netrashetty
Netra Shetty
Berkshire Hathaway (NYSE: BRK.A, NYSE: BRK.B) is a conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years, while employing large amounts of capital, and minimal debt.[1] Berkshire Hathaway stock produced a total return of 76% from 2000-2010 versus a negative 11.3% return for the S&P 500.[2]
Warren Buffett is the company's chairman and CEO. Buffett has used the "float" provided by Berkshire Hathaway's insurance operations (paid premiums which are not held in reserves for reported claims and may be invested) to finance his investments. In the early part of his career at Berkshire, he focused on long-term investments in publicly quoted stocks, but more recently he has turned to buying whole companies. Berkshire now owns a diverse range of businesses including railroads, confectionery, retail, home furnishings, encyclopedias, manufacture of vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; as well as several regional electric and gas utilities.
he syndicated study uses a two-part survey to measure the opinions of air travelers on 22 airlines departing from 30 airports in North America, Europe, and Asia. Each year, 240,000 passengers are interviewed. Depending on the airline routes being researched, the survey can be conducted in seven languages: English, French, Dutch, German, Swedish, Chinese, or Japanese.
GAP Transatlantic (operating since July 1999) covers 16 airlines, 15 airports in North America and 10 in Europe. GAP Transpacific (October 1999) covers 12 airlines, 15 North American and four Asian airports. GAP Europe to Asia (April 2000) encompasses 12 airlines, six European airports and four Asian airports.
No airline or airport personnel are involved in the survey distribution process, which eliminates any potential for airline employee-introduced bias and also frees cabin crews from an extra burden. Instead, GAP interviewers in each airport approach air travelers at their gate or in the departure lounge to engage them in the survey process, which entails completing a four-page questionnaire prior to departing and a second, shorter form at the conclusion of their flight.
“We interview them when they are the most available: before the flight,” says David Perroud, GAP manager, P. Robert and Partners. “Many people at that time are just waiting for the flight to board so anything that can distract them from waiting is welcome. We have very few refusals.”
The respondent gives the completed first part to the GAP representative, who then instructs him or her on how to return the second part, either by the postage-paid mailer, by fax or by telephone.
In 20-some questions, part one of the survey examines the performance of airline staff during reservation and check-in, the respondent’s impression of the airport facilities, and gathers other information about flying habits, frequent flyer program membership, and demographic data.
Part two looks at the boarding process, the airplane’s cabin comfort and features, the cabin crew, food and beverage service, onboard amenities, and post-flight impressions in addition to overall assessment of the airline and the flight in question.
Rather than contacting respondents after their flight by phone or mail, the GAP study reaches the passengers while the experience is still fresh in their minds. “We want to capture their opinions very close to the moment of truth,” says Paul Lai, general manager - marketing research, Delta Air Lines, Atlanta, a GAP subscriber.
The survey boasts a response rate of better than 50 percent, that is, about 50 percent of respondents who complete part one also follow through and submit part two.
“That response rate is a far cry from the less than 10 percent response rate from previous studies,” Lai says. “When the response rate is so low, results could be inconsistent and unreliable. We would see results going up or down without any reasonable explanation. That’s when internal customers may question the validity of your research, and rightly so.”
While Lai does not want to cite specific examples of issues uncovered by the research, he does offer that the GAP research gives Delta opportunities to benchmark industry leaders in any service area and then act accordingly. “If we see that airline X is doing very well in the area of food and beverage, for example, we may want to find out what is going on there. So then we put our product people on the case and have them do some competitive flying to find out what they are doing to make their rating so high.”
As is typical with syndicated studies, participants receive data on their own performance as well as that of competitors. “The first and most important thing with GAP is that it is a benchmark,” Perroud says. “Airlines used to have a lot of information about their own passengers. Now they can measure their own performance and compare it to the competitors.
“The other important thing is that it’s an ongoing survey, so they can track their passenger satisfaction over time. So if they change something in their in-flight service, the food perhaps, they can see how their rating is affected. They can track quarter-by-quarter.”
Study subscribers receive results quarterly, in the form of data tables, raw data in SPSS or Quanvert, etc., and an Excel macro that allows them to produce charts from the data. Every six months a full report is issued.
Active in development
The airlines have been active participants in the development of the GAP study. “The design process has been a long one, involving around 15 airlines,” says Perroud. “We have done two different pilot studies and also have analyzed the study to see what is the most effective way of asking the questions. All of these airlines were already asking those kinds of questions so we had a good starting point.”
Dissatisfaction with syndicated transatlantic route research brought various airlines together two years ago to discuss development of a new study, Lai says. “Since a lot of airlines felt that need, it was easy to get people together to talk about possible solutions. So taking the first step was not that bad.”
While the first step was easy, those that followed were considerably more difficult. The biggest problem was crafting a consensus among the participating airlines during the survey development process, Lai says. “Everything from how a question is worded to how we use the results, even the look of the graphics, has been a bit challenging. There are so many airlines involved, and each has its own quirky preferences. Now, with the survey in full bloom, it is almost a miracle that we were able to pull it off.”
Help from the airlines was also instrumental in translating/back-translating the questionnaires into the various languages. Cathay Pacific helped with the translation of the Chinese questionnaire, for example. No matter the language, the survey forms use the same scales and are structured the same way.
Airline involvement in the study is ongoing. For example, Lai and other airline representative members of the GAP Technical Committee met in London in January and in Miami in October to discuss a host of issues pertaining to the survey, from adding new routes to data weighting options.
Davies & Lam claims that the leverage and bargaining power of customers tend to be relatively greater when customers are few in numbers and when they purchase in large quantities and when customers’ purchasers represent a sizable percentage of the selling industry’s total sales. In the restaurant and food industry, the number of customers is very large, and often, they prefer to go in supermarkets and cook their own food instead of going to restaurants. From this alone it can already be said that the bargaining power of consumers in weak.
Suppliers
A group of supplier firms has more bargaining power when the input is, in one way or another, important to the buyer and when the supplier industry is dominated by a few large producers who enjoy reasonably secure market positions and who are not beleaguered by intensely competitive conditions (Davies & Lam 2001). In Grace’s Cuisine kind of industry, they don’t have an advantage of being able to dictate the price that they are willing to pay the supplier. Additionally, when the suppliers’ respective products are differentiated to such an extent that it is difficult or costly for buyers to switch from one supplier to another and when the buying firms are not important customers of the suppliers, supplier power increases.
Substitutes
The price and availability of acceptable substitutes for a product places a ceiling on the prices which the producers of that product can charge, and unless the sellers of a product can upgrade quality, reduce prices via cost reduction, or otherwise differentiate their product from its substitutes, they risk a low growth rate in sales and profits because of the inroads substitutes may make. In the restaurant and food industry, as mentioned above, there is a large number of competitors. This amount of rivalry is the main force that drives the prices of all companies in the industry down. For example, other restaurants and these are mostly food chains can match the low prices that Grace’s Cuisine offers in the market and even equal the quality of the products that they offer, making the substitute force high in the restaurant and food industry where Grace’s Cuisine operates. Further, the competition from substitutes is affected by the ease with which buyers can change over to a substitute, a key consideration being that usually the buyers switching costs—the one-time costs facing the buyer in switching from use of a product over to a substitute for it, is low. Since switching from one chain to another will create a relatively low cost or fuss for the consumer, the substitute force in the industry is relatively high. This opens an avenue for Grace’s Cuisine to improve quality and differentiate from their competitors while driving down costs at the same time.
Key Findings
With regards to the Key Findings and extensive performance of key account managers and sales managers, Grace’s Cuisine should do some evaluation regarding the completion of the whole project. I as the account managers should also consider the implications of non-compliance in relation to other aspects of the audit, particularly the reliability of management representations (Abbott, P. & Sheldon, I. 1996). In this regard, I need to reconsiders the risk assessment and the validity of management representations, in case of non-compliance not detected by the entity’s internal controls or not included in management representations. The implications of particular instances of non-compliance will depend on the relationship of the perpetration and concealment, if any, of the act to specific control activities and the level of management or employees involved (Arter, 2002). I should, as soon as practicable, either communicate with those charged with governance, or obtain audit evidence that they are appropriately informed, regarding non-compliance that comes to the auditor’s attention. However, I need not do so for matters that are clearly inconsequential or trivial and may reach agreement in advance on the nature of such matters to be communicated. If in the non-compliance is believed to be intentional and material, I should communicate the finding without delay. I may conclude that withdrawal from the engagement is necessary when the entity does not take the remedial action that I consider necessary in the circumstances, even when the non-compliance is not to the financial statements.
Conclusion
The general, long-term development of the restaurant and food industry is one characterised by a series of evolutionary periods that at times can best be described as revolutionary in nature. In line with this observation, Grace’s Cuisine needs to constantly be on the lookout for strategies which would help in maintaining their market leadership. Meaning to say, sales and marketing strategies for Key Account Managers and Sales Managers need to be considered by Grace’s Cuisine. Problems in the industry today appear from so many angles, at so many levels and in so many directions that their pursuit without a regular path will soon become lost in details. Porter’s five force model will help any organisation determine the direction in which they are going to take through an analysis of the five forces: suppliers, buyers, competitive rivalry among firms currently in the industry, product substitute and competitive entrants to the industry. Using this tool and other business analysis procedures, Grace’s Cuisine, as well as other firms, is challenged to understand an industry’s profit potential and the strategy necessary to establish a defensible competitive position, given the industry’s structural characteristics. Overall, the restaurant and food industry in which Grace’s Cuisine belongs is a highly attractive industry which contributes a large share of the total profits of Grace’s Cuisine. With the intensity of rivalry kept in check by the restaurant and food giants, high threat of industry entry, low supplier and buyer power, prospects for Grace’s Cuisine holds much promise.
Warren Buffett is the company's chairman and CEO. Buffett has used the "float" provided by Berkshire Hathaway's insurance operations (paid premiums which are not held in reserves for reported claims and may be invested) to finance his investments. In the early part of his career at Berkshire, he focused on long-term investments in publicly quoted stocks, but more recently he has turned to buying whole companies. Berkshire now owns a diverse range of businesses including railroads, confectionery, retail, home furnishings, encyclopedias, manufacture of vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; as well as several regional electric and gas utilities.
he syndicated study uses a two-part survey to measure the opinions of air travelers on 22 airlines departing from 30 airports in North America, Europe, and Asia. Each year, 240,000 passengers are interviewed. Depending on the airline routes being researched, the survey can be conducted in seven languages: English, French, Dutch, German, Swedish, Chinese, or Japanese.
GAP Transatlantic (operating since July 1999) covers 16 airlines, 15 airports in North America and 10 in Europe. GAP Transpacific (October 1999) covers 12 airlines, 15 North American and four Asian airports. GAP Europe to Asia (April 2000) encompasses 12 airlines, six European airports and four Asian airports.
No airline or airport personnel are involved in the survey distribution process, which eliminates any potential for airline employee-introduced bias and also frees cabin crews from an extra burden. Instead, GAP interviewers in each airport approach air travelers at their gate or in the departure lounge to engage them in the survey process, which entails completing a four-page questionnaire prior to departing and a second, shorter form at the conclusion of their flight.
“We interview them when they are the most available: before the flight,” says David Perroud, GAP manager, P. Robert and Partners. “Many people at that time are just waiting for the flight to board so anything that can distract them from waiting is welcome. We have very few refusals.”
The respondent gives the completed first part to the GAP representative, who then instructs him or her on how to return the second part, either by the postage-paid mailer, by fax or by telephone.
In 20-some questions, part one of the survey examines the performance of airline staff during reservation and check-in, the respondent’s impression of the airport facilities, and gathers other information about flying habits, frequent flyer program membership, and demographic data.
Part two looks at the boarding process, the airplane’s cabin comfort and features, the cabin crew, food and beverage service, onboard amenities, and post-flight impressions in addition to overall assessment of the airline and the flight in question.
Rather than contacting respondents after their flight by phone or mail, the GAP study reaches the passengers while the experience is still fresh in their minds. “We want to capture their opinions very close to the moment of truth,” says Paul Lai, general manager - marketing research, Delta Air Lines, Atlanta, a GAP subscriber.
The survey boasts a response rate of better than 50 percent, that is, about 50 percent of respondents who complete part one also follow through and submit part two.
“That response rate is a far cry from the less than 10 percent response rate from previous studies,” Lai says. “When the response rate is so low, results could be inconsistent and unreliable. We would see results going up or down without any reasonable explanation. That’s when internal customers may question the validity of your research, and rightly so.”
While Lai does not want to cite specific examples of issues uncovered by the research, he does offer that the GAP research gives Delta opportunities to benchmark industry leaders in any service area and then act accordingly. “If we see that airline X is doing very well in the area of food and beverage, for example, we may want to find out what is going on there. So then we put our product people on the case and have them do some competitive flying to find out what they are doing to make their rating so high.”
As is typical with syndicated studies, participants receive data on their own performance as well as that of competitors. “The first and most important thing with GAP is that it is a benchmark,” Perroud says. “Airlines used to have a lot of information about their own passengers. Now they can measure their own performance and compare it to the competitors.
“The other important thing is that it’s an ongoing survey, so they can track their passenger satisfaction over time. So if they change something in their in-flight service, the food perhaps, they can see how their rating is affected. They can track quarter-by-quarter.”
Study subscribers receive results quarterly, in the form of data tables, raw data in SPSS or Quanvert, etc., and an Excel macro that allows them to produce charts from the data. Every six months a full report is issued.
Active in development
The airlines have been active participants in the development of the GAP study. “The design process has been a long one, involving around 15 airlines,” says Perroud. “We have done two different pilot studies and also have analyzed the study to see what is the most effective way of asking the questions. All of these airlines were already asking those kinds of questions so we had a good starting point.”
Dissatisfaction with syndicated transatlantic route research brought various airlines together two years ago to discuss development of a new study, Lai says. “Since a lot of airlines felt that need, it was easy to get people together to talk about possible solutions. So taking the first step was not that bad.”
While the first step was easy, those that followed were considerably more difficult. The biggest problem was crafting a consensus among the participating airlines during the survey development process, Lai says. “Everything from how a question is worded to how we use the results, even the look of the graphics, has been a bit challenging. There are so many airlines involved, and each has its own quirky preferences. Now, with the survey in full bloom, it is almost a miracle that we were able to pull it off.”
Help from the airlines was also instrumental in translating/back-translating the questionnaires into the various languages. Cathay Pacific helped with the translation of the Chinese questionnaire, for example. No matter the language, the survey forms use the same scales and are structured the same way.
Airline involvement in the study is ongoing. For example, Lai and other airline representative members of the GAP Technical Committee met in London in January and in Miami in October to discuss a host of issues pertaining to the survey, from adding new routes to data weighting options.
Davies & Lam claims that the leverage and bargaining power of customers tend to be relatively greater when customers are few in numbers and when they purchase in large quantities and when customers’ purchasers represent a sizable percentage of the selling industry’s total sales. In the restaurant and food industry, the number of customers is very large, and often, they prefer to go in supermarkets and cook their own food instead of going to restaurants. From this alone it can already be said that the bargaining power of consumers in weak.
Suppliers
A group of supplier firms has more bargaining power when the input is, in one way or another, important to the buyer and when the supplier industry is dominated by a few large producers who enjoy reasonably secure market positions and who are not beleaguered by intensely competitive conditions (Davies & Lam 2001). In Grace’s Cuisine kind of industry, they don’t have an advantage of being able to dictate the price that they are willing to pay the supplier. Additionally, when the suppliers’ respective products are differentiated to such an extent that it is difficult or costly for buyers to switch from one supplier to another and when the buying firms are not important customers of the suppliers, supplier power increases.
Substitutes
The price and availability of acceptable substitutes for a product places a ceiling on the prices which the producers of that product can charge, and unless the sellers of a product can upgrade quality, reduce prices via cost reduction, or otherwise differentiate their product from its substitutes, they risk a low growth rate in sales and profits because of the inroads substitutes may make. In the restaurant and food industry, as mentioned above, there is a large number of competitors. This amount of rivalry is the main force that drives the prices of all companies in the industry down. For example, other restaurants and these are mostly food chains can match the low prices that Grace’s Cuisine offers in the market and even equal the quality of the products that they offer, making the substitute force high in the restaurant and food industry where Grace’s Cuisine operates. Further, the competition from substitutes is affected by the ease with which buyers can change over to a substitute, a key consideration being that usually the buyers switching costs—the one-time costs facing the buyer in switching from use of a product over to a substitute for it, is low. Since switching from one chain to another will create a relatively low cost or fuss for the consumer, the substitute force in the industry is relatively high. This opens an avenue for Grace’s Cuisine to improve quality and differentiate from their competitors while driving down costs at the same time.
Key Findings
With regards to the Key Findings and extensive performance of key account managers and sales managers, Grace’s Cuisine should do some evaluation regarding the completion of the whole project. I as the account managers should also consider the implications of non-compliance in relation to other aspects of the audit, particularly the reliability of management representations (Abbott, P. & Sheldon, I. 1996). In this regard, I need to reconsiders the risk assessment and the validity of management representations, in case of non-compliance not detected by the entity’s internal controls or not included in management representations. The implications of particular instances of non-compliance will depend on the relationship of the perpetration and concealment, if any, of the act to specific control activities and the level of management or employees involved (Arter, 2002). I should, as soon as practicable, either communicate with those charged with governance, or obtain audit evidence that they are appropriately informed, regarding non-compliance that comes to the auditor’s attention. However, I need not do so for matters that are clearly inconsequential or trivial and may reach agreement in advance on the nature of such matters to be communicated. If in the non-compliance is believed to be intentional and material, I should communicate the finding without delay. I may conclude that withdrawal from the engagement is necessary when the entity does not take the remedial action that I consider necessary in the circumstances, even when the non-compliance is not to the financial statements.
Conclusion
The general, long-term development of the restaurant and food industry is one characterised by a series of evolutionary periods that at times can best be described as revolutionary in nature. In line with this observation, Grace’s Cuisine needs to constantly be on the lookout for strategies which would help in maintaining their market leadership. Meaning to say, sales and marketing strategies for Key Account Managers and Sales Managers need to be considered by Grace’s Cuisine. Problems in the industry today appear from so many angles, at so many levels and in so many directions that their pursuit without a regular path will soon become lost in details. Porter’s five force model will help any organisation determine the direction in which they are going to take through an analysis of the five forces: suppliers, buyers, competitive rivalry among firms currently in the industry, product substitute and competitive entrants to the industry. Using this tool and other business analysis procedures, Grace’s Cuisine, as well as other firms, is challenged to understand an industry’s profit potential and the strategy necessary to establish a defensible competitive position, given the industry’s structural characteristics. Overall, the restaurant and food industry in which Grace’s Cuisine belongs is a highly attractive industry which contributes a large share of the total profits of Grace’s Cuisine. With the intensity of rivalry kept in check by the restaurant and food giants, high threat of industry entry, low supplier and buyer power, prospects for Grace’s Cuisine holds much promise.