five more hotels and to expand the hospitality business. However, not all the stakeholders of the organization are pessimistic with the new purchase, because of the inexperience. Moreover, the contribution once the purchase of the new hotels are made, from the stakeholders are limited as only two of them Patrick Rodger and Sean Rodger have firsthand experience with the both the type of business,

Nevertheless, the expansion will lead to a growth for the organization as a whole, The returns will be higher and as the existing pubs are facing huge problem socially, administratively and also financially. Therefore, the diversification is needed indeed but with proper assessment in prior.

Also Read: Analyse of Strategic Management

PESTLE analysis:

Political factors:

The political factors of the business environment are crucial at this point. With the Brexit being the most concerned matter, it is essential that whilst planning, this is needed to be taken into consideration. The Brexit will have a huge effect over the labor market of Northern Ireland and therefore, it will also increase the labor cost, which is needed to be taken care of.

Economic factors:

The living standard of the people of Northern Ireland is high. The per capita income of the nation is 23700 Euros per annum. Therefore, it can be observed that economically the proposal is viable.

Social Factors:

The demand in the hospitality industry is high. The consumers have huge attraction towards living in high standards. Moreover, the tourism industry of Northern Ireland is in upwards drift. In 2016, the industry had seen 3.5 million of trips with expenditure amounting to around GBP 658 million. These figures have been constituted jointly by the international tourists as well as native ones. Therefore, the potential is high.

Technological factors:

The power of information technology, fast internet services and online market space have only augmented the business environments for all the industry and tourism industry is not apart from that. With the presence of social media platforms it will easier for Rodger’s limited to perform better.

Legal factors:

The legal matters get streamlined due to government’s spontaneity. The ease of doing business in the country is currently being flourished. However, it is to be kept in mind that the organization has to follow some of the legal procedures that are mandatory which can be carried out by the legal professional amongst the stakeholders.

Environment factors:

The environmental factors are also contributing towards the benefit of the industry. The efflorescence of the nature is divine Northern Ireland. It is one of the major tourists’ attraction due to this. Therefore, the demands are always high. This will bring in extra demand for Rodger’s Limited if they buy the hotels.

Trend analysis:

Different Ratios

2016(%)/times

2015(%)/times

2014(%)/times

2013(%)/times

 

 

 

 

 

Revenue Growth Ratio

-5.061

-5.061

4.995

 

Gross Profit Ratio

57.999

59.937

59.996

66.423

Net Profit Ratio

6.807

6.225

8.688

13.885

 

Capitalization:

The purchase of five new hotels will cost a minimum of 1.6 million Euros to Rodger’s limited. However, there could be an agreement where the present owners can ask for higher valuation of the business. There the cost burden upon Rodger’s limited will be high. However, as the hotels are running units, it will be easy to recover the cost if the strategies are implemented properly.

Ratio analysis:

Different Ratios

2016(%)/times

2015(%)/times

2014(%)/times

2013(%)/times

 

 

 

 

 

Current Ratio

1.51

1.59

1.44

1.61

Return on Equity

6.42

6.01

8.83

13.82

 

Cash Flow position:

The cash flow position of the hotels is in decreasing numbers. Over the years, the organization has only been draining its liquid assets and therefore, though the fund flow is positive, the organization may face a huge problem with the working capital. Therefore, while purchasing the hotels, this factor will also be needed to consider.

Value Chain analysis:

The Value chain of Rodger’s limited is alike any other organization. However, as the organization is already working in two different sectors, public house and hospitality, the value chain comprises of operations, marketing and service. However, with the new acquisition, the organization will be required to expand its value chain constituents. There will be inbound logistics where it will be required to acquire raw materials. There negotiations will be a key factor and the ability to capture the best quality material will enhance the growth potential. However, at that time management will also be required to properly understand and segregate the operations of public houses and the hotels apart. In this context, Freeman (2010, p.124) has said that the value chain of operations are supported by human resources, infrastructure of the firm and also technological assistances. As seen above, that Rodger’s Limited will get the benefit of all the factors except human resource, the new venture will be high yielding.

Ansoff matrix:

Strategic Management

Ansoff matrix would be useful to describe the position of the Rodger’s Limited, given that it is aiming to buy the hotels. The hospitality market in the Northern Ireland is growing at a rapid pace. Therefore, according to the Ansoff matrix, it is an existing market and the service is also not new (Hill et al. 2014, p.156). Therefore, it will be best for the management to concentrate on product development. It can be done by installing new ideas or even with other initiatives. In addition to this, a diversification will also be helpful as it will attract the customers more towards the organization.

Graphs:

Graph 1: Revenue growth ratio, GP ratio and NP ratio

Strategic Management

Graph 2: Current ratio and Return on equity ratio

Strategic Management

Expectations of the shareholders about the strategic decision:

Rodger’s limited has a limited number of stakeholders all of whom hails from a single family. This company was started by two brothers, namely Albert Rodger and Patrick Rodger and currently is having five shareholders with Brian, Sean, Patrick’s children and Albert’s two daughters and Patrick himself. This company started its business as a public house. However, Sean always thrives to expand this public house business to hotel business. Therefore, later on a hotel had also been added in the portfolio. Nevertheless, at present they are given an opportunity to buy five more hotels, which requires a strategic planning. For the purpose, they have set some main objectives which are describing their expectation to earn maximum profit from both the businesses. Currently, the public house business market is failing to increase the in profit figures. Therefore, the shareholders are looking forward to enter the hotel business to earn higher profits.

Stakeholder definition:

Stakeholders are defined as the people who have interests in a company.  As the Rodger Ltd is a family based company, the number of the stakeholders is also a few. Rodger Ltd is a small business group with five shareholders and have two public houses and a hotel. The stakeholders are therefore the employees of these hotel and pubs, the suppliers and other related parties who have a direct or indirect connection with the Rodger’s limited. In case of a public house stakeholders may be workers that are barmen, managers, customers. On the other hand the stakeholders of the hotels would be the managers, customers, employees and other persons who are directly or indirectly engaged with the business.

Stakeholder power in the business:

According to Hitt et al. (2012, p.47)), interests of stakeholders vary on the basis of their needs. The interest of a manager is to complete a job on time. Therefore, the influence over the performance of the employees of a manager is high. Rodger’s limited is providing their manager with every possible opportunity to make the most of its employees. Customer satisfaction is the main focus of an organization. Therefore, it means that good quality of product and services should be provided (Wheelen and Hunger, 2011, p.41). Unless the quality of the products or the services is improved the customers may not look forward to buy anything from that organization. Therefore, the influence of the customers is also high. In addition to this, the suppliers are also influential to the performance of an organization. Therefore, the aim will always be to get the highest return on the purchase price.

Description of the shareholder analysis:

The shareholder analysis means defining the number of shareholders and their degree of interest in the organization (Moutinho, 2011, p.545). In Rodger’s limited, there are five shareholders and these shareholders are head of the organization in any context. Therefore, the growth of the organization will be their only interest. As the organization is a family business, it can be said that all of the shareholders share same views towards the betterment of the organization.

Identification of the shareholders in Rodger’ Limited and their portion:

Shareholder is also called the owner of the company, who invests their money in the business and takes a part in profit or loss generated by the company at the end of the year. Shareholder has the right to take the decision on the behalf of the company (Thompson and Martin, 2010, p.545). Currently Rodger Ltd has five shareholders. Patrick Rodger is at the helm and his two sons Sean and Brian are also assuming important roles as operation manager and finance manager. The other two shareholder of the organization are the cousins of Sean and Patrick, who are also holding major position of shares in the organization and are contributing towards the strategic change.

Expectations of the stakeholders of Rodger’s Limited:

Expectation plays a vital role to determine the future of a company. Generally expectations of the stakeholders set the goal of a company, so, expectation is an integral part for the owners of an organization. The path of achieving the goal for a company fully depends upon the way a owner address his or her expectations. Stakeholders of Rodger’s Ltd have observed a decline in their profit margin with the existing businesses and it is a major hindrance to their expectation to grow. However, the scope of buying new hotels is also, to some stakeholders, unfeasible. On the other hand, some of them are keen to make the purchase (Eden and Ackermann, 2013, p.457). Therefore, it can be seen that with the purchase decision, there is a dilemma between them. However, it is assured that they all aspire to make the purchase a high yielding one.

Stakeholder Mapping:

Stakeholder mapping is a process of identifying the stakeholders and collect information on their perceptions. It puts forth some questions on the stakeholders, such as:

Who are the stakeholders of the company?

Where they have come from?.

What are the interests for which they make relationship with the company?

In this study, answers to these questions have been found out. Stakeholders mapping very much depends upon the knowledge and interests of the participated stakeholders. Mapping a stakeholder helps identify the most active stakeholder for the business. In case of Rodger’s Limited, five main stakeholders have been identified by the process. As the elder son of Patrick is showing most of the concern on the new purchase, the stakeholder mapping has chosen Sean as the most useful stakeholder for the Rodger’s Limited.

Description of stakeholder movement:

Movement means a person or a group of people working together for the benefit of an organization. Here the stakeholder movement regards betterment of the organization in terms of societal, profit and technical advancement. For the betterment of an organization, its key player plays a vital role, means one who takes the responsibility for the benefit of the organization. In the new purchase, Rodger’s limited’s five stakeholders will play vital roles. Patrick plays a role as the thinker for the organization, who always tries to safeguard the family business. On the other side, all inheritors are keen on to expand their business in the hotel industry. Both the girl will help in the business with their professional skills. On the other hand, Brian will play the most important role in the finance department. However, most important role will be played by Sean for the organization. He will manage the new operation and will lead the strategic change.

 

Stakeholders’ reaction to the change of Rodger’s Limited:

Stakeholder reaction means the action taken by a stakeholder in different performance of an organization. In the given study, it has been reported that Rodger’s limited will be acquiring five hotels and it will impact upon the strategic decisions of the organization. Therefore, some of the stakeholders are concerned. However, the main interested person Sean is willing to take over the hotels as he is keen upon the hospitality industry. However, Brian is prudent and their cousin sisters are also looking forward to make the purchase happen but Patrick, the oldest member of the family and the founder of Rodger’s limited is concerned with the viability of the project as it will impact fully upon the financial condition of the family business.

Managerial decisions to take to come to an accord with all the stakeholders:

The decision must be unanimous and at the time of meeting, it is necessary that all the major shareholders are present. However, in order to make the meeting useful, it will be necessary to take into consideration all the factors that will impact upon the strategies of Rodger’s limited. For example, Brian would be in charge of financial implications of the new movement. The sisters will be responsible on the part of project valuation and legal procedures. Sean will be responsible on checking the viability of the operations. Therefore, it can be said that to make the decisions useful, the shareholders are needed to come together with all the information and implications regarding the purchase and these information are needed to be assessed properly. If the answers are found out, only then the shareholders will be able to come to an accord.

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Conclusion

This report carries a full assessment of the viability of Rodger’s limited purchasing five hotels in Northern Ireland. Therefore, the report carries SWOT analysis of the present business of public houses and the one hotel it has in its portfolio. In addition to this, it also carries PESTLE analysis to know the business environment for the organization. Thereafter, the implications of the new purchase have been assessed and on the basis of this, the viability of the purchase has been reported. It has been found out that the new purchase will be beneficial if the organization’s management comes up with product developmental plans and though the financial obligations are high and a risk is present, a perfect assessment from the concerned ones will make the acquisition work in the best way.

 

References

  • Aaltonen, K., (2011). Project stakeholder analysis as an environmental interpretation process. International journal of project management29(2), pp.165-183.
  • Chevalier, J.M., 2016. Stakeholder analysis and natural resource management..
  • Eden, C. and Ackermann, F., (2013). Making strategy: The journey of strategic management. Sage.
  • Freeman, R.E., (2010). Strategic management: A stakeholder approach. Cambridge University Press.
  • Hill, C.W., Jones, G.R. and Schilling, M.A., (2014). Strategic management: theory: an integrated approach. Cengage Learning.
  • Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.
  • Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., (2013). ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review2(2), pp.196-206.
  • Moutinho, L. ed., (2011). Strategic management in tourism. Cabi.
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