Burlington Norhtern- The Ares Decision Essay
Burlington Norhtern- The Ares Decision
The purpose of management in sectors of an economy and control systems is to achieve goals and objectives of an organization with ease and at least cost. The ultimate purpose of any system is that it should be “in control” rather than “controlling people” (Simons 2000). Systems which are in ‘perfect control’ other than controlling them show profound differences between the two concepts and the ability to achieve their goals with ease. Both the internal and external environments impact an organization control structure.
There are four paradigms that forms the framework around which the theme of understanding of controls is built (Simons 2000)In the first paradigm is one that enables organization to adapt themselves to their environment knowing what they want and how to achieve it with ease,. When an organization decides what they want, the process is referred to as part of control system. The process would either be based towards centralization or decentralization. Purpose would be, to effectively adapt to the changing environment.
When an organization is able to identify and discover the best strategies and instruments of control, it is headed towards success. (pp 2) The second paradigm of the control system comprehensively covers the activities and behavior of top management levels of the organization (described as management controls), process (operational control) and task or transactional control; at the Grass-Root level (pg 3). The paradigm emphasizes on the integration at the board levels of the management team (management controls)
The third paradigm explores the explicitly democratic and participative styles of management due to the growth in the field of information technology and knowledge management. This has resulted in research on management control and its relationship with strategic management. The paradigm deals with coordinating control systems with self control and designing and implementing systems for controlling the not-so-sincere people. The fourth paradigm deals with the adaptive theory of human behavior.
Simons assumes that human beings want to contribute, achieve innovate and work competently even though they do not want to have specific external inducements to be so. Generation and implementation of adaptive control strategies are quite capable by human beings. This can be achieved through mutual consolation without an external force t make them fall in like and work for the organization. Everybody doing a business or government owned organization are looking for growth. Sufficient profit is thus essential to support market expectations.
The problem arises when the top management pushes too hard for profit and does not have the right controls in places. In such cases employees may start to do dumb things like misusing revenues or making unethical decisions. In response to the above the company should therefore employ all sorts of controls. It should also be noted that if they go overboard in that same direction, the businesses will risk becoming internally focuses loosing growth power. This forms the basis of our paper in which we shall discuss the variety of forces in a business and to maintain the ultimate challenge.
The Burlington Northern Rail Road (BN) was created in 1970 by the merger of four rail roads, Chicago Burlington and Quincy railroad; Northern pacific Railway, Great Northern Railway, and the Spokane; Portland and Seattle Railway Co. In 1980 another railway the ST. Louis-San Francisco Railway co. (Frisco) was acquired and merged into BN- (oligopoly watch 2003). BN decision to delay to deploy the ARES was as a result of perhaps because of the high price tag associated with the system wide application. The “Amtra Ares” would benefit the Burlington Northern by working an advanced train control system.
Passengers would benefit with on time improvement in performance, reductions in running time and continuous communication for increased services reliability. The Ares deployment would cause a vast improvement in the management on safety of trains on any given rail. It enables the railroad to determine the exact location of train. If implemented ARES will permit an additional capacity on rail lines and better enable trains to be dispatched faster. In addition the technology will also permit timely monitoring of the mechanical conditions of equipment. (Oligopoly watch briefs 2003)
The company also faces major competition form other established rails in US and therefore the industry profitability depends on porters five forces model for likely profitability. As porter (2005) a business has to understand the dynamics of its industries and markets in order to compete effectively in the market place. He contends that the competitive environment is created by the interaction of the five different forces acting on a business. (Bowman and Davviney 1997) The original competitive forces as proposed by porter, identified forces which would impact on an organization’s behavior in a competitive market.
The analysis focused on the following areas:- • The rivalry between existing sellers in the market • The impact of the suppliers on the sellers • The potential threat of new sellers entering the market. • The threat of substantial products becoming available in the market. • The power that is exerted by the customers in the market. The analysis are well illustrate in table in Appendix I DEGREE OF RIVALRY The Company faces major competition from other railway operators and means of transport. Rivalry determines the extent to which the value created by an industry will be dissipated through head-to-head competition.
The concentration of alternative means of transport in the region seem to be a factor that affecting the effectiveness of the industry. ( High Beam Encyclopedi) • The nature of the cost of transport should be variable in order to attract ore travelers to use that means of transport. • The capacity of the rail should be considered by the management to accommodate more people and goods. • They should also focus of market growth to increase competition and this shows their stability. • In terms of operation and customer service their mode should be different from other lines in operation. THE THREAT OF ENTRY
Porters admit that both potential and existing competitors influence average industry profitability. This threat is usually based on the market entry barriers. Entry barriers exist when it is difficult to economically operate for an outside in an industry already saturated with incumbents. The company faces loss threats from other competitors in terms of economics of scale. The benefits derived from such operation is worth noting and can be utilized to keep the company making other contracts in to industry faces challenges and barriers such as cost of entry, distribution channels and may lack differentiation. THREATS OF SUBSTITUTE
When a company is faced by the threat of substitute products that pose to its profitability; it will depend on the relative price-to-performance ratios on the different types of services or products that the customer can turn to satisfy his basic needs. • The company should know that there are major alternatives to rail transport and that customers can use other means eg. Air and road. • The threat of switching out should also be discovered as a factor that can affect their competitiveness in that these costs are incurred when retaining, retooling and redesigning when a customer switches to a different mode of transport.
• The company should be sensitive on their pricing system which should be in tandem or cheaper with other alternatives. • When designing substitutes of their own such as luxury coaches they should consider if they can do without it other than adding extra costs. BUYER POWER Buyer power influences the appropriation of the value created by an industry/company. The concentration of customers and size determines the buyer power. Other factors depend on how the company has marketed itself to the customers and differentiation of the competitors.
The company poses credible threat of backward integration form the travelers who are their frequent customers. They should focus much on their maintaining the customers’ base through service improvement. The declining number of customers also does not frequent the route, their bargaining power towards the company falls means of attracting them back should be developed. SUPPLIER POWER This typically focuses on the relative size and concentration of companies offering similar services to the industry participants and degree of differentiation.
The ability of a company to charge customers different prices in line with different in the value created indicates that there is high supply of services with low supply power For the supply power of Northern railway to exist the company should: • Maintain their brand name power in recognizable in the market. • Create different values in services offered with different prices. • Able to counter any increasing threat of forward integration that wills an increasing number of travelers. • Ensure that the customer is well informed of his services. • The merger of the four companies is a strong point they should maintain. Case #2
Burlington industry must capitalize on the stability and management control it has instituted over the years it has been in operations. Also begin planning and reporting by business line and should identify activities and functions that led themselves to competition. This is because the company faces a serious problem when it comes to regulating the railway transport. Use of technologies such as ARES should be encouraged by this company. The following measures as stated above cn help them to solve this internal problems. 1. Management control They should try to reinforce what they already have accomplished over the years.
Substantial structural and operating changes can result in increased stability, expense control and an effective program of capital reinvestment. The restructuring effort should:- • Reduce management levels clarify roles played by authority and enhance accountability. • Should have regular reporting. • Control budget • Focus on its core duty of passenger rail service. 2. Planning and reporting by business line Accountability in their financial transactions is one major factor they should consider. Transparency should be provided along the companies operating profile to facilitate management and god policy decision.
In infrastructure management good technology like ARES which can help them control traffic should be deployed. Such structures would bring a different dimension which not only focuses on the cost of each line of operation but the mission, goals and market opportunities associated with the company. The management accountability should go hand in hand with the performance for each business line and this includes on time performance and customer service. 3. Advance Competition The utimage goal of Northern rail line should be to focus on maintaining a vibrant passenger rail system with a competitive supply of service industry and delivery.
This objective should be supported through • The development of an activity based analytical capabilities that elatify the cost of individual business lines. • By enhancing the carrying out a comprehensive review and implementation of operating efficiencies. 4. The company should focus on delivering services in a cost effective manner as possible. They should also identify opportunities for revenue advancement and savings. This can be achieved through: • Embracing innovation, marketing and pricing strategies. • Creating flexible work rule that will enhance operational efficiency while maintaining service quality.
• Timely scheduling of departure and arrivals to reduce cost. • Invest in technology such as ARES that will improve productivity, help solve internal problems and failures. 5. Customer service and time performance. In order for the company to have an even customer service it should focus on the following:- • Develop a highly skilled, service oriented workforce which has the capacity to interact well with customers. • Create timely dispatch and arrival times which will avoid congestion. • Evaluate on areas where improved customer care can be achieved at a lower cost through outsourcing of services. Case # 3
The future on the success of Burlington Northern rail depends upon its inputs form the high traffic volumes, higher revenues yields while ensuring operating capacity is sufficient to match demand and lowered unit costs. They therefore need or are obligated to address these issues in grater details superior performance will only flow if the company gets better at managing new care competencies like pricing, capacity, networks and schedules. In addition o making improvements in general productivity the company should have better cost management by addressing this cost disparities in comparison with other transport modes.
Burlington should move from a constraint driven environment to a market driven one with an aim of capturing and retaining the market share. This will be achieved if they offer excellent services to customers and ensure that resources are used properly. Failure to comply with such minor issue will push them out of business as they lose market share. Case # 4 The advanced Railway electric system (ARES) is important if implemented would address traffic and increase yield through market planning and scheduling technology. The increase operating would lower operating cost.
The management science techniques as they are called are being used for queuing, decision, information, statistics as well as stimulation, operation research and linear programming. The new approach for planning and re-configuring rail networks are opening up key opportunities and major savings. To maintain a competitive advantage the company should aim at developing high speed rail networks and advanced scheduling though ARES a key factor in matching out to demand. The increase in demands calls for an effective system to build schedules to meet the changing demand, both constraint driven and market driven criteria.
The system makes it possible to choose between all alternatives and find best arrangements tailored to meet the organizations conditions. If Burlington does not implement ARES it is faced with and impending threat on traffic as the railway scheduling is becoming more and more complex. They will not be able to meet the changing demand and because of this they cannot maximize profits as there will be increased operational costs. Being able to find the best technology like ARES in such a difficult choice environment is a strong competitive advantage.