National Express UK - Challenges of Financial Management - Book Report/Review Example

? National Express UK Introduction As a part of the multinational National Express Group plc, National Express UK operates as the premier provider of transport services in the country (National Express Group, 2013a). The organization’s operations within the UK encompass rail, coach, bus and light rail services, with the company holding the prominent recognition of being the largest operator of bus services in West Midlands (Parliament of Great Britain, 2010). However, the most popular division of National Express UK is its scheduled coach service which also includes the white coach (Parliament of Great Britain, 2010). This business division unites 1000 locations across the United Kingdom and 500 destinations in Europe and North Africa as a partner of the Eurolines Network within the United Kingdom (National Express Group, 2013b). The UK coach business acts as a source of employment for 1500 individuals and operates from the head office of the company which is located in Birmingham (National Express Group, 2013b). The UK coach division of National Express is extensive and primarily functions on a key road network that covers more than fifty million miles, on an annual basis (Parliament of Great Britain, 2010). National Express believes that its UK coach business is a critical component of its wider operations as it essentially governs the extent to which the organization is able to provide significant customer value to the millions of individuals that benefit from its services. According to a report presented to the Parliament of Great Britain (2010), the functioning of the company’s coach network shares several common characteristics with the operations of the UK rail division. This notion implies that in order to achieve success and fulfill the corporate objectives that have been outlined by the National Express Group plc and the National Express UK, the company must work in cooperation with various authorities and agencies and comply with the regulations that have been outlined by these departments. Therefore, the primary partner of National Express Coach is the Highways Agency in addition with a number of local bodies which work for highway departments in the country (Parliament of Great Britain, 2010). Despite, of the staggering number of customers that benefit from National Express Coach services, the company has been able to maintain an impressive fleet which is characterized by great accessibility and ease of access (Parliament of Great Britain, 2010). The customer base of the organization is diverse and the firm proudly serves a clientele that belongs to various age groups and strata of society. The company believes that the common factor found in its large customer base is their desire to obtain services which provide greater value in terms of quality and affordability (Parliament of Great Britain, 2010). 2. Analysis of Current Position and Environment The financial reports generated for the year 2012 for the rail, bus and coach division of the organization revealed that the National Express UK was able to increase its operating profit for UK bus services business only, as the UK coach and UK rail division was marked by a decline in operating profits in 2012 as compared to the previous year (National Express Group, 2013c). The increase in the competitive nature of the UK transport services industry is an important consideration with regards to the current position of the organization in the market and the recent decline in the operating profit of the firm can also be attributed to this observation. As suggested by Kachru (2005, p. 84), “an in-depth investigation and analysis of our competition is one of the most important components of environmental scanning…” and to achieve this insightful knowledge, analysts can use the recommendations of the tool of PESTLE analysis (See Appendix A), as it facilitates an understanding of those political, economic, sociological, technological, legal and environmental elements which have a potential to impact the business or are presently influencing the operations of the business (Murray-Webster, 2010). The political influences within the external environment are highly significant because they govern the formulation of an organization’s business strategy by providing monetary initiatives or assisting business development through the development of suitable regulations. According to Topham (2013), senior level managers in transport companies agree that the present political initiatives for promoting and advancing the system of transport system of the nation have been unconstructive in the development of transport facilities. This observation is rooted in the fact that the present political structure of the nation has not been able to maintain and execute a positive transport policy and failures in this regard are evident from in the ambiguity that is specifically associated with the development of infrastructure such as high-speed rail (Topham, 2013). This observation is clearly alarming for National Express UK because the progress of its operations and business activities is rooted in the advancement of infrastructure and the cooperation of political agencies. The economic factors influencing the organization’s activities can be assessed by examining the demand for transportation services across the UK. While, demand itself is associated with several factors such as the availability of substitutes, the number of people willing to avail the services of National Express UK also increases with enhancement of tourism prospects and the economic benefits that are obtained by hosting international events such as the Olympics (Parliament of Great Britain, 2006). According to Fletcher (2011), competitive pressures on National Express UK caused a reduction in the price of company shares; however, the same observation was recorded for rival StageCoach which is reflective of the situation in the transport industry. The competitive pressures also hit rival FirstGroup when Grand Central was granted an additional route (Fletcher, 2009). This observation asserts that as competing businesses continue to receive access to multiple routes, the position of National Express UK would be put at further risk; therefore, it is fundamental for the organization to continue the launch of multiple packages in order to cope with the threat posed by new and existing entrants. Even though, political and environmental dynamics have not been favorable for the operations of the organization, sociological changes that have been prompted by an increased awareness of using environmentally-friendly transportation services has encouraged customers to opt for traveling via coach. As proposed in the report released by the Parliament of Great Britain (2010), “Coach is the most environmentally efficient mode of travel with an average CO2 emission per passenger kilometer of only 30 grams”. Technological advancements in the transportation industry have equipped modern coaches with an extensive range of facilities that enhance the travelling experience by providing value-added services to the customers. A majority of coaches in the company’s fleet are installed with air-conditioning, Wi-Fi and power sockets to facilitate customers during their trips (National Express Group, 2013d). Legal and environmental determinants with regards to the UK transport industry are largely associated with laws on carbon emission and which propose the development of a carbon reduction strategy for the transport industry (Department for Transport, 2009). Under this strategy, the UK government aims to integrate national, local and regional governments by developing performance frameworks to assess the operations transporter providers in accordance with these determinants. 3. Overview of the Organizational Structure At National Express UK, the development of the organizational structure (See Appendix B) is the responsibility of the Board of Directors, which has formulated an organizational structure that is marked by the presence of specific responsibilities, delegation of tasks and comprehensible frameworks that govern the progress of business operations in their entirety (National Express Group, 2013e). 4. The Human Element and Behaviour of the People and National Express As a part of the global National Express Group, National Express UK abides by what are termed as ‘Global People Standards’ (National Express Group, 2013f). The ‘Global People Standards’ that are implemented across the organization comply with five distinct principles which have been established in alignment with excellent human resource management practices. Once, the process of recruitment has been initiated, the company welcomes new employees by launching a systematic process of induction that has been designed in accordance with the vision and values of the firm, so that every new member of the team is aware of the expectations and standards that he/she must fulfill as a part of the organization (National Express Group, 2013f). The human element in this case is respected by engaging the employee with the vision and values of the business rather than expecting him/her to follow them without having a prior understanding of what these principles rest on. Furthermore, the company also maintains a framework of employee performance management and talent management. While, performance management assists employees in reaching the goals and objectives that have been defined by the company, talent management is more in-depth and insightful. According to National Express Group (2013f), the framework of talent management is practiced at the organization “to ensure that all our people reach their full potential in National Express”. This technique essentially encompasses an identification of the human element and employee behaviours to assess the potential of the worker and define exclusive mechanisms which take into account the distinct need of each worker so as to allow him/her to maximize their abilities and expertise. 5. The Business Strategy of the Organization According to the Annual Report of the company for the year 2012, the National Express Group plc formulates holds the responsibility of formulating the strategy for its global operations. The strategic priorities of National Express UK are 1) enhancing the operations of the business by successfully maintaining the c2c rail franchise 2) expanding the scope of the company’s operations in the UK to drive revenues and 3) increasing the operating cash flow of the firm (National Express Group Annual Report, 2012). The success of these strategies can be assessed by comparing key performance indicators for the group in 2011 and 2012. Even though, the company was only able to increase its profits in one division, the overall operating profit of the organization reported a slight increase in 2012 from 2011; however, revenue growth in the UK remained consistent (National Express Group Annual Report, 2012). 6. The Challenges of Financial and Human Resource Management for the Organization The challenges of financial management for the firm are evident through key performance indicators which have been reporting a decline in the revenue growth for the firm in 2012. This change can be attributed to the competitive forces in the industry and the fact that various transport providers have been granted access to multiple routes thereby, increasing their client base. The financial management challenges to the firm can therefore be outlined as 1) developing strategies to increase operating profits across all business divisions and 2) enhancing revenue growth. Owing to the emergence of HR-related issues, National Express’ coach division hired Jenifer Richmond as the new HR director of the department. The staff members of the firm face immense pressure to maintain the standards of the international group by offering premium services to the customer. Therefore, training and development of the employees is a critical factor of developing the company’s HR function. The primary HRM problem facing the company however is the development of a people strategy which suits the distinct needs of the UK’s competitive transport industry. Appendix A PESTLE ANALYSIS Political Economic Social Technological Legal Environmental Presence of uncertain transport policy Slow development of infrastructure projects Lack of initiatives to encourage investment by transport firms Lack of cooperation from political agencies and bodies Presence of substitutes negatively impacting the demand for company’s services Staging global events such as the Olympics increases the potential of transport firms Tourism prospects boost economy and the profits of the company Consumer awareness regarding the effects of CO2 on environment Customers aiming to use environmentally-friendly transport methods such as Coach. Buses equipped with Air-conditioning, Wi-Fi technology CO2 emission laws Implementation of environmental performance frameworks to monitor carbon emission Appendix B ORGANIZATIONAL STRUCTURE References DEPARTMENT FOR TRANSPORT. 2009. Low Carbon Transport A Greener Future, a Carbon Reduction Strategy for Transport. The Stationery Office/Tso. FLETCHER, N. 2009. Competition fears hit FirstGroup and National Express. [online] Available at: http://www.theguardian.com/business/marketforceslive/2009/jan/29/firstgroup-nationalexpressgroup [Accessed: 2 Nov 2013]. FLETCHER, N. 2011. National Express dips on bus competition fears despite upbeat trading news. [online] Available at: http://www.theguardian.com/business/marketforceslive/2011/dec/20/national-express-bus-competition [Accessed: 2 Nov 2013]. KACHRU, U. 2005. Strategic Management: Concepts and Cases. New Delhi, Excel Books. MURRAY-WEBSTER, R. 2010. Management of risk guidance for practitioners. London, TSO (The Stationary Office). http://www.books24x7.com/marc.asp?bookid=41543. NATIONAL EXPRESS GROUP ANNUAL REPORT. 2012. Strategic overview | National Express Annual Report and Accounts 2012. [online] Available at: http://www.nationalexpressgroup.com/ar2012/delivering-strategy/strategic-overview.html [Accessed: 2 Nov 2013]. NATIONAL EXPRESS GROUP. 2013f. National Express Group PLC - Global People Standards. [online] Available at: http://www.nationalexpressgroup.com/careers/globalpeoplestandards.aspx [Accessed: 2 Nov 2013]. NATIONAL EXPRESS GROUP. 2013a. National Express Group PLC - About us. [online] Available at: http://www.nationalexpressgroup.com/aboutus/ [Accessed: 2 Nov 2013]. NATIONAL EXPRESS GROUP. 2013b. National Express Group PLC - UK Coach. [online] Available at: http://www.nationalexpressgroup.com/aboutus/ukcoach.aspx [Accessed: 2 Nov 2013]. NATIONAL EXPRESS GROUP. 2013c. Home | National Express Annual Report and Accounts 2012. [online] Available at: http://www.nationalexpressgroup.com/ar2012/ [Accessed: 2 Nov 2013]. NATIONAL EXPRESS GROUP. 2013d. Technology // National Express Coaches. [online] Available at: http://www.nationalexpress.com/travellingwithus/sittingonboard/technology.aspx [Accessed: 2 Nov 2013]. NATIONAL EXPRESS GROUP. 2013e. National Express Group PLC - Internal Control. [online] Available at: http://www.nationalexpressgroup.com/aboutus/internalcontrol.aspx [Accessed: 2 Nov 2013]. PARLIAMENT OF GREAT BRITAIN. 2006. Going for gold: transport for London's 2012 Olympic Games : third report of Session 2005-06. London, Stationery Office. PARLIAMENT OF GREAT BRITAIN. 2010. The major road network: eighth report of session 2009-10 : report, together with formal minutes, oral and written evidence. London, Stationery Office. TOPHAM, G. 2013. UK transport companies 'held back by lack of government strategy'. [online] Available at: http://www.theguardian.com/politics/2013/mar/13/uk-transport-companies-government-strategy [Accessed: 2 Nov 2013]. Read More