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The questions are based around the following case study. You should base your answers upon the information in the case study.
Hong Kong Tramways (HKT) runs the world’s largest double-deck tram fleet. Started in 1904, HKT now has a fleet of over 160 trams operating on the north side of Hong Kong Island, which carries an average of 200,000 people each day. The vision for the company is “To be the world’s most iconic and ingenious tramways”.
The trams – essentially double-floor buses, but running on rails set into the roadway, and powered by electric motors supplied by overhead power cables – are held in great affection by the people of
Hong Kong. The trams running today are little different in appearance to the ones that ran in
1904, and the Hong Kong people regard the system as an important part of their heritage. In 2000, HKT introduced a new, sleeker tram; people hated it, and said that it looked like a bus. Subsequently, HKT has adopted the traditional style. When, in 2015, there was a proposal to scrap the trams, the Planning Board was inundated with 22,000 letters of protest. Although the trams are admired by tourists to Hong Kong, they are predominantly used by Hong Kong residents. The company sells a range of souvenir items relating to the trams.
Although the trams look the same as the 1904 models, they embrace modern technologies. The newer trams in the fleet are now made of lightweight aluminium, are fitted with lightweight motors, and some are fitted with air conditioning to cope with Hong Kong’s hot and humid summers. HKT has developed an app for mobile phones which provides real-time operational information about the trams, along with QR codes at all tram stops. However, there are still outdated aspects of the system; for example, the old power lines and the electrical substations mean that the system can only support 10 air-conditioned trams on the network at any one time. Updating the infrastructure requires a large investment.
Although the trams are held in great affection in Hong Kong, the use of them is declining. Although the average is 200,000 passengers per day now, this is falling (it was 500,000 per day in the 1960s) as a consequence of competition from an improved and extended subway system and from buses. In addition, the fares are fixed by the government at only HK$2.30 (US$0.30) per trip, and increases have only been allowed twice since 1998 (the last in 2011). In contrast, the Metro system can increase prices every year under an agreed formula. HKT does not receive any government subsidies, and therefore it is a purely commercial operation.
One of the reasons for the declining use of the trams is the slowness. Trams typically run at 16km per hour when there are no jams, but the average speed is only 8 km per hour (down from 10km per hour five years ago) because of the increase in cars, buses and traffic violations. HKT has managed to persuade the government to synchronise traffic lights in order to speed up the tram service, and it is lobbying to restore reserved tram lanes that were long ago removed to accommodate bus and car traffic.
Fares alone are not sufficient to cover expenses, and it is advertising that keeps the company in profit. The majority of trams are covered with advertising features, but even this is facing difficulties at the current time; the downturn in the Chinese and Hong Kong economies is reducing the demand for advertising, particularly from the luxury retail industry, which is a major user of tram advertising. Commenting upon this and summarising the situation facing the company, the managing director said: “That means that our attractiveness is decreasing, our operating costs are increasing, and our capacity is also decreasing”.
The HKT trams are distinctive, and HKT builds and maintains the trams itself. It is thought important that such a Hong Kong icon is made in Hong Kong, and in addition the need to customise the standard models produced by global public transport manufacturers would be even more expensive. The company is keen to promote its “green” credentials, as a zero-emission form of public transport, with recent changes to the trams further reducing the environmental impact.
The HKT company has been owned since 2010 by a French company, RATP Dev Transdev. This company operates metro lines in South Korea and India as well as a tram network in Shenyang (China), and it hopes that it can capitalise on the heritage of the Hong Kong operation to boost its business across Asia. The managing director of HKT said: “Hong Kong has a very strong image for public transport . . . and we can show our clients in China and South-east Asia all the changes we have brought in. We are in Asia to grow.”
Answer all FOUR (4) questions
Critically discuss the benefits, to an organisation, of systematically analysing its 25 environment. (10 marks)
What frameworks would you use for analysing the environment facing a large, multi-product, organisation, and why? (5 marks)
Using a range of these frameworks, identify and justify what you consider to be the FOUR (4) most important issues arising from the business environment that Hong Kong Trams faces. (10 marks)
Total 25 Marks
Apply Porter’s generic strategy framework and the Ansoff Matrix to Hong Kong Trams, and identify & justify the most appropriate strategy that you consider the company should pursue. How might the strategy of Hong Kong Trams be influenced by the fact that it is part of a larger organisation?
Some organisations make use of a strategy formation process that is strongly 25 deliberate, while other organisations make use of a strategy formation process that is strongly emergent.
Critically evaluate why it might be appropriate for some organisations to use a more deliberate strategy formation process, and others a more emergent strategy formation process. (15 marks)
Which process do you consider that Hong Kong Trams uses and why? Do you think the company has the right balance between deliberate and emergent strategy formation processes? (10 marks)
Total 25 marks
Explain why it might be useful for an organisation to analyse its stakeholders, and 25 outline how such an analysis could be undertaken. (15 marks)
Analyse the stakeholders involved in Hong Kong Trams, and identify which stakeholders you consider to be the THREE (3) most important. Carefully justify your choice. (10 marks)
Total 25 Marks