BA (Hons) Business â€“ Thomas Galley NCN 302 Strategic Business Decision Making: Report: Strategy at the Salvation Army
Abstract This report considers The Salvation Army in the UK. Discussion of how the Salvation Army has developed strategy to date along with corporate style analysis of the strategic position is combined with a review of the current environment and relevant markets. The focus of this report will be The Salvation Army's strategic position. Looking at the current position and value proposition and, deciding on an appropriate and sustainable position for the future. The report looks recommends a more professional, focussed approach for the Salvation Army in order to contend with significant pressures from a crowded marketplace and a challenging political economy.
Pattern of strategic development
Recommendations for long term strategy
Appendix A: Adaptation of the strategy clock
Introduction The focus for this report will be the Salvation Army in the United Kingdom. Existing strategy will be evaluated. Various tools will be used to analyse the Salvation Army (SA) and its environments and recommend a long term strategy. Pattern of strategic development The strategy of Salvation Army has developed organically. Norms of behaviour have foundations both in Christianity and a hierarchical, quasi-military structure proposed by the founder (Murdock, 2007). Few organisations have a comparable structure. Traditional, publicity averse, and change resistant (Wallace, 2011). The SA presents interesting challenges for the corporate strategist. Potential conflicts abound. The SA proposes various strategies (Salvation Army, 2002) (Salvation Army, 2009) (Salvation Army, 2009a). Themes that are ideology-, strategy- and need-based are presented without any congruent or all encompassing focus. There is no conclusive idea of whether the SA’s primary objective is furtherance of Christianity or their good work. For the SA the two themes may not be mutually exclusive. Some stakeholders may disagree therefore this needs further examination. Some discussion of corporate style strategy as an appropriate tool for a Christian Church is necessary. In the case of this report, any recommendations should be considered as based on an academic, business perspective. Strategic context Macro context A current PESTLE analysis reveals strong potential influences on the SA, predominantly from changes in the political, economic and sociological contexts. Societal trends Needs The SA recognises four areas of need based at the beginning of the last decade. Diverse approaches to spirituality, the polarisation of society, exclusion derived from diminishing community, and symptoms of pressure (Salvation Army, 2002) (Henley Centre/Salvation Army, 1999). These problems are drivers of demand for the SA’s work.
Giving The Charities Aid Foundation makes a direct link between the ability of charities to resource themselves and national wellbeing or happiness. ‘Significantly, the correlation between happiness and giving is stronger than the correlation between wealth and giving.’ (CAF, 2010) This finding supports the stance of the SA, given their approach of working to find solutions for problems of societal exclusion. The UK currently scores low in the propensity of individuals to volunteer time (CAF, 2010). Humanism/Secularism Humanists regard religion as having no place in public services. Copson (2007) claims that religious public service organisations, to some extent are responsible for the exclusion identified by the SA as a growing problem. Religious involvement can challenge the concept of public services equally available to all. This depiction is representative of wider trends in society that the SA should respond to positively. Social exclusion The SA did research to identify some ‘drivers of social exclusion’ that lead to homelessness (Salvation Army, 2009a). The main causes were: problems with relationships, financial issues, drugs, alcohol, criminality, mental health, work issues and bereavement. Political trends Big society David Cameron’s coalition government are attempting to introduce the notion of the ‘Big Society’ (Bentley & Woodcock, 2011). There is discussion as to whether the policy is a cover for cuts to funding in the public sector (The Economist, 2011) (Labour, 2010). It is as yet unclear whether the ‘big society’ will be a success. Cuts The cuts that compose the government’s deficit reduction plan have reduced local government budgets significantly (Curtis, 2010). A substantial proportion of SA income comes through this channel (Salvation Army, 2009). Choices will need to be made in terms of whether services are reduced or funded differently. Cuts in the public sector will place demand pressure on the SA and limit their ability to raise funds (Boxell et al, 2011). Economic trends Economic inequality and unemployment Thomas Galley
Unemployment is at its highest for well over a decade (BBC, 2011).This and the growing gap in equality between the rich and poor (Bennett, 2010), exacerbates demand for the good work of the SA (Elliott, 2010). Both have the effect of limiting propensity to make donations. Technological trends Social media Much has been made of the social media as a way of raising brand awareness and communicating with stakeholders (Levy, 2010). The SA has a presence on twitter (Salvation Army, 2011) and facebook (Salvation Army, 2011a). Market context Porters Five Forces framework allows business to '... to determine an industry's potential for profit.' (Grant, 2003. p. 95.). Regardless, a Five Forces analysis for the Salvation Army can give insight into its markets. An adapted version of the framework (Downes & Mui, 2000. p. 65.) proposes three further forces. Acted upon purposefully, they can leverage competitive advantage. The SA is subject to these forces of: Globalization, digitization and deregulation. Notions of bargaining power and competition have equivalence with stakeholder relationships in the not-for-profit sector. Charities compete for stakeholder acknowledgement. Funding The SA operates in several markets for funding including: Charity shops, donations, legacies and funding from the public sector. In 2009, 74% of people made regular donations to charities averaging £17.70 (Travis, 2010). The market was in decline. Competition for donations will be stronger. Intangible Business (2006) noted that legacies were strongly represented in the composition of many charities funding. The SA has a significant proportion of income derived from legacies (Salvation Army, 2010). However, only 3% of UK legacies go to charities. A small increase in the number of people donating to charities in their legacies would result in a significant improvement on the balance sheet of charities. The National Organ Donor Register has some degree of success in getting individuals to consider end of life choices. It currently has over 16 million signatories. A reciprocal agreement could further the aims of both organisations. Outsourcing The use of face-to-face contracted fund-raisers (or ‘chuggers’) to raise money for charity is under scrutiny (Kelly, 2011). Thomas Galley
The SA has suffered adverse publicity from trade with Kettering Textiles Ltd (Gammell & Bloxham, 2011). The SA has an interest in minimizing negative publicity from this kind of fund-raising. Licensing Intangible Business (2006) promotes licensing as a tool to raise income and further the goals of charities. The link-up with New Covent Garden soups (New Covent Garden, 2009) adds value to both brands. The SA could have increased its bargaining power in such agreements. Benchmarking Booth (2010) recommends ranking charities on worthiness. Brookes (Brookes et al, 2010) furthers this argument claiming that, 'if charities want to be the answer to helping build Big Society they need to get serious about demonstrating their impact.’ The assertion is one that, where funding is finite charities are responsible for proving their worth and the value they add to society. The work of other charities is important. There have been significant innovations in the way that charities operate in recent times including: Oxfam retail online professionally (Oxfam, 2011a). Their ‘products’ include ‘feed a family (£7)’ or ‘cow (£80)’ as well as content from their network of shops. This is a unified resource that adds value to many areas of the organisation. Comic relief work with Sainsbury’s (WorldNews), 2011 allows customers to round up their bill to the nearest pound as a donation. Oxfam chose to improve perception and cost base with their February 2011 donations campaign. A strategic link-up with PayPal meant Oxfam could promise 100% of the donations would go directly to their cause (Oxfam, 2011). PayPal paid the administration costs. This kind of symbiotic relationship could improve perception of value for the SA. The strategic position Bowman’s strategy clock helps business to decipher strategic position, understand competitive advantage, and focus thinking upon sustaining or improving the position. (Johnson et al, 2008). Perception of brand value could be measured in terms of how worthy stakeholders consider the cause (Intangible business, 2006). The SA’s lack of focus presents difficulty for the organisation in presenting itself as a ‘worthy cause’. A variation of Bowman’s strategy clock adapted for the not for profit organisation is proposed in Appendix 1 (Galley, 2011). Thomas Galley
The SA has reasonably high perceived added value. It is ranked as 4 th most valuable charity brand (Intangible business, 2006). The SA has a medium to low cost base. 79% of spending is on charitable activities (Charities commission, 2011). This figure varies widely. For example: Amnesty International: 98% (Charities commission, 2011a). YMCA: 48% (Charities commission, 2011b). The data suggests that the SA holds a low-price or hybrid position. Organisational context The role of the corporate parent in the case of the SA is one of minimal interference and control over its various component parts. SA focus is driven by ideology over strategy. Christian principles are fixed (Salvation Army, 2002). The value network in has evolved with other charities as key stakeholders. Given that the SA works in diverse areas of need, crossover with other charities is an issue. Charities often compete for funding to serve a common cause. This is of concern to potential donors (CAF, 2010a) The value chain and network The value network reveals the SA derives added value from support activities. The extent to which this has a positive effect is limited by lack of development of the primary activities. Primary activities are controlled at the level of each site. Casual ambiguity rather than strategic choice develops value at the organisation or local unit level. The infrastructure of the SA adds value. The organisation carries out many charitable works. The church is without doubt successful. The HR function adds significant value, combining low paid, committed professionals and volunteers. Procurement is an area which could be better used to leverage cost advantage due to the stratified nature of the SA.. Role of the corporate parent The SA operates as a collection of smaller units with diverse needs and purpose, sharing a common ideology; rather than a unified organisation. The extent to which each unit is self-managed has eliminated the need for a powerful corporate headquarters. Leadership seems to be by persuasion rather than direction. Conclusions The SAâ€™s strategic position should be considered in terms of all three of Porters generic strategies (Lynch, 2009). Thomas Galley
The SA can improve in terms of: cost leadership, differentiation, focus. Such improvements may help to secure a hybrid position. The SA could do more to publicise its activities effectively. This could create competitive advantage from improved stakeholder perception. In order to minimize the effect of cuts the SA needs to determine strategy based upon improved efficiency, greater focus on fundraising, cost savings, or, (ideally) a combination of all three. The SA works supporting people with diverse needs. Their role in creating demand for the work of the SA should, it could be argued, be prioritised on the basis of the highest unfulfilled need. This kind of strategy would invoke the SA to consider and review its effectiveness continuously. Strategy should be designed to take into account the best methods being used by other organisations. Good communication should raise the profile of the SA’s work and could help the SA to realise some of its other objectives. Real social networks in the form of the SA’s network of churches are already successful and could be complemented by technology innovation. The SA may wish to evaluate outsourcing of fund-raising activities. Negative publicity may outweigh efficiency savings. The SA should attempt to consolidate a hybrid position on the strategy clock, resist environmental and competition pressures that inflate costs for the SA and limit the effect of their perceived competitive advantage. The SA should maximise its exposure and leverage the brand against better agreements that may allow access to a supply chain or purchasing economies. There is a requirement to continuously adapt to societies most pressing needs, while conforming to the SA's norms. Recommendations for long term strategy Rules for projects should be drawn up to control how resources are being used. The focus of the corporate parent should be sharing best practice across all of its dependants The SA should evaluate the extent to which contract companies can profit from providing services. Examine adding value to the corporate parent by combining its efforts Thomas Galley
internationally. For example a single website, some centralised functions. Examine adding value to the SCU’s 1 using separate branding (e.g. Salvation Tracing, Salvation Education, Salvation Life Houses, and Salvation Addiction Care). The SA should lobby government for positive changes that will improve conditions for need groups, and allow them to offer a higher degree of operational effectiveness. Examine potential strategic relationships with charities from other religions and secular backgrounds. Marketing focus on legacies. Consider a joint campaign with the national organ donor register combining legacy and organ donation end-of-life choices. Reciprocal agreements with business, that add significant value to the SA should be sought. The SA should develop a core competence of engaging with stakeholders transparently. Continuous SCORE assessment (tetradian, 2006). Use as a model for the whole organisation and review regularly. Make a priority of combining strategy design and execution.
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SCU: Strategic Charity Unit
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Appendix A: Adaptation of the strategy clock
Perceived added value
Adaptation of Bowman's strategy clock for not-for-profit organisations
Cost base Figure 1: Galley, 2011. Figure 1 describes a proposed adaptation of Bowman's strategy clock (Johnson & Scholes, 2002). The purpose of this adaptation is to allow not-for-profit organisations to assess their position in terms of competitive strategy. The dimension of 'perceived added value' should be linked to measures such as brand value (Intangible business, 2006) which aim to measure stakeholder perceptions of the given organisation.
The dimension of price has questionable validity for the case of the not-for-profit organisation. The proposed adaptation replaces price with the 'cost base' dimension. Those organisations with a low cost base results in more of the funding going to the cause, rather than on administration, staff or legal costs. It is proposed that cost base is roughly comparable with price as both represent an opportunity cost to the individual or organisation donating funds, or indeed time or any other resource.