Extract A Majestic Wine launches franchise-lite Majestic Wine has launched franchise-lite, empowering store managers and giving them more control. Under the new franchise-lite model, managers will be given far greater control over the day-to-day running of their stores. They will also be given a proportion of their stores total contribution, rather than earning a bonus from a percentage of sales. Majestic says this means their salary could go from 30,000 per year to 50,000. The Chief Executive of Majestic explained, Majestic is turning the traditional retail command and control style of leadership on its head by becoming less centralised and autocratic, giving our store managers more control over their store, from selecting their own staff and products to opening times and discount levels. This means staff can be rewarded for their customer service levels and profit contribution, which we believe will deliver more sustainable growth in our business. Following a successful trial run with 21 test stores, Majestic is now rolling the programme out and expects it to reach 50 to 60 per cent of its 211 stores over the next year. The retailer also has high hopes that the new model will stop some of its best staff leaving the shop floor to work in more lucrative office jobs. (Source: adapted from http://www.cityam.com/270928/majestic-wine-kicks-off-franchise-litepartnership-scheme) QUESTIONS 1 Explain one disadvantage of an autocratic style of leadership on Majestic Wine (4) 2 Assess the likely impact of the franchise-lite model, on a business such as Majestic Wine (10) Specification Map: Q1: Theme 1 (1.4.5 - Leadership) Q2: Theme 1 (1.4.3 Organisational design; 1.4.4 Motivation in theory and practice; 1.4.5 Leadership)
Mark Scheme Question Number Answer 1 Knowledge 1 Application 2 Analysis 1 Knowledge/ understanding: 1 mark for understanding the term, autocratic leadership Autocratic leadership is a style of leadership where managers hold all the power and make all the decisions without consulting members of staff Application: 2 marks for contextualised example Majestic Wine are a business that operates in the retail sector Traditionally, Majestic had a command and control style of leadership which was autocratic Managers had little or no say over the running of their stores Analysis: 1 mark for developing a possible disadvantage of autocratic leadership to Majestic Wine Autocratic leadership could result in poor motivation amongst managers resulting in them leaving Majestic for other jobs, for example, more lucrative office jobs. This could lead to an increase in costs Could result in stores not being able to meet and respond to the needs of the local market as managers have no say on the running of their stores. This could result in less revenue Mark (4)
Question Number Answer 2 Knowledge 2, Application 2, Analysis 3, Evaluation 3 Mark Majestic Wine are launching franchise-lite, a new model which empowers managers, giving them more control over their stores The model has been trialled in 21 stores and is being rolled out to other stores The model empowers managers, giving them more control over the running of their stores, this could lead to increased motivation The model gives managers the opportunity to earn more money Increased motivation and the potential to earn more money, could result in better customer service as well as reduced labour turnover as managers may be less likely to leave for more lucrative office jobs Managers will be able to choose their own products, discounts and opening times which may make it easier to respond to local needs. This could result in increased store revenue and greater overall revenue for Majestic Potential Counterbalance The new model moves Majestic to a more decentralised approach. This could result in inconsistencies between stores, for example, different products and opening times Majestic may need to invest heavily in training managers which could result in an increase in costs, especially in the short term Managers may not welcome the extra responsibility which could result in managers becoming less motivated, resulting in poor customer service Some managers may lack the necessary skills needed to take more control over the stores, this could result in Majestic needing to replace some managers, increasing recruitment and selection costs Potential judgement The move will have a positive impact, especially in the long-term, as it will empower managers, giving them far more control over the running of their stores. This will allow stores to respond more closely to local needs The move could have a negative impact, particularly in the short-term, as managers may need to be trained in the new system and some managers may lack the skills and/ or not welcome the increase in responsibility (10)
WORKED ANSWERS Q1: 1 Explain one disadvantage of an autocratic style of leadership on Majestic Wine (4) Autocratic leadership is a style of leadership whereby managers, and in this case, senior managers, make all of the decisions without consulting other staff. One disadvantage of an autocratic leadership style to Majestic Wine is that it could lead to poor motivation within Majestic Wine stores. Majestic Wine traditionally operated a command and control style of leadership which is autocratic. The structure was also centralised. This meant that store managers had little or no say in the running of their own individual stores, for example, what types of wine to stock or what discounts to offer. This could have resulted in store managers being frustrated and leaving Majestic Wine for other jobs, for example, more lucrative office jobs. As a result, costs could increase due to the need to recruit, select and train new managers, putting a strain on profit margins. Q2: Assess the likely impact of the franchise-lite model, on a business such as Majestic Wine (10) One positive impact of the franchise-lite model on a business such as Majestic Wine is that it could lead to increased sales revenue. Majestic are currently rolling out their new franchise-lite model which moves away from their traditional command and control / autocratic style of leadership towards a more decentralised approach, where store managers are empowered to take more control of their stores, for example, recruiting their own staff and choosing which types of wine to stock. As a result, not only could store managers become more motivated, resulting in better customer service, but they can also respond more closely to local needs, for example, choosing opening times that better suits the stores location. By providing better customer service and responding more closely to customer needs, customers may be more inclined to visit and return to Majestic Wine, resulting in increased revenue for the business. However, one negative impact of the franchise-lite model on Majestic Wine is that it could lead to an increase in costs. The new franchise-lite model involves store managers taking more control over the day-to-day running of the stores, for example, choosing what stock to order. This may mean that Majestic need to invest in training store managers, not only to learn systems which they may not be familiar with, but to also take on more responsibility. The cost of this could be significant,
especially as Majestic has 211 stores. Furthermore, existing store managers may not welcome the extra responsibility or may lack the skills to take on more responsibility. This could result in store managers leaving or needing to be replaced, leading to an increase in recruitment, selection and training costs. This could impact on the profit margins of Majestic Wine. Overall, I believe that the new franchise-lite model will have a positive impact, especially in the long-term. Although moving towards the new model could involve an increase in training and some existing managers leaving, resulting in increased costs, this should only affect Majestic in the short-term. Empowering store managers via the new model will allow them to exercise more control over their stores leading to better customer service and the chance to meet local needs, increasing revenue per store and overall revenue for Majestic.
LEVEL OF RESPONSE GUIDE LEVEL MARK DESCRIPTOR 0 A completely inaccurate response. Level 1 1-2 Isolated elements of knowledge and understanding recall based. Weak or no relevant application to business examples. Generic assertions may be presented Level 2 3-4 Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented Level 3 5-6 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. Level 4 7-10 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors leading to a supported judgement.