Business Improvement - Essay Example

Introduction The report presents various strategic recommendations for business improvements in a major electronics company. On having been appointed as the consultants for the organisation what is needed to provide business strategies to improve the business in the region. In this report, recommendations will be made on various strategic and structural transformations that will provide the company the best possible course of action to implement for present and long term success. These would also guide the organisation to attain absolute competitive advantage over its rivals. The first task that the consultants undertook was to understand the current business model of the company. The below mentioned flowchart explains this model in detail: The electronics assembly company, a family-owned business, was established in the 1930s to produce radios. The company until the late 1980’s had an aggressive policy of new product development and was a major player in the fledgling electronics market. With the growth in the domestic market in the 80s, the company built a reputation for itself due to its superior quality, technology and innovative products. It appointed an assembly staff of 15 people with two qualified electronics technicians who previously worked in the R&D division of Sony and Microsoft. Due to the company’s strategy to operate in a highly competitive market with low margins, the company was able to garner a wider consumer base for its products. However, in the recent past, the company has been facing many challenges. First and foremost, there had been very little and often no growth in sales revenues for the past three years. Further, the company is not able to fulfill the stock requirements, as there had been no supplier arrangements between the company and the Asian manufacturers to purchase components on an ad hoc basis. This has resulted in the company not being able to assemble the product on time and fulfill the product requirements of the stores. There is also a lack of scalable leadership, the current CEO of the company would retire by the end of 2012 and no one has been nominated so far for the position. Also, the company needs specialised electronics technicians to replace the current ones, as both are nearing retirement age. Therefore, the inundating task before the CEO is to implement a strategy that would help the company to restore its growth and sales revenue by rebuilding its brand in the market and wining over competitors. Through this comprehensive strategic report, an outline will act as a guide in overcoming the ongoing problems faced by the company and help the CEO in stimulating the changes and creating a successful organisation. Discussion As discussed above, the CEO of this electronics company like other companies in the segment faces various challenges including increasing revenue and sales growth, undertaking product innovation, developing the operations and creating a scalable leadership. Further, midsized companies face issues such as addressing larger scale of production and supply with lesser resources (Wren, 2005). The company in this case study also cannot afford to allocate resources for product innovation and undertake large scale production. Further, the company is also facing problems due decrease in consumer brand loyalty and competition from other brands. Therefore, the CEO is looking at solutions that would provide tangible outcomes with low level of risks. In order to understand the challenges in detail, a comprehensive SWOT analysis was undertaken (Griffin, 2008) and Porter’s five forces analysed. SWOT analysis Strengths Innovative & quality products Low product price due to low margin Wider consumer base Sourcing components from manufacturers rather than producing them, thereby, cutting costs Weaknesses Does not have a strong leadership Not able to bridge the gap between demand and supply Lack of talent management Opportunities Company is known for innovative products till 1980s. It should leverage this image and start investing into R&D to develop newer products for the market. Threats The company faces major threat from various branded companies that are indulging in aggressive marketing strategies & lowering prices to counter assembled electronics companies The challenges discussed in the SWOT analysis are provided in detail in Appendix I. Porter’s five forces The Porter’s five forces highlight the five forces that affect the competitive intensity in the market. This model, developed by Michael E. Porter, has three forces that are external and two that are internal threats. These five threats are rivalry within the industry, product substitution, new entrants, bargaining power of customers and suppliers (Porter, 1980). The Poter’s five forces The company faces the greatest threat from various branded companies that are indulging in aggressive marketing strategies and lowering prices to counter assembled electronics companies (Porter, 2008). While applying the Porter’s five forces in the landscape of the company, the following results were found: Rivalry within the industry: Very high Bargaining power of suppliers: High Bargaining power of customers: High Threats of product substitution: Medium Threats of new entrants: Low The major components of the model is given in the below figure and the explanations in Appendix II. Conclusion In order to regain its lost market value, the company needs to adopt various strategic decisions, which includes reviewing the entire management structure of the company, undertaking resource analysis, revamping the supply chain and creating innovative products. In this part of the report, various business improvement strategies are discussed that the company would implement in a phased manner. In order to cope with the current challenges, it was decided to create new frameworks for the company. These frameworks provided various recommendations that were later applied within the company. Stress was laid on creating structural, human resource and strategic frameworks. Structural framework: Clear objectives and goals were defined, along with identifying key personnel and roles, as well as coordinated activities through the company’s hierarchy. It was found that it is essential for the company to create clear directions and hold people responsible for their tasks (Davis & Luthans, 1980). Human resources framework: Recommendations were provided to develop employee relationships and provide training programs. Effective training programs would ensure that the next line of leaders is ready to take up the mantel once the frontline leaders retire from their jobs (Shapiro, 1989). Strategic framework: Concentrated was on meeting the changing needs of the consumers. Recommendations were made in bridging the demand-supply gap by maximising the utilisation of available resources and undertaking new contracts with the suppliers. Also highlighted was made on the need to create innovative products (Coyne & Balakrishnan, 1996). Recommendations Following the comprehensive analyses of the company and creating various frameworks, following recommendations were provided: Developing core competencies: The company and especially the CEO need to develop the core competencies of the company to overcome the competitors. One of the major competencies of the company had been its ability to develop innovative products. One more recommendation was made on leveraging on this capability and aggressively investing into R&D to develop new products. This helped the company in gaining an edge over its competitors (Hitt et. al., 2007). Implementing a formal organisational structure: Currently the company lacks a formal management structure and does not have a scalable leadership. Also recommendation was made for the responsibilities to be delegated to various key personnel. The company was asked to shed its image of being a family-owned company and change into a private firm (Barak, 2000). For doing this, recommendation was made on creating a clear line of leadership and training the next line of leaders. This helped in countering situations that the company was facing, which was the forthcoming retirement of two of its R&D heads without anyone to take on their positions (Winter, 2003). Developing higher management: The also proposed that the company should identify and develop a strong CEO to lead the company. A company without a proper leader cannot survive in this competitive world, thus, the company was asked not only identify its next CEO soon but also create a management board to make it a true private firm rather than a family-owned one (Booth, 1993). Creating clear procurement policies: Recommendation was made for the company to rework its contracts with the component suppliers. As the suppliers only provide the components in bulk, they are not under any obligation to provide the company with added products on an ad hoc basis. This creates problems especially at times when there is shortage of stock. Thus, the company was asked to not just buy components in bulk but should also be able to procure them on ad hoc basis (Hitt et. al., 2007). Undertaking competitive analysis: The company undertook a competitive analysis to understand the market scenario. This helped the company in developing its strategy as per the current market conditions. For instance, the branded electronics makers are providing cheaper products and innovative financing options to lure customers from the assembled market. This knowledge helped the company to create innovative products and market them aggressively against these promotional offers. Diversifying product portfolio: One of the major concerns of the company has been the decline in growth and revenue. Thus, the company was recommended to diversify its product portfolio and asked to assemble consumer durable products along with electronics as they are a natural extension to their current product offerings. Proposal was made that by moving into a new area of business, the company would benefit immensely and would gain newer markets and customers. References: Barak, M.E.M. (2000). The inclusive workplace: An ecosystems approach to diversity management. Social Work, 45(4), 339-342. Booth, Simon A.S. (1993). Crisis management strategy: competition and change in modern enterprises‎, 201. Routledge. Coyne, K.P. & Balakrishnan, Sujit. (1996). Bringing discipline to strategy. The McKinsey Quarterly, 4. Davis, T. & Luthans, F. (1980). A Social Learning Approach to Organisational Behaviour. The Academy of Management Review, 5, 281. Griffin, Ricky W. (2008). Planning and Strategic Management. Fundamentals of Management, 67-68. Hitt M. A, Ireland D. R, and Hoskisosn R. E. (2007). 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