Shoes & Heels Company Operational Strategies - Case Study Example

Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: 2a. Literature Review According to porter strategy, company can adopt any of four cost strategies in its operations, it entails cost and profit mix (appendix 1).Cost leadership entails luring customers to buy your product may be by using attractive pricing but one should remain with the core aim to minimize cost and maximize profit. Therefore, firm should consider reducing production cost through use of technology, eliminating unproductive practices and using efficient machines, increasing the sales and having influence over the supply of raw materials where it can obtain them at a lower cost than its competitors for example buying large volumes or reducing proximity. It is suitable in market segment where customers are price sensitive in order to be effective (Kotler, Philip 1986). Differentiation strategy comes in when firm contains some unique aspects therefore, customers cannot choose competitor’s goods. Porter’s strategy is effective when combined with other strategies such as market segmentation and differentiation strategy. 3.4 Operational strategies. Operation management is core to any business success. S&H Company therefore, adopt diverse strategies in order to make sure all components of the business are well coordinated. The operations of the company are going to be both local and international since it is going to operate in United Kingdom and United States. According to Griffin and Pustay (2010), International Operations Management refers to the transformation activities of an international firm. The international activities entail sales and distribution to USA market. Operational activities regarding S&H Company are coordinated by chief operational manager who is assisted by S&H Store operational managers. S&H Company will major on procuring shoes from producers at a discount. The company shall then sale the shoes at their designated stores both in UK and USA. The company also shall distribute the shoes to its franchise where it targets to have 5 franchises in the first year of its operation in USA and 8 franchises in UK. The decision to buy the shoes instead of making was arrived at after considering financial, amount saved and human resource available for the company, which led to unanimous decision to buy from four major shoe makers who will be given various designs of Fleet wear. The S&H awarded the following companies to produce fleet design, The British Flat Shoe Company, Van Dal Shoes Company, Sargasso & Grey Company and Hotter Comfort Concept. The companies were contracted to produce fleet product due to its well known products which are widely recognized (Pustay and Griffin, 2002). The other consideration includes; expertise among the human resource, use of advanced technology, high efficiency and suitable terms of agreement. The shoes companies contracted are majorly based in UK since initial phases of the product requires close attention. The company will then export the final product to US market in large volumes in order to cut on cost. The company wish to contract US based company to manufacture fleet product once the product reaches growth stage since it will have perfected on the designs and estimated sales volumes based on designs (Pustay and Griffin, 2002). In order to ensure that companies are cautious on product cost, S&H Company will provide the cost range developed by research and development team. The range will be given deviation of 10% both above and below the cost arrived at by the team. The company will purchase fleet product at a discount raging between 10%-20% for every purchase that exceed $50,000. The companies agreed to have a margin of 15% after covering all the cost incurred in the production of the product. The contracted companies will source for raw materials, human resource and required machinery/technological while S&H Company controls the design and activities after fleet product are packaged (marketing and distribution). The company will then charge a margin of 30% to the franchises and wholesalers. The company stores and online shops will charge a margin of 50% on the total cost incurred per unit. The margin of 50% was arrived at after considering that it won’t be fair to sale to franchises and wholesalers at a margin of 30% and charge 40% to direct consumers of the company line of products. In order to stimulate franchisers and wholesalers segment, S&H Company aims at providing discount at 5% to any purchase greater than $8,000. The discount will increase wholesalers and franchisers margin, thus encouraging price reduction that increases demand in return, therefore, enabling S&H Company to make huge purchases that attract higher discount from shoe producers. The success of any company depends on the supply chain that the company adopts. The channel of distribution dictates the size of the market the company is going to serve and acceptability of the company products in the market (Martinez Ramos, 2004). S&H Company opted to choose too distributors, one to serve local market and another one to serve international market (USA). The distributors include Brooks International which will be tasked to distribute shoes to USA market to wholesalers, S&H STORES, franchisers and S&H online shoppers. UKD-UK Distributors will solely concentrate in UK market by distributing Fleets to wholesalers, franchisers, online shoppers and S&H stores. S&H Company aims at instituting advanced product management structure in order to achieve balance between demand and supply without straining its capacity. According to (Geracie, 2010), Product management is defined as an organizational lifecycle activity within company that deals with planning, forecasting, and marketing of product at all stages of the product life cycle. Fleet products therefore, need clear and defined product management strategy within its life cycle. The lifecycle of a product entails product development, product marketing and product strategy. Management of each position in the lifecycle ensures that the product grows to its maturity thus minimizing loses or product failure to fetch maximum returns. Fleet products will be produced in five different designs and with four colors; red, blue, white, black and grey. S&H Company will order 4,000 pairs of shoes of each design. The 2,000 pairs of each design with different range of colors which will be distributed to S&H stores in UK and USA. The remaining 2,000pairs will be distributed to franchisers that have already signed the contract with S&H Company, both locally and internationally (USA). The first patch of the shoes will act as the baseline to make annual quarterly (3months) forecast in order to ensure demand meet supply. The balance between supply and demand will make sure that the company does not incur shortage cost or high storage cost (Martinez Ramos, 2004). The ultimate aim being, profit maximization and maintenance of customer loyalty which is major goal of every business entity. The company shall ensure that sells increases by a factor of 10% every three months, the increase will be communicated by sales and marketing department to procurement department. Procurement department will increase the economic quantity unit to be ordered from companies licensed to produce fleet product. Maintenance of a clear organization structure and effective channel of communication must incorporate to S&H Company in order to ensure that operational activities flow smoothly without any confusion. The planning will entail increasing order quantity by 12% which is 2% higher than sales growth forecast. The order will be evenly distributed basing on designs and colors in order to reduce accumulation of slow moving design. The inter-store transfers will be exercised in order to avoid shortage cost and building up of stock in region with low demand. The company will combine both pull and push promotional strategy in marketing fleet product both locally and internationally. Pull promotional strategy involves helping franchisers and retailers to market the product in order to stimulate demand which increases the purchases made by franchisers and retailers. The push promotional strategy entails company marketing fleet product as an S&H Company which in turn stimulate demand for the product both online shop, franchisers shops, S&H Stores and retailers selling fleet product (Martinez Ramos, 2004). The channels of advertisement will be evaluated in accordance to coverage, cost and timing of the advertisement. The content should be appealing to professional women above 18 years since they are S&H major target. In order to protect fleet design, S&H Company shall patent the design in order to avoid duplication which will ruin fleet market. The research and development department will be tasked to ensure that innovative fleet products are launched yearly in order to keep the anxiety in the market under control and avoid shift in the market to competitor’s product (Martinez Ramos, 2004). The prototype of S&H Company operations is shown by appendix 2 where the relationship between different product cycle and activities are illustrated. Reference Geracie, G. (2010). Take charge product management. Chicago, Ill.: Actuation Press. Griffin, R. and Pustay, M. (2010). International business. Upper Saddle River, NJ: Prentice Hall. Martinez Ramos, M. (2004). Interaction between management accounting and supply chain management. Supply Chain Management: An International Journal, 9(2), pp.134-138. Pustay, M. and Griffin, R. (2002). Instructor's manual with video guide International business. Upper Saddle River, NJ: Prentice Hall. Warren, K. (2002). Competitive strategy dynamics. 1st ed. Chichester, West Sussex: Wiley. Wymbs, C. (2011). Digital marketing: The time for a new “academic major” has arrived. Journal of Marketing Education, p.0273475310392544. Appendix 1: Porters Strategy Competitive scope Lower cost Differentiation Broad target Narrow target Competitive advantage Appendix 2: S&H Company Operation Plan Read More