The rise and fall of ABC learning

Strategic analysis:

Introduction

            ABC was a prominent company with at least forty child care centers and a capital of about $25 million in 2001. The company then experienced remarkable expansion to about 2000 centers within a duration of seven years and globally spread to three continents (Smith & Fenner, 2008). The tables however turned and in 2008 and ABC fell in financial crisis with an $850 million liability. The company was commenced in 1988 by Eddie Groves a prominent entrepreneur who previously worked as a milk distributor and his wife Le Neve an elite in the field of education thus played a significant role in establishing ABC (Rush, Emma and Downie, 2006). To emphasize how much of a capitalist he was short listed as one of the most affluent men at an age below 40. The organization had faced a lot of criticisms with the claims that it was making big profits exploiting the Australian taxpayers and gaining monopoly of all other children care centers in Australia hindering their development. ABC had been thriving not until it experienced a down fall of its profits by 42% in 2007 and was unable to service its debts then its services were suspended and eventually its assets were sold off as stated by Carson (2008).

Environmental factors affecting ABC

In the 1970s women started got educated and become more enlightened thus began to start their families at a later age. This could have affected positively the rise of ABC since their was demand for their services of health care but also at a later age it could have affected the company negatively since the women focused more on work and got smaller families giving birth at a later age. This was further influenced by the social revolution and high cost of running a home forcing a woman to work and thus having small manageable families. The company targeted those developed countries in the US, UK and Australia whose women were more educated compared to developing countries. These were macro environmental factors that affected the larger society reducing the ability of the company to serve its customers. A bigger blow hit this company when the federal government which was very supportive to families’ subsidized tax on child cares by 30% in 2004 and further to 50% by 2008 thus. This forced this company to increase its charge for the services it rendered yet the overall performance of the company would not withstand this massive loss. This was meant to be a strategy for people to enlarge families where the government paid them a large lump sum amount of money on giving birth. This was a big micro environmental factor hindering the ABC’s company to serve its customers thus a contributing factor to its down fall. The government also had power to legalize business operations and award licenses if an organization has qualified staff, facilities and meets the required stipulations. This in itself was a disadvantage for ABC since it increased its operation cost which with the societal changes it could not cope up with thus leading to its downfall. In 2004 a stock detonation occurred which lasted until 2007 gave an added opportunity for ABC Company to grow and expand globally but with the world financial crisis that occurred in 2008 it consequently fell.

Strategies that ABC applied to operate its business

For this organization to thrive it had applied several strategies which included the observation of its services consumption trends in a bid to know its market, this helped it to know its competitors and do a frequent SWOT analysis of itself. It also had tried to cope up with modern trends of technology to increase its regulation. This was meant to counter the Porter’s five forces for any dynamic market (2010) which included the threats of entrance, the power of buyers and that of suppliers, threat of substitute and also in the fear of rivalry. This helped it to have competitive advantage and deliver efficiently keeping customers’ loyalty. It used the strategy of employee engagement by their frequent training and motivating of workers to show their appreciation and make them more qualified. It had also introduced insurance policies for them. Its most unique feature was its continued emphasizes in education such that it had the first Pre school curricula in the entire Australia thus through strategic planning attracted many clients. Further on expanding globally it used different brand names. An example of such brand name was the La Petite Academy used in over 600 schools in the US.

With these strategies this organization was able to expand but to some extent these strategies contributed to its failure. These strategies made it to achieve monopoly due to its strategic planning through its founders thus having a distinctive competence which many organizations did not have. Further its success was attributed due to its ability to develop status in the market and satisfy customers. It thus built 3 core values of good business the business objectives, shareholders and customer value as stated by Kotler and Armstrong (2001) who term this as a guerrilla tactic to attract customers. On the other hand these strategies may have contributed to the failure of this organization because it used some of its financial resources to persuade the government not to cause any reforms in the childcare which were eventually put in place thus in a bid to keep its monopoly it fell. Its ability to open many organizations yet not upgrade its management made it overwhelmed with work since they had no experience in international auditing. This resulted to misuse of finances and vandalism of property thus the fall of the company since all its constituent branches were all making losses. The coverage of extensive areas using different brand names made it loose it original stature thus did not attract many customers as had done previously. ABC failure was also due to its high cost of running in that it had a surplus of about 15,000 employees though it was using an external firm to recruit them thus lack of strategic planning lead to its failure and indebtedness. (Korporaed and Meade, 2008).

With the current trends of the economy if the company had to been able to consolidate and raise its funds then it would have continued but only for a while due to increased competitors and many similar businesses. It tactics to plan for the future and its expansion were unrealistic and not well considered thus would eventually collapse. It was not also able to keep up with the technological changes since it required new and better trained workers with international experience which the organization had not prior planned for so it would eventually come to fall. The lack of support from donors and the government financially too contributed to it’s sudden fall.

The company’s strategies were not right since they had been formulated under poor planning and lack of consideration of important factors. It did not consider the risks associated with credit, liquidity, pricing of the services offered and the risk of inflation thus the incurring of losses. Instead the use of segmentation strategies which helps to divide the market depending on the area that is most in need of those services as according to Sunil, Lehmann and Donald (2005) should have been used. This would help ABC company to a large extent to expand its horizons globally without receiving losses. Further it would help it to position itself in the market creating a sense of dominance and then recuperate once it experienced financial crisis. According to Goldstein and Dough (2007) this would help in retaining customers and tagging them to ensure all of them get the quality support they require preventing the company from falling. The issue of the forces of dynamic market should be taken seriously as this will give a clue on the competitive strategy that will be used in the company. This will enhance prior planning and give a company competitive advantage.

Conclusion

Giving an account of the rise and the fall of ABC then deductions on the importance of strategic planning and also considerations of the risks associated with the concerned business is dire and essential. Further the ability of this company to expand should be taken up by upcoming companies but only if they can withstand the risks that are associated with it. This means that a careful SWOT analysis should be done every time an organization plans on implementing its project this would have prevented the sudden fall of ABC due to micro and macro environmental factors. The use of segmentation strategy is also advised to ensure that marketing tagging has been done thus allowing competitive advantage.

 

References

Carson, V. (2008). ABC child care goes under: Sydney Morning Herald. Retrieved on 28th February 2011 from:

http://business.smh.com.au/business/abc-child-care-goes-under-20081106 5iys.html?page=1

Goldstein, Doug. (2007). What is Customer Segmentation?” MindofMarketing.net, New York, NY.

Korporaal, G. and Meade, K. (2008). ABC Learning’s Eddy stripped of stake. Retrieved on 1st March 2011 form http://www.news.com.au/business/markets/abc-learnings-eddy-stripped-of-stake/story-e6frfm30-1111115745030#ixzz1FSUA4AqQ

Kotler, P. and Armstrong, G. (2001). Principles of Marketing. 9th Edition. Prentice Hall pp 639-651.

Porter’s Five Forces. (2010) Strategic Management: A Model for Industry Analysis, International Center for Management and Business Administration, Inc.

http://www.quickmba.com/strategy/porter.shtml

Rush, Emma, and Christian Downie,  ABC Learning Centres: A Case Study of Australia’s Largest child care Corporation. Australia Institute, June 2006.

http://www.answers.com/topic/abc-learning-centres-ltd#ixzz1FSeDmfle

Smith, T. and Fenner, R.  (2008). ABC Learning Names Ferrier Hodgson Outside Manager. Retrieved on 28th February 2011 from: Bloomberg. http://www.bloomberg.com/apps/news?pid=20601087&sid=aDq3o1DcJTDM&refer=home

Sunil, G. , Lehmann and Donald, R. (2005). Managing Customers as Investments: The Strategic Value of Customers in the Long Run, Upper Saddle River, NJ: Pearson Education/Wharton School Publishing, pp 70-77

 

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