Enterprise Operations 1. September 2014 Examination

Transcription

1 Operational Level Paper E1 - Enterprise Operations Examination Examiner's Answers Note: Some of the answers that follow are fuller and more comprehensive than would be expected from a well-prepared candidate. They have been written in this way to aid teaching, study and revision for tutors and candidates alike. These Examiner's answers should be reviewed alongside the question paper for this examination which is now available on the CIMA website at The Post Exam Guide for this examination, which includes the marking guide for each question, will be published on the CIMA website by early October at SECTION A Answer to Question One Sub-questions 1.1. to 1.10 test candidates' knowledge of a wide variety of topics within sections A, B, and C of the syllabus through the use of objective test questions (OTQs) in a conventional multiple choice format. The correct answers are: 1.1 C 1.2 C 1.3 A 1.4 A 1.5 D 1.6 D 1.7 B 1.8 B 1.9 C 1.10 C Enterprise Operations 1

2 SECTION B Answer to Question Two Requirement (a) This question examines learning outcome B2(b) 'discuss ways of organising and managing information system activities in the context of the wider organisation'. Identify certain discrete difficulties Explain each in turn Some technological difficulties Geographically dispersed (virtual) teams work across time and space by utilising advanced communications and information technology. This reliance on technology means that (for instance) an area with lower bandwidth communication, localised power cuts, etc. coupled with diverse working hours can cause coordination and productivity difficulties. Communication can be inferior Electronic communication methods (e.g. webcams, , online forums, etc.) are not as rich as traditional face-to-face communication. Subtle changes in a tone of voice or body language, etc. can be 'missed' when using e-communication methods which could possibly lead to misunderstandings and mistakes. Set-up costs Unlike traditional office working, remote teams require objectives and work tasks to be more fully documented and tracked through online systems. Setting up and maintaining these systems can be costly and time consuming Monitoring difficulties Virtual environments mean that managers cannot see individual workers, stop at their workplace and ask them what they are working on and how they are progressing. This makes it harder to monitor an individual s effort and wellbeing. Maintaining a corporate culture A shared organisational culture is harder to manage when the team is distributed. It is also harder to create a sense of camaraderie through non work-related activities. (It may even be necessary to get the team together in person at regular intervals for these reasons). (Other valid responses are possible such as a requirement for new skills and behaviours by managers, etc. and these will also receive credit). Note: The Examiner's answers and subsequent marking scheme have been prepared on the basis that the teams are geographically dispersed but from within the same organisation. Cross organisational teams do exist and this might legitimately be reflected in alternative answers which will also receive credit. 2 Enterprise Operations

3 Requirement (b) This question examines learning outcome A1(c) 'explain the impact of international macroeconomic developments on the organisation's competitive environment'. Identify five potential disadvantages Describe each in turn There could be a lack of protection for young firms trying to establish themselves in emerging industries meaning that they may have difficulty competing with longer established foreign competitors in the short term. Free trade may undermine a distinctive national culture, possibly including its language and way of life (e.g. through the undue influence of multinationals or creeping 'Americanisation') and this may be seen as undesirable. Free trade can potentially reduce national security by encouraging a reduction of border controls, etc. With the specialism that free trade brings, individual countries become overly dependent upon supplying a narrow set of products or services, and do not develop alternatives (e.g. over dependency on oil exports by oil rich nations). This may be risky if such products become less popular or alternatives are developed. International free trade can be inefficient and environmentally damaging. Free trade raises consumer expectations leading to (for instance) the costly shipping of 'out of season' fruit and vegetables from the other side of the world. (Other valid responses are possible and will receive credit) Requirement (c) This question examines learning outcome A2(b) 'analyse relationships among business, society and government in national and regional contexts'. Identify discrete reasons Explain each in turn In addition to taxing profits of business, governments may tax individuals in order to help finance government programmes of spending from both direct tax (income tax on earnings) or through indirect taxes (taxes on consumption). A general tax on consumption may be a flat rate general value added tax (VAT) percentage which the vendor must pay to the government. A government may use indirect taxation to encourage or discourage particular patterns of consumption and examples are given below: Import duties: to encourage consumption of home produced goods and services, and discourage imports. Hydrocarbon tax: to discourage the use of cars and the associated damage to the environment through a heavy tax on fuel. Enterprise Operations 3

4 Tax on demerit goods: to discourage consumption of these goods and habits like smoking (by applying a tobacco tax) because of health concerns for society and, possibly to reduce the demands on the health provision in the country. Variable rate value added tax: a government may decide to apply variable rates of value added tax to different products. For instance there may a lower rate applied to books (in order to encourage literacy) than chocolate (which might be considered a luxury item). Requirement (d) This question examines learning outcome C1(a) explain the shift from price-based to relational procurement and operations. List the spokes Briefly elaborate on each in turn Cousins (2000) strategic supply wheel depicts the corporate supply strategy at the hub of a wheel and underlines the need for an integrated approach to implementing a supply strategy. This involves balancing all five spokes in the wheel. These spokes are given below: Organisational structure (e.g. centralised, decentralised, matrix, etc.) affects interactions with the rest of the organisation and the way in which control is exercised. Relationships with suppliers (whether based on price, partnership sourcing or some other basis). Cost/benefit analysis as central to rational strategic decision making within the organisation. Appropriate skills and competencies of staff to deliver the organisation s strategy. Appropriate performance measures, both internal and external, for monitoring and control of a strategy. Requirement (e) This question examines learning outcome C1(c) explain the particular issues surrounding operations management in services. Identify five features Describe each feature in turn A product is a visible and tangible object, while services are intangible. Products can therefore be inspected / sampled before buying, services cannot. It is also more difficult to measure the quality of a service than it is for a physical product, (although SERVQUAL attempts to do this). Services are consumed immediately and therefore cannot be stored. In a product manufacturing organisation there is normally a physical separation of production and purchasing processes. However customers participate directly in the delivery process 4 Enterprise Operations

5 of a service. When evaluating the quality of a service, customers will take into account the face-to-face contact and the social skills of those providing the service. Services tend to be more labour intensive than for products where manufacture may be heavily automated. (Other valid responses are possible and will receive credit e.g. a service can be paid for but not owned (a product can be bought and owned), products can be standardised more easily than services which customers like to be customised to their needs, etc.) Requirement (f) This question examines learning outcome A1(b) 'explain the emergence and importance of outsourcing and offshoring'. Identify discrete problems Briefly explain each in turn Offshoring involves transferring some part of the organisation s activities to another country. Managing operations across national borders can lead to significant issues in areas such as: Language barriers leading to potential misunderstandings and communication difficulties. Time differences caused by operations in different time zones meaning that liaison may be difficult and responses to queries may involve delays. National cultural differences (as explained by Hofstede and others) can lead to frustrations and misunderstandings. Normally offshoring occurs in order to exploit lower labour costs in another country. The effects of variations in currency exchange rates can undermine these potential costs savings. The 'host' countries in which offshored activities are performed may not respect basic human rights to a sufficient degree and may permit exploitation of workers, etc. which can lead to ethical dilemmas and also attract adverse publicity for the organisation. Enterprise Operations 5

6 SECTION C Answer to Question Three Requirement (a) examines learning outcome E1(a) 'explain how HR theories and activities can contribute to the success of the organisation', requirement (b) examines learning outcome B1(c) discuss the transformation of organisations through technology and requirement (c) examines learning outcome D1(e) describe theories of consumer behaviour. (a) (b) (c) Identify potential contributions of a centralised HRM function Describe each issue in turn as it relates to M09's future operations Identify the range of potential benefits Explain each issue in turn as it relates to M09 Identify different insights consumer behaviour offers Explain each in turn in a way that is relevant to the scenario Requirement (a) M09 s new Director of HR has been appointed to 'make a real difference' and the establishment of a professional, effective centralised Human Resource Management (HRM) directorate can contribute much to the successful future operation of M09 as a whole. Overcome identified strategic weaknesses A number of strategic weaknesses exist within M09 including the company s Human Resource (HR) operations relative to others in the same industry. Under current arrangements certain managers are primarily concerned with day to day people related issues. Indeed, it could be argued that the continued operation of these units in this way has prevented M09 as a whole from functioning in a truly strategic way. As a result M09 s Chief Executive has announced a move towards combining support into a single central headquarters and has appointed a Director of Human Resources. An effectively led, cohesive Human Resource Management (HRM) function can overcome this strategic weakness. Alignment of human resource and corporate strategies The new directorate can help M09 achieve its corporate goals through concentrating on the performance of its most valuable asset, its people. Centralised HRM can offer a focus for strategic people management by developing procedures and strategies that support achievement of corporate strategies across all M09 s operations. Economies of scale The way in which M09 has dealt with HR issues in the specialist snack and bottled drinks units until now is likely to be producing operating inefficiencies. These divisions are currently deprived of the advice of Personnel or HR specialists on issues such as optimum staffing levels and skills mix, etc. to the detriment of operating efficiency. Taking (for example) the process of placing advertisements for new workers, managers in the specialist snack and bottled drinks units would have to prepare newspaper copy, then make arrangements for and then pay for each advert placed. In the confectionery divisions personnel specialists take on this burden and (presumably) negotiate discounted advertising rates for 'volume' business. A wholly centralised function would achieve even greater economies through a higher volume of business. 6 Enterprise Operations

7 Adopt specific HR theories and ideas HRM importantly can help M09 adopt contemporary thinking and best practice in areas such as the acquisition, motivation, development and management of an organisation s workforce. A centralised dedicated HRM function would be more familiar with the specific theories and activities and best practice of HRM in a way that would not be possible for most line managers. HRM specialists knowledge of these factors can be shared within the organisation. Compliance HRM importantly can ensure that the organisation complies with current employment and related laws. Legal compliance in recruitment and dismissal (for instance) may be faulty where it is conducted by middle managers in certain units who may not have been fully trained in the latest laws. This can lead to the risk of the organisation being sued, which can be expensive, internally damaging and attract adverse public relations. Consistency and fairness HRM can ensure that there are standardised, consistent, robust practices and mechanisms across the whole of M09. At the moment differing standards, practices and demands in roles, responsibilities, recruitment, reward and appraisal will lead to inconsistent outcomes and certain workers being treated in an inequitable fashion. In summary, a centralised HRM function will help ensure that there is a consistency and fairness in the treatment of all of M09 s individual workers. Support for managers HRM specialists from the newly created directorate can offer expertise and guidance to individual managers on one-off HR difficulties and issues and so help them meet their objectives. M09 s middle managers perform a wide diversity of roles. Whilst specialists assist managers in chocolate production units in other units there is no such support meaning in addition to their other duties and responsibilities these middle managers are responsible for all the 'hiring and firing' of the factory workforce. Without support, inexperienced or under pressure managers may feel isolated or have difficulty coping. In addition, these managers might appear to be underperforming relative to their counterparts in other units simply because they are unable to concentrate fully on other parts of their job because of HR 'distractions'. They may also be envious of other managers and this might lead to conflict and disrupt working harmony. Rationalise HR provision The new directorate offers an opportunity to rationalise HR provision in M09. Best practice from all areas of M09 can be shared and embedded as part of a rationalisation of HR provision. The current lack of specialist support means that a more comprehensive package of services including induction, training, career planning, etc. is only possible in the main chocolate producing unit. It is said that middle managers in other units are responsible for all the 'hiring and firing' of the factory workforce, which suggests a lack of emphasis on a wider pattern of HR provision. By implication workers in these units are denied access to training and effective induction, etc. Career planning and reduced staff turnover Under the existing arrangements managers may not be aware of vacancies elsewhere within the group. Workers who have 'outgrown' their job or need personal development in certain areas would be forced to make their own arrangements which could lead to them leaving the organisation. This represents an unnecessary and expensive 'drain' of talent which can be remedied by the new centralised directorate. Standardise the middle managers role M09 s many middle managers perform a wide diversity of roles with some being more closely involved in human resource issues that others. A newly established Human Resource Management (HRM) function can help standardise the role of and expectations of all these managers and so contribute positively to a more rational approach to the management of the company s operations. Enterprise Operations 7

8 Requirement (b) The new Director of Human Resources has been asked to identify her priorities to 'make a real difference'. She feels that many of the existing administrative and management systems are outdated and need replacing. She is also aware of a revolutionary central People and Payroll system that will be on the market soon. The proposed system could offer a number of benefits to M09 including those outlined below: System integration A strategic planning meeting identified M09 s many different systems and support structures as a strategic weakness. The People and Payroll system can help address this weakness. The solution will provide a single integrated technology for both centralised human resource and payroll processing. It is wasteful to operate separate systems, and common data can be used for both applications. Speed of entry and processing Existing administrative and management systems are outdated and need replacing. Apparently the current practice involves a submission of timesheet entries manually. This advanced technology will involve a direct entry facility which should reduce entry and processing times. The unification of payroll and HR systems will also make reconciliation of separate data sources (that is likely to occur presently) unnecessary. Ability to reduce costs and increase efficiency M09 s current systems are both outdated and various, and the integrated solution offered by the People and Payroll system will simplify and rationalise operations. The current maintenance costs of the several systems that M09 operates presently are likely to be costly. There is now potential for increased efficiencies and cost savings. (These savings should be balanced against costs associated with new handsets, software, staff training, etc.). Improved accuracy According to the scenario, timesheet entries are submitted manually. This system with direct entry will help eliminate errors and inaccuracies arising from data entry and operations could also be speeded up as a result. Better control The software s browser facility allows managers to have immediate access to information on overtime, holidays and sickness, etc. The system also produces high quality information including productivity ratios and analysis for managers. This facility will enable M09 s managers to exercise tighter control over staff activities (and possibly reduce costs). Improved communication The system which is described in the scenario as 'advanced' offers managerial communication to the HR directorate and a mechanism for receiving information for decision making. The diary facility will also make meetings and work scheduling easier. Relative competitive advantage M09 s technology currently lags behind that of its competitors and the commitment to replace it with the most advanced available may provide M09 with some competitive advantage over its rivals. Instead of systems being a source of strategic weakness this new HR and payroll system could become a relative strength. Improved security features Most modern systems tend to have inbuilt designed security features. As current systems are outdated they may not be secure so there may be a risk of data loss and improper use. This is particularly important in this case as potentially sensitive payment and personal information is involved. Break down departmentalism The focus of existing systems is on individual production units rather than on the organisation as a whole. The strengthening of HR practices including the establishment of a shared corporate central department and common software should help break down potential departmentalism within M09 and help establish a shared corporate focus. 8 Enterprise Operations

9 Model for organisational transformation It is significant that the new Director of Human Resources has identified the central People and Payroll system as a priority to 'make a real difference'. This system is obviously seen by her as a driver for beneficial change and this thinking may offer a model for the future transformation of M09 as a whole through technology. Requirement (c) Theories of consumer behaviour and research into it can help guide M09 s marketing practices by offering insights into a number of issues such as those identified below. Precise factors that may influence consumer behaviour Influencing buyers consumption patterns is an important dimension of marketing. Consumer behaviour can be influenced by a potentially diverse series of factors including all aspects of the marketing mix and the social and physical environment in which sales take place. Only effective market research can determine what these factors are. In terms of the marketing mix the following is significant. The likely impact of price changes Pricing incentives are normally introduced to stimulate further sales and ultimately higher revenue streams. The likely impact on sales of pricing incentives being offered by M09 can be gauged through understanding consumer behaviour, as can likely buyer behaviour when a price cut ends, etc. (Likewise the impact of price increases can also be assessed). The likely impact of promotional activities Similarly, the effectiveness of a promotional exercise can be estimated including the likely impact of a campaign on sales and customer loyalty. This information might also be used (for instance) to determine the duration of such a promotion. The impact of brand Brand is important to any company and could represent a significant corporate asset. The reason for this is brand s importance when consumers make a choice between competing products. The likely impact on consumer behaviour of efforts to strengthen a brand image on both new and existing products might be better estimated through market research. The strength of buyer habits One of the main theories of consumer behaviour relates to the habitual nature of buyer behaviour based on either loyalty to a particular brand, inertia or 'satisficing behaviour' (accepting the first solution that is good enough to satisfy a need, even if a better solution may exist). The strength of buyer habits represents a valuable piece of information for M09 in this respect. Information for portfolio management The Director of Marketing believes that market research is a priority in order that consumer behaviour can help guide M09 s future marketing practices including the strategic management of its product portfolio. He also believes that M09 needs to review its portfolio of products (possibly because some of the company s lines are in danger of losing touch with customer requirements). Research into consumer behaviour can help determine likely consumption patterns and provide an understanding of market share (and potential share) as part of product portfolio management. (Other valid responses are possible and these will also receive credit.) Enterprise Operations 9

10 Answer to Question Four Requirement (a) examines learning outcomes E1(b) explain the importance of ethical behaviour in business generally and for the line manager and their activities and E2(a) explain the HR activities associated with developing the ability of employees. Requirement (b) examines learning outcome D1 (b) ' describe the marketing environment of a range of organisations and requirement (c) examines learning outcome D2(b) apply tools within each area of the marketing mix'. (a) (b) (c) Identify the ethical considerations Identify the human resource (HR) considerations Describe each in turn in a way that is relevant to the scenario Identify potential advantages Explain each in turn in a way that is relevant to the scenario Establish possible advantages Elaborate upon each in turn Requirement (a) E has just announced E88 s intention to launch an 'E88 cosmetic care' range which will be sold at cosmetic parties held in customers homes. There are various human resource (HR) and ethical considerations associated with E88 selling cosmetics by this latter means. The ethical stance of an individual business is determined by questions of 'fairness' often by reference to its organisational culture and shared philosophy. What is known about E88 is that it is entrepreneurial (and arguably therefore takes risks), is different and is associated with ethical operations. E88 s venture into cosmetics is certainly entrepreneurial and arguably different (albeit that companies such as Tupperware and Ann Summers have used a similar approach for many years). Ethical considerations Fairness of using associates. Questions arise whether E88 s prospective associates are being exploited as there is a requirement to buy a basic stock, continue to sell products in order to 'earn' and possibly exploit connections with family and friends. Whether or not this breaches E88 s ethical code is a valid point. Use of customers homes. E88 s general approach reflects ethical trading; however there may be issues of using parties to make sales. The approach could be seen as being based upon associates putting pressure on their relatives, friends, and friends of their friends to host parties in their own homes. Is the public being tricked/pressured into using their home in this way? What is in it for the host of the party (gifts, discounts, fees, etc.)? Is E88 unfairly passing on overheads to its customers? These questions raise ethical issues for which there is no right or wrong answer. Selling approach. Orders for products will be charged at a 'list price' and associates will receive a commission based on sales. It could be argued that associates are obliged to adopt impolite or 'pushy' sales techniques in order to achieve sales, which is unfair on partygoers. Human resource (HR) considerations Recruitment of associates. Potentially anyone can apply to be an associate. Successful associates will however be required to buy a basic stock of the entire cosmetic range (88 products in all). This may be considered to be expensive and could deter some potentially good new recruits from applying for such a position. 10 Enterprise Operations

11 Selection of associates. From those who do apply careful selection criteria should be used. Selection processes should include testing the attitude by applicants in terms of (a) displaying a sense of fun, (b) reflecting the image of the company and (c) showing a capability to undergo training, etc. Trustworthiness is an important quality for an associate to possess and there will be a need for suitable selection procedures to be devised including interviews and the supply of satisfactory references. Training of associates. E88 has announced that anyone can apply to be approved as an associate but will need to undertake 'initial training'. The precise nature of this training will need to be carefully determined and is likely to include communication skills, sales techniques and how to arrange parties. Further training once an associate is in position may also be necessary. Remuneration of associates. The overall remuneration package that E88 devises needs to be sufficient to both attract and retain 'good' associates. Orders for products will be charged at a 'list price' and associates will receive a commission based on sales. In the apparent absence of a basic flat rate payment, this commission must be sufficient an incentive to make the job financially attractive. Motivation and retention of associates. Although pay is not the only motivator of employees, E88 needs to consider whether motivation from a commission only remuneration scheme would be sustained over a period. High turnover rates caused by disenchanted and demotivated associates leaving may involve some risk to E88 s reputation and would mean that past costs of selection and training would be wasted. Supervision, monitoring and control. Given E88 s high brand awareness and associated ethical trading practices, it is important that its reputation and brand are not damaged by this venture. It follows therefore. that there needs to be effective supervision, monitoring and control of associates. This may necessitate the appointment of supervisors and the establishment of effective monitoring and control systems (possibly involving customer questionnaires, etc.). Flexibility. E88 s proposed approach is likely to produce a flexible workforce possibly comprising part-time workers operating flexible working hours and patterns. The fact that associates can arrange to work hours that are most convenient to them means that the initiative is likely to extend the country s workforce by allowing those with child care and other responsibilities to join the labour force and earn money. Requirement (b) When a business supplies its ultimate end customers a 'zero level channel' is said to operate. E88 s direct marketing approach reflects this through interactive online marketing and the use of cosmetic associates. Direct selling online is now commonplace for a variety of goods and services and there are many current successful examples of companies using an on-line approach (such as Amazon.com). To achieve scale economies, firms need to develop new markets and e-marketing including online selling has allowed organisations to trade more easily globally and seek out and exploit new markets. Sales through parties, in this case by associates, have a longer history but they are not currently as popular an approach as selling online. It nevertheless underlines E88 s determination not to use more traditional retail outlets to make sales. There are many advantages of E88 using a direct marketing approach. Enterprise Operations 11

12 Builds on a E88 'fun' philosophy Direct marketing impacts upon an organisation s marketing mix significantly, not least its implications for place mix. 'Place' involves getting the right products into the right places at the right time. In this case the use of associates making sales at parties means that 'place' is customers own homes; the use of the internet means that 'place' is not physical, it is cyberspace. As E88 s philosophy is based on sense of fun, these approaches may be seen as compatible with this notion. Flexibility Both approaches to direct marketing offer flexibility, whether promoting the company brand, answering customer queries, making direct sales, or, conveniently, displaying E88's full product range. In terms of promoting a company s goods and services: A physical demonstration at parties occurs. The ability to display videos and profile customer reviews as well as static pictures underlines the flexibility of the internet. Furthermore the use of independent review sites and search engines should offer further flexible means of E88 reaching potential customers. Convenience for customers There is a convenience of place under direct marketing. Both approaches offer convenience for E88 customers or prospective customers: The on-line facility is constantly open ('24/7') and this means that shopping can take place at a time and place that is the most convenient for the individual buyer concerned. For the user this also offers the attraction of time saving over traditional shopping and offers a convenient means to compare and contrast prices etc. with rivals 'online'. The party approach offers a relaxed atmosphere in which to get the opinion of friends when making a purchase. Lower prices This direct marketing approach shortens any supply chain by dispensing with the need to supply retailers and so potentially removes costs from the value system. The E88 cosmetic care range will not be available in shops and will be competitively priced against high street brands. This aspiration is perfectly feasible as there is potential for lower prices as costs are lower than physical stores with their associated capital and running costs. Good customer relationships E88 has an opportunity to develop good customer relationships through direct marketing including direct communication over issues of delivery and dealing with complaints. With the incredible uptake of use of the internet a number of benefits present themselves in marketing terms (for example, in terms of data collection and providing enhanced value to customers and suppliers). One advantage of E88 using the internet as a part of a direct marketing approach is the speed of transaction and communication (of for instance, changes to product range, delivery times, prices, etc.) Online trading means that there is a potential for companies to develop databases of customers, those making enquiries for further sales promotions as well as developing direct relationships with customers. Parties mean that associates can make sales personally and can enhance customer relations by presenting 'a human face' to E88 s operations. Synergies to other E88 operations: distribution Both forms of trading as a part of a direct marketing approach demand efficient distribution systems once an order is placed and there is some synergy with E88 s (carbon neutral) package distribution service. 12 Enterprise Operations

13 Synergies to other E88 operations: mobile telephones The company already has an interest in mobile telephones as part of its diverse range of operations. Smart phone technology now means that with internet access, browsing and purchasing on line can occur conveniently. The use of mobile telephones (M-marketing) could also be used to arrange a follow up by passing details on to associates. To stimulate product interest, there is a potential through E88 mobiles to operate text alerts, etc. Increased promotional opportunities E88 has high brand awareness thanks to good public relations. This can represent an effective solution to promotion and avoids paying for potentially expensive advertising in traditional media. With this new venture, personal promotion is possible at sales parties and promotion is also possible in electronic form using for example web banners, affiliation web sites, collaboration with other web sites and search facilities. In this way E88 will increase its range of promotional tools. Requirement (c) Social media marketing is a form of internet marketing using established, pre-existing social network websites (such as Facebook, Linkedin and Twitter) as a marketing tool. The opportunities offered by social media marketing vary from the more expensive advertisements on sites (e.g. through web banners) to reliance on users themselves to spread a corporate message. The interest shown by organisations of all sizes in social media also means that E88 may miss out and lose ground to its competitors unless it seriously considers its potential. There are potential advantages of E88 using social media in the promotion of its brand, products and services. Cost of promotion Social media serves as a relatively inexpensive platform for E88 to implement marketing campaigns. E88 s current promotional strategy to achieve brand awareness relies on good public relations. The low cost exploitation of social networking sites rather than paid for advertising in traditional media is consistent with E88 s existing approach. Scale of promotion When compared with other forms of advertising (e.g. posters or advertisements in magazines which may have a modest audience reach) the potential scale and audience reach through social networks is vast. The share of adult internet users with a profile on social network sites has increased four or five fold over the past few years and the use of viral videos can lead to exponential exposure. Trusted source for promotion Social media marketing can involve creating content that attracts attention and encourages viewers to share it within their social networks. In this way a corporate message spreads from user to user. As the message appears to come from a trusted, third-party source, as opposed to the brand or company itself, the potential for E88 to promote itself in a credible way is apparent. Consistency with E88 s image E88 s image for being creative, entrepreneurial and its approach of doing business 'with a sense of fun' is well known and the use of social media fits this thinking well. Ability to reach target demographic The advantage of social media for E88 is the potential for a more precise targeting of promotion to a particular market segment. E88 can target advertisements to precise audiences on certain network sites based on the audience's profile (e.g. in terms of age, gender and career, etc.) Currently the company enjoys high brand awareness particularly for those in the age group which also happen to be the heaviest users of social media. Enterprise Operations 13