Grade 12: Sourcing and Sustainability
- Sourcing and Sustainability
Financial institutions such as banks play a significant role in the promotion of sustainable economic and social development based on their capabilities (Garanti BBVA, 2018). Awareness and positive attitude have been created in the financial industry towards the transformation of the planet’s social, environmental, and governance issues, with the introduction of new frameworks, financial products, initiatives, and the increasing utilization of risk filters and impact investing. The increased realization for the need for sustainable finance covers all the pillars of sustainability; social, environmental, and economic pillars and is linked to the location and production supply chain drivers. This development though is faced with many barriers as various locations (nations) lack adequate environmental and information technologies, nature conscious structures, and new systems of energy.
To realize environmental, social, and governance sustainability, banks should negotiate with lawmakers to enhance the creation of laws that provide the legal ease of this sustainability development. Consequently, they have a higher financial capability that should provide enough facilities to realize the development. Therefore, financing should be an in-house product from the banks while effective lawmaking should be outsourced to enable for the successful realization of the sustainability application in the finance sector. In the product categorization by value and criticality, the outsourced product can be categorized as a critical item while the in-house product as a strategic item (Rangel, de Oliveira, & Leite, 2015). Suppliers for the above products/services can employ capacity aggregation, where they can increase the supply chain surplus through demand aggregation across various firms to gain production economies of scale that is not achievable by a single entity on its own.
The product to accomplish this sustainability goal will need independent craft suppliers, who are the lawmakers (who will independently craft laws and regulations to govern the objective of the finance sector), and the service will require manufacturers and vendors to enable for the realization of social, environmental, and governance sustainability. The main risk that is associated with the banks and financial institutions outsourcing the creation of laws and regulations is that they are faced with financial and reputational challenges in cases of error from the third party.
Sustainability requires a significant amount of investment and the creation of laws and regulations to be provided. The public and government institutions are an important asset in drafting and ensuring effective laws and regulations are created and implemented. The total cost of ownership for a law cannot be computed, and thus, it should remain a regulatory discipline to govern the realization of social, environmental, and governance sustainability via the finance industry.
- Revenue Management and Financial Performance
Amusement parks provide a variety of services that despite being aimed at improving customer/client attraction, also help them improve on financial performance. They achieve this through various ways as described by PARKWORLD. (2011), including;
- Strategic control of the inventory. Amusement parks utilize their inventories as a source of customer attraction. They employ tactics and strategies that are deemed to increase their profitability and improve their customer intake when they need them. For instance, they employ attractive prices during off-peak seasons to attract a bigger chunk of clients
- Discounting. The idea has existed long in the hospitality industry. But currently, many amusement parks issue discounts based on timeline-where a client books early and it costs less than when they book in the last hours of the peak seasons, for instance, seats.
- Pricing strategy. Theme parks utilize a variety of pricing to increase profitability as well as manage their revenue flow. For instance, selling by period (off-peak and on-peak) and the daily tickets. Each pricing strategy is accompanied by different specifications and is aimed at maximizing space usage.
- Other important revenue management strategies that improve the financial performance of amusement parks include the physical rate fences and non-physical rate fences like the addition of transport charges and presents to customers.
Businesses segment customers mainly in four categories;
- Based on demographic information
- Geographical information
- Behavioral information
- Psychographics
A business can easily differentiate between the segments and structure its pricing to make one segment pay more than the other through price discrimination, where the firm eliminates consumer surpluses through 1st, 2nd, and 3rd degrees of price discrimination. To make this pricing strategy effective, companies must structure pricing based on the different market segments and control demand in a manner that one segment does not utilize all the available assets.
References
Garanti BBVA. (2018). Development of Sustainability in the Finance Sector. Retrieved from https://surdurulebilirlik.garantibbva.com.tr/about-sustainability/development-of-sustainability-in-the-finance-sector/
PARKWORLD. (2011). Yield Management : Park World Online – Theme Park, Amusement Park and Attractions Industry News. Retrieved from https://www.parkworld-online.com/yield-management/
Rangel, D. A., de Oliveira, T. K., & Leite, M. S. A. (2015). Supply chain risk classification: discussion and proposal. International Journal of Production Research, 53(22), 6868-6887.