Free «Managerial Economics» Essay Sample


Coty UK is a leading Wholesale and Distribution Company specialized in perfumes and beauty products. Effective value chain is important for Coty UK as it influences all operations and logistics of the company. Effective organizational performance depends upon value chain and allocation of resources. Value chain is extremely important for Coty UK because it helps the company organize and control its activities around the world. Decision-making has a great impact on company’s profitability and prosperity. The decision under analysis is “The ways Coty UK should use to improve its value chain and gain competitive advantage”

Coty UK Value Chain

Following M. Porter, the value chain is the sequence of activities, from start to finish, by which the product or service is transformed from an idea to a consumable form (Porter 1985). For instance, if the product is multimedia equipment, the chain starts with the materials (electronics parts and plastics), and end with delivery to a customer such as a manufacturer of multimedia equipment (Slack et al 2003). It is possible to say that if a firm is not fully integrated backward, the value chain would commence with the receipt of raw materials, and if forward integration is incomplete, the chain could end with manufacture and warehousing. According to Porter, “the main elements of the value chain are: firm infrastructure, HRM, technology and procurement. Primary activities involve: service, marketing and sales, outbound logistics, operation and inbound logistics” (Porter 1985, p. 35).

Proposed Improvements

The new challenge for Coty UK will be to balance financial spending and service quality, and provide a technology infrastructure that will anticipate the long-term trend to restructure the firm. Christopher underlines that organizations on the whole are indeed transitioning between states of structure as the combination of technology and customer needs continues to evolve (Christopher 2005). For this reason, technological improvements (automation of all processes) will help Coty UK to create a competitive advantage (Kotler and Armstrong 2008).

Empowerment of employees is another way to achieve a value focus in the value chain. It will be possible by eliciting suggestions from and delegating decisions to lower level employees. Innovation should be viewed as comprising three stages-need recognition, initiation, and implementation. Need recognition follows from the realization that something is wrong. Customers, employees, regulators, and other stakeholders could be the source of information about gaps in performance (Naylor 2002). Marketing Research should be the organizational function. It will help Coty UK anticipate possible market changes and react effectively to competitor’s actions (Kotler and Armstrong 2008).

Christopher underlines the importance of initiation in value chain. Initiation, or the generation and testing of new ideas, is typically the purview of R&D while implementation is assigned to Operations (Christopher 2005). There is often a separation between the need recognizers and initiators on the one hand and implementors of innovation on the other. For instance, while overall productivity has remained high in the United States over the past four decades (whether measured against input measures of labor hours or dollars of capital invested) a continuing focus on productivity has served to make production an inward looking function, content to develop techniques to increase outputs or lower costs, or both. Following the same strategy Chief Executives can drawn in far greater numbers from the ranks of Marketing and Finance professionals than from a shop floor persuasion, have not encouraged production people to look at or deal with, the external environment (Christopher 2002).

Coty UK should introduce customer relationship management (CRM) system to meet heightened customer expectations and face market competition. In general, CRM emphasizes the use of information technology in managing customer relationships. On the one hand, advances in database technology have made it possible to know and segment customers in ever more creative ways (Baudin, 2005). By Coty UK, data warehouses can be used to store and search vast amounts of data. Data mining and modeling techniques revealed otherwise 'invisible' patterns of customer behavior, which can be trans­lated into customer-specific marketing strategies. With its foundations in Software's CRM solution, CRM reinforced the view that marketers manage, and businesses win/lose - customer relationships, not customers. As the most important, it can cover such areas as accounting, manufacturing, warehousing, field service, and shipping systems. This solution also included direct sales, sales through indirect channels such as distributors, and Internet sales using electronic commerce. Services are provided via a range of media, including telephone, fax, mail, the Internet, various mobile devices, and face-to-face interaction (Christopher 2002).

HRM- training and development of human resources is the main priority of Coty UK.  The company should invest in human resource and training. For example, selection techniques (screening, testing, interviewing) assess the complete person, how well he or she meshes with the company's value creation process, and their ability to absorb and see many points of view (Baudin, 2005). In addition to productivity, quality, and responsiveness, an important method of evaluating people is based on their ability to take a holographic view of the firm. Rewards are based partly on the variety of skills learned or number of jobs performed satisfactorily. Training programs, in addition to targeting and teaching specific skills and techniques, also help supplement selection and appraisal strategies by building awareness and support of the holistic nature of the firm's value mission (Baudin, 2005).

The company decided that extended design teams should be another important factorsofsuccess.  It is possible to say thatCoty UK forms an extended design team in order to  generate ideas for product improvement and bring them to completion.. In these teams, employees perform marketing research, vendor management, control legal affairs (Slack et al 2003). This deterministic perspective, best characterized by the word ‘impact’, contends that computers are changing the nature of organizations. The underlying premise is that the outcome information systems implementation can be predicted. The essence of value lies in providing products or services that fulfill customer needs (Christopher 2005). The long term success of Coty UK in the marketplace is based on its ability to react to, anticipate, and create high quality products for customers.

Firm infrastructure influences operations and decision-making of the company. Coty UK consists of “cells of competencies” closely connected with technologies. This structure allows the company to plan, coordinate and control all activities. Following Chase and Jacobs (2003), firms that remain in the traditional structure will be at a competitive disadvantage. Organizations that adopt the new structure, like Coty UK, receive additional costs in training and educating employees and need to develop new performance measurements. MIS (management information systems) play an important role in Coty UK infrastructure and its everyday activities. MIS help Coty UK to connect global worksites and partners, improve communication and logistics. Strategic planning is used by Coty UK to plan strategic direction and reduce possible risks. Strategic planning can be seen as a tool for making decisions and develop long-range plans. In telecommunications industry, strategic situations are complex and involve uncertainty. In Coty UK, planning is directed toward the future and predictions of changes in the environment. In today's quest for managers who are more leaders than conciliators, any interest in scenarios on the part of the strategist or executive is welcomed. Control function of management allows Coty UK to keep high standards, superior quality of all products and improve productivity (Slack et al 2003).

Technology development should be the next stage of value chain. In Coty UK creativity is valued and appraised by the company. R&D (research and development) is staffed by specialists in visualizing and realizing marginal or major product changes. The uniqueness of Coty UK is that the company has a separate R&D group to enhance product value at the concept stage. Innovations allow Coty UK to reduce costs and improve quality of its products (Lucas 1994). Also, Coty UK uses internet technologies to improve communication with customers (Kotler and Armstrong 2008).

Competitive Advantage

Coty UK can achieve competitive advantage in 5 years proposing customers high quality of products and after sale services. Also, customers can be involved in product development stage and be able to monitor how the firm meets their important needs (Kotler and Armstrong 2008). Competitive advantage can be achieved by assessing needs of potential customers and their wants. Since customers might not want to, or have enough information to, review the firm's performance on each product, this would be conducted internally, possibly by a Product Value Council (or some such group), if one has already been constituted as part of the extended design team mentioned earlier, or by forming such a team specifically to help the firm become more aware of and competitive in delivering the best value to its customers (Naylor 2002). Coty UK should improve its after sale service and customer support. These areas are often neglected by its competitors, so Coty UK can achieve competitive advantage delivering quality products and services to all customers (Kotler and Armstrong 2008).

In Coty UK, the first-stage of value creation comprises the generation of ideas leading to value enhancement. Modifications to an existing product or process should be a part of value conceptualization. The advantage of Coty UK’s value chain can be achieved if they make suppliers a part of value creation initiated at this stage of the process by placing additional responsibility on them for improving the part of the product they provide. For instance, in the optical transmission equipment example, the manufacturer should be inspired into developing quieter and lighter equipment appropriate to the range of equipment offered by the firm. The needs of decision makers at higher levels of the firm must be catered to and various alternative designs of Management Information Systems can be evaluated and deployed depending on the nature of the industry, the details of information needed, and the frameworks or models chosen for decision making. In addition to the decision-making needs that information fills, it also helps movement toward the holographic organization and supports measures like job rotation and training. Information systems that facilitate the sharing of information across value areas in addition to providing information specific to each value area are necessary (Perera, 2007).


In sum, effective structure and technological solutions applied in value chain process allow Coty UK to compete on the global scale and deliver superior quality of products and services.  In product businesses conceptualization is indispensable to achieving high levels of value. The case of Coty UK shows that whether the firm provides, visualizing how value will be provided, how this will afford the firm a competitive advantage relative to its rivals, and constantly seeking to enhance the value concept, are critical to its continued success. Just as important, however, is making the concept come to life. The value of the product has to be communicated to the customer. In addition, direct information transfer between customer and firm, service businesses enjoy an edge, because the customer is in the system. Their needs are therefore not remote and to be inferred but right here and given expression to.


What Our Customers Say

Get 15%OFF   your first custom essay order Order now Use discount code first15
Click here to chat with us