Most successful corporations have applied either employee empowerment theory or the penetration pricing theory. A combination of both theories might also enhance market performance of any given corporation. However, empowerment theory facilitates a culture of employees’ contribution by allowing them to participate and contribute to the decision making processes.
The application of this theory enables an organization to discover the full synergy and power of its employees as regards to problem detection, solving alongside better service deliveries. In contrast, the penetration pricing theory might help a company to evade market competition. It can be applied when a company wants to operate at the least cost possible while setting the lowest product prices.
Various theories have been applied during decision making processes. The memo however highlights the applications of the employee empowerment and penetration pricing theories as noted in human resource and marketing areas respectively.
Moving towards workforce empowerment culture
Workforce empowerment turned out to be a corporate catchphrase in early nineties and the corporate press accord deemed it to be a noble thing. During this periods, the customary view saw workforces as replaceable objects in corporations, individuals who ought to be well trained to execute well defined and narrow tasks as well as people who should be constantly supervised and watched every time (Rehkopf, 2009).
With the advent of employees’ empowerment culture, there has been the necessitation that even the sophisticated and more educated employees have the urge of contributing in their workplaces and to the employers.
Basically, employees’ empowerment in simple term implies the full-fledged cronies in pursuit of high quality levels and better services. Empowered employees are always encouraged to make decisions, think and take personal actions on the basis of the defined corporate guidelines (Rehkopf, 2009).
The organizational management must thus recognize employee abilities and offer the requisite authority and tools which enables them to incessantly advance their performances. The management is charged with responsibility of stating its expectations as regards to the recognition and solving of the problems through empowering the employees to so.
A practical example of empowerment
Very few corporations truly embrace the employees’ empowerment concept. In fact, corporations that adopt this concept have realized the massive synergy and power which could be released when workforces are allowed to fully participate in the assumed operations. A practical example where the concept of employees’ empowerment culture was widely embraced is Ritz-Carlton Hotel.
Instead of marginalizing its employees by failing to listen to them and refusing to have them contribute in the hotel decision making processes, Ritz-Carlton Hotel does exactly the opposite. Employee empowerment is not merely used in guests’ satisfaction, but it is rather intended to crown them imaginary services (Hardina, 2007). Every employee at Ritz-Carlton Hotel has a chance to contribute to the decision making process and they have the mandate from the leaders to act accordingly.
How the employee empowerment concept bring about specific actions
Initially, Ritz-Carlton Hotel did not engage its workforce in the continual process improvement and in the development of work processes. It was thus very difficult to gauge how the indispensable service deliveries to partners could be made. There was equally laxity and non-commitment on the side of employees as regards to service deliveries and goal attainments.
The morale and motivation in the institution was extremely low while the employees were less energized by failure to involve them in the decision making processes. The employees thus felt like they were not recognized and neither were they deemed part of the organization. Thus, they lacked the full sense of entrepreneurial commitment (Rehkopf, 2009).
The theory of employee empowerment necessitates that each employee within the organization must totally sense the commitment of the organization to such an empowerment. Merely saying that the workforce is empowered is actually not real. In fact, the management and all leaders found at different levels ought to act by shunning the mere talks.
This theory requires that the management ought to realize that workforce empowerment is not like the magical gifts that workers receive from the management. The leaders have the responsibility of establishing a pivotal atmosphere and environment where the workforce feels the real empowerment (Ryan, 1998). They should have a feeling that they are emboldened in the decision making process and must be aware of the management backing and support.
Results achieved by practicing employee empowerment theory
After the theory was implemented at Ritz-Carlton Hotel, the employees unleashed their full potentials as regards to service delivery and consequently participated in all the entrepreneurial operations. They aided the hotel management in detecting and solving the emerging problems besides providing guests with legendary services.
The employees felt like they had greater stakes in the hotel and fully remained loyal and accountable to their assumed tasks. Indeed, they equated their respective triumphs and purpose with those of the hotel. There were sky-high morale and motivations in the hotel devoid of sporadic campaigns and gimmicks by the management (Rehkopf, 2009). The employees were passionate about fellow workers and service deliveries to guests.
What I could have done differently
As a practicing manager, I could have aspired to know the employees by their names, share my time with them, treat them like adults and personally look for their welfare. Most important, I could have shared with them my visions and goals for the hotel by thoroughly and frequently communicating with them. Information and guidelines for empowered behaviors could also have been made available to each worker.
Workers who attain beyond expectations could have been rewarded while any emanating member issues could have been instantly resolved. Thus, the employees could have been made and parcel of the hotel. Another theory that could be used in decision making is the self-determination theory. Based on this theory, workers have both external and internal perceived locus of locality which makes them feel that any force initiates and sustains their actions. Such forces might in turn cause motivation.
II. Penetration pricing theory
This concept has been widely employed by most new market entrants when they aim at winning clients and consequently garnering larger market shares from their competitions. The theory derives from the demand price responsiveness by assuming that clients will always move to the novel brands and products whose prices are seemingly low.
The assumption is that provided brand loyalty has been developed, then the set prices might be raised progressively to attain the dominant market price. In case prices are low, then the preliminary goodwill will be generated and hence companies will be capable of holding unto their clients besides gaining other positively referred customers (Baker, 2006).
A practical application of penetration pricing
There are numerous issues that are addressed via applying this theory. As reported in the media, this theory has been extensively applied by Wal-Mart Corporation. The company believed that when higher prices are charged on commodities, market competitors will eventually outperform it by reducing their prices. Since identifiable and distinct prices segment are inexistent in the market while price elastic demand are exhibited, larger products market will permit competition take place.
Prices will eventually reduce thus permitting subsequent price hikes which will operationally offset the preliminary low prices (Hardina, 2007). Wal-Mart applied this theory by setting low prices to help its clients save money and live better lives. The company did this by offering pleasant shopping experience, guaranteeing satisfaction, setting the least possible prices, providing knowledgeable experience and a variety of quality products. It was as a result of price antagonism and market competition that Wal-Mart opted to adopt this theory.
How penetration pricing concept bring about specific actions
The theory of penetration pricing helps customers to recognize each other. Any company that draws on penetration pricing stands a better chance of countering the competitors’ actions and has exceptional positioning strategies.
For instance, Wal-Mart applied this theory in its business operations and the corporation has had the chance to utilize economies of scale. Economies of scale in turn helped the company to produce numerous goods at the least cost possible. The end result is a reduction on the charged prices, avoidance of market competition and becoming a market leader (Winninger, 1994).
Results achieved by employing penetration pricing theory
When Wal-Mart applied this concept, it created a positive impression which made clients to believe that the corporation truly provides the lowest priced products. The created image overshadowed various clients’ expectations by creating a price loop. The company effectively applied penetration pricing to an extent that clients deemed it an imperative factor when making their product choices (Hardina, 2007). Therefore, while the suppliers assume low pricing strategies, the company offers better prices to ensure low sourcing costs.
What I could have done differently
Given that Wal-Mart employees and suppliers show their ill-treatment grievances at the company, the company is in the verge of being negatively portrayed. However, to make all market participants’ and employees happy, I could have offered the clients’ quantity and product loyalty discounts. The cost of production could have been reduced via economies of scale which in turn could have allowed the setting of low prices.
Employee empowerment can be applied to ensure performance improvement. It is considered as an important element for managers who are in quest for outstanding services. Any effort put towards employees’ empowerment could possibly give results beyond expectations. Conversely, any company that applies the penetration pricing theory stands a better chance of making its products to be recognized by the clients. The theory helps in creating a positive brand image in the minds of clients.
Baker, R. J. (2006). Pricing on purpose: Creating and capturing value. Sudbury, MA: John Wiley and Sons.
Hardina, D. (2007). An empowering approach to managing social service organizations. Florence, KY: Springer Publishing Company.
Rehkopf, E. (2009). Club resources international: Making employee empowerment a reality at your club. Retrieved from http://www.clubresourcesinternational.com/media/8651/employee%20empowerment.pdf.
Ryan, J. (1998). Giving people the chance to sparkle. Journal of People Management, 1(13), 40-42.
Winninger, T. J. (1994). Price wars: How to win the battle for your customer. Ontario, CA: St. Thomas Press.