Poor Management - the Reason behind the Collapse of Kenya Castel Breweries Ltd - Research Proposal Example

POOR MANAGEMENT THE REASON BEHIND THE COLLAPSE OF KENYA CASTEL BREWERIES LTD Poor Management the Reason behind the Collapse of Kenya Castel Breweries Ltd Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 11, 04, 2011 Table of Content Abstract iii Introduction 1 Literature Review 3 Objective of the study 8 Research design and methodology 9 Problems/risks anticipated 13 Limiting factors 15 References 16 Abstract The main function of management of any corporate or business organization is to oversee the organization’s day to day activities so as to ensure the smooth running of all the aspects of the organization towards achieving the set goals and objectives. This report therefore analyses this important aspect of a business organization. It reviews the literature on the management of Kenya Castel Breweries Ltd and the management issues that led to its collapse in mid 2003 and latter its closure in 2004. Introduction Kenya Castel Breweries Ltd. Was a renowned company in the Kenyan beer industry. The company was established in the country in 1998 as an expansion of South African Breweries (Castel Breweries). The mother company was established in 1895 in Johannesburg and become the leading brewer in the South African beer industry. As a way of expanding business Castel Breweries moved on to open a branch in Kenya under the name Kenya Castel Breweries Ltd. The company was established to join other breweries in the area such as East African Breweries that were already established in the beer industry. The main goal for the establishment of the company was to use it as a breakthrough into the region (East Africa). Kenya Castel Breweries is located along Thika road 5 kilometers from Thika town and around 40 kilometers from Nairobi. The breweries cost around $40 million. The main shareholders of the company include the Castel Breweries of South Africa, who take up 51%, a consortium of Kenyan investors (34%) and the Dutch group FMO (15%). The company ventured in the manufacture of soft drinks, mineral water and beer under the Castel brand. Upon opening, statistics show that the company used to brew up to 500 000 hectoliters of beer a year. This later increased to 800 000 hectoliters. The company in the case study employed linier type of management and employed around 600 people including both permanent and casual staffs. It had a managing and directing body headed by the managing director/general manager who was in charge of overseeing all activities at the company. The C.E.O. of the company worked closely with this managing director especially in the matters of key decision making. Under the managing director were the various departmental managers in charge of the company’s several departments. The main function of these managers was to represent the company’s administration at department level (John 1993). They were the managing authority at this level and oversaw every activity in their departments and reported to the managing director. Examples of these managers included the production manager, marketing manager, finance manager, research and development manager, information system manager and the human resource manager among others. This shows that Kenya Castel Breweries was divided into several small departments. With all the above strategies the company could not survive in such a less competitive market as compared to its mother-company in South Africa. The company collapsed in mid 2003 and later closed down in 2004. Several reasons have been suggested as the main factors that contributed to the collapse of the company. Some analysts state that it was stiff competition from its already established rival, Eat African Breweries Ltd (Simiyu 2000). On the other hand, some theories suggest that political influence in the company’s management led to its closure. However, a close analysis of the company’s proceedings since its establishment clearly shows that poor management was the main factor that led to the collapse of the company in 2003. This is evident from the various researches done on the company as well as its documents such as financial reports. As thus, this research project hereby examines these issues of poor management, what they are and how they affected the company until it collapsed. Literature Review As stated earlier, there have been various articles written about the company. Some of them try to explain the reason behind the short life of the company. Some criticize its management blaming the whole team to have compromised the future of the company with their own greed (Simiyu 2000). This section of the research project reviews some of these articles and their relevance to the research question which is to reveal how poor management led to the collapse of the Kenya Castel Breweries Ltd. We live in the era characterized with advanced technology and globalization with business activities evolving each and every day. Markets have become more diverse and only the fittest and quick adapting businesses can survived in this era (Davis 1975). In the process of adaptation, cooperates have met several challenges that have seen some of these cooperates fall to the bottom of the value chain like the case for Kenya Castel Breweries Ltd. Over the years professional conduct and civility issues have been major contributors to the general success of cooperates (Gioia & Sims 1983). Similarly, business ethics have been a sensitive part of this success. With all these in mind, corporate owners are looking for corporate leaders who can empress these issues in this diverse global environment, leaders who are ready to adapt to the ever evolving market but still keep good professional conduct and maintain iconic corporate reputation. Leaders who can come up with effective strategies and the rationale of how a business/organization creates, deliver, and capture value (such as social, economic or financial). As such, management is a vital component of any organization whether social or business. It is the body that oversees all the above functioning of the business to ensure the smooth running and implementation of the company’s models into organizational structures, (such as human resource, workflows, and organ grams) and systems (such as production lines, information and technology architecture). Hamel (2000) states: Business management can be defined as the art of planning, coordinating and controlling business operations which requires that it be liquid and profitable if it is to survive in its niche market. In order for a business to attain this objectives, it has to create enough value for its consumers and clients in order that its revenues supersede its total costs. Business management in a word constitutes strategies and concepts that address specific problems that face business endeavours satisfactorily as value-adding organizations (p. 56). How the strategies are formulated and implemented greatly determines the long term survival of the business. The literature review on Kenya Castel Breweries Ltd reveals that most of the aspects above were not properly addressed. Dunstan states that there are several issues that should be properly addressed by managing body of any corporate. Among them includes the environment in which the business operates, the employee career goals, the customer base/market as well as complying with the state laws. As such, the management process of any corporate entails a lot of things that require responsible and professional handling and in an ethical manner (Dunstan 2005). The case at the company was different. One of the major problems the company faced was poor relationship with the local people. This resulted into continuous fights with people either in courts or physical fights that saw some properties of the company destroyed (Johnstone 2006). Another issue of poor management that greatly affected the company according to the literature reviews was mismanagement and embezzlement of funds. There were several corruption cases in courts that involving company’s funds. Most of these cases revolved around key people in the managing body. A good number of these cases were never completed and most of the culprits managed to get away with them (Dunstan 2005). The issues of delayed salaries for the employees at the company were common and led to several strikes from time to time. Other proves of mismanagement of funds were the company’s financial reports. (Johnstone 2006). He also states that lack of enough funds to run the company was the main reason that led to its closure in 2004. The cases of mismanagement of funds were very pronounced and eventually led to bankruptcy. With the bankrupt status obviously imply that the company could not cater for its bills. The company was thus forced to laying off some staffs as it could pay off salary arrears. Another major blow to the company was pulling out of key shareholders such as South African Breweries who saw no need to continue investing in such a mismanaged company (Johnstone 2006). Some incidences of poor business management are also seen in the way the company’s managing body coordinated the various departments of the company. Most attention seemed to be given to the finance department for the reasons best known to the managing body. This was done at the expense of all other departments. It is important to note that every department in any business organization is important and should be responsibly handled with professionalism and in an ethical manner (Dan 2009). As such, the managing body is obligated to clearly spell out the work of each department and supervise the departments to ensure that each of them is within the jurisdictions of its functions. For instance, the production department should take inventories of raw materials and oversee that these raw materials are properly used in the production process with minimal waste. The production manager in this case insures that the whole production process leads to products or services that meet the market needs and in right quantity. On the other hand the marketing team under the marketing manager is obligated with carrying out market research to determine which services are required. With this information they advice the production team accordingly. In other instances, the marketing department is charged with advertising and promoting the firm products/services. The finance department generates finances from possible external sources such as banks, stock markets, individuals among others. It carries out allocation of funds within the company evaluating the general firm’s expenditure. Daly Speedy & Jackson (2004) states that their main responsibly is to generate income for the firm and budget the generated income, maximizing on profits while minimizing on losses. At the same time the human resource department under the human resource manager is in charge of handling matters to do with the man power at the firm. According to Brenner (1997), “Human resource managers have a number of tasks some of which are hiring personnel, conducting training for personnel, coordinating the evaluation/appraisal programs and reward systems in companies and managing career related issues in the firm among others” (Brenner 1997, p. 53). Research and development mangers increase the firm’s efficiency and general quality of production by improving on the technology through researches on new advancements in the technology world. On the other hand, information flows in and out of the company are under the watch of the information manager who ensures effective and smooth flow of information between the company and its friends (suppliers, customers among others). They are also in charge of the internet issues at the firm. Even though the Kenya Castel Breweries Ltd had a well structured linier type of management that comprised all the above departments, the literature reviews on the company reveals that these departments were not properly coordinated to work together towards achieving the company’s goals and objectives. There was no cohesion among departments (Dunstan 2005). In his book Business ethics, Sultan states that one of the major factors that lead to the failure of businesses is a poor choice of a business model (Sultan 1998). Every business has a strategy in which it operates. This rationale of how a business/organization creates, delivers, and captures value (such as social, economic or financial), is called a business model. It is a profit oriented plan implemented by a firm to generate revenue. It is a vital component of a business as it converts technology into economic value, maximizing on revenues generated while cutting down on expenses incurred. Generally, business model refers to the broad rang of information and formal descriptions representing core business aspects including purpose, strategies, organizational structures, infrastructure, trading practices, and operational processes and policies (Sultan 1998). As a result business models are key structures of any successful company. Lack of good models or poorly structured business models are the downfall of many organizations/businesses. In his book Sultan (1998) highlights the collapse of Kenya Castel Breweries as a perfect example of this scenario. He states the course of this to be the unprofessionalism in the management of the company. The process of designing business models is part of business strategy. Business operations implement company’s business models into organizational structures, (such as human resource, workflows, and organ grams) and systems (such as production lines, information and technology architecture). Talking about human resource management as an organizational structure the company faced a major blow at the expanse of its success. Staffing of the company was another mess. High levels of unprofessionalism in the output of the company and its generally poor conduct was due to employment of college and university students on internship programs. These students were put in key positions that needed the element of experience of which they lacked thus depriving the company of expertise advantage. Objective of the study A number of issues have come up in the literature review especially management issues in connection with the collapse of the company. Daly, Speedy & Jackson (2004), state that most iconic business organizations survive on proper planning which provides direction by mapping the path to the set goals and objectives. Several businesses have failed due to failure of realizing this path to achieving their goals. One thing they do not know is that this sense of direction comes with proper team of management personnel. Kenya Castel Breweries Ltd is one of these companies that have fallen due to lack of direction and poor management. The objectives of this study are to research on these management issues that led to the closure of the company. The study seeks to identify what kind of issues they are, how true they are according to the literature review and how they affected the company. Research design and methodology In the efforts of achieving the study objectives that research may have various approaches. The project hereby proposes a number of research designs that will help evaluate the research questions. The research design for these objectives can include simple data collection as the objectives are measurable and results-oriented. The research design will evaluate and emphasize on cost effectiveness of the methods used by researching on the cheapest and most convenient methodologies. Each objective can have a different method of collecting data to determine if the objective will be met. The key target data to be collected is determined by hypotheses that support the objectives and goals of this study. Going by the objectives derived from the literature review, among the target data includes statistics of the company, various business documents such as financial reports, documents against acceptance and cash flow sheets among other documents. Minutes of board meetings especially those on financial and human resource departments are also important for the study. This is because these two departments have been greatly mentioned in the literature review. Information from former workers at the company may also be instrumental in determining the relevance of my study’s objectives. However, the collection of this data should be done with focus so as to ensure I do not collect irrelevant information. This implies both to the documents collected and verbal responses taken. Having stated the objectives, the project suggests research methods that can be used to measure how well the project objectives can be met. As indicated in the research design, most designs included case studies and data collection. The types of data to be collected included former employees’ reactions as well as their suggestions on the collapse of the company. Similarly, data can also be collected from former customers of the beverages and other corporate. The data collected has to be reliable so as to be used statistically to gather prove of objectives to be met As such, data collection methods can be used. For example, I can come up with questionnaires and administer them to former employees, local people and former consumers among others to find out their say on the project’s objectives. The questionnaires can be open-ended so as to give room for them to freely express what they think and feel in different contexts. Among the questions to form part of the questionnaires may include questions such as what affected the company. How was the company’s management? How did the company relate with the society? What one needed so as to secure a job at the company? How did the company appreciate its staffs? It is important for the questionnaire to provide room where the respondents can express their mind concerning the company. Interviewing is another form of data collection method that can use. Potential interviewee can be the same ones for the questionnaire. I can also interview people from companies that the company had gotten into partnership with such as Nairobi Water and Kenya Power & Lighting Co. The interviews have to give more emphasis on the research question (exact cause of the collapse of the company). The interviewee can also be asked for their take on the project’s objectives and their general advice. Both the above methods of data collection have the same approach. They involve a second party who has great influence on achieving the objectives of the dissertation (Patton 2002). As such, for the above objectives to be effectively met, data collection has to be done by convenient personnel. The questionnaire and interviewing exercise should not be biased and more emphasis should be given to relevant information for the sake of time and cost effectiveness. Moreover, because of the questionnaires, conducting field-test before use will be advantageous as it provides a rough estimate of the expected results. However it should be noted that equally these methods have their own weaknesses. The methods involve more people. Whenever there are many people involved there tends to be manipulations so as to fit different views and expectations. These methodologies are prone to external interferences. Similarly, the accuracy of such methods depends on the knowledge of the interviewee, who may give false information deliberately or either due to ignorance (Joubish 2009). It is with for this reason that I choose to incorporate literature review in my research design as a method of collecting data. It is another effective and easy methodology for my case study. It is less involving when it comes to finances as compared to other methods such as questionnaires and experiments among others. Issues of money have been the major hindrances of many activities including experiments and other researches especially the scientific ones (Joubish 2009). Literature review involves minimum movements and less time consuming thus becoming a cost effective methodology for the research. In addition, the fact that the method involves little contact with other people or organizations increases its levels of accuracy. Having decided on the methodologies, it is also important I be methodical. Being methodical helps the researcher remain focused on the case study. It also gives guidelines for the research from writing down research proposal questions, highlighting key topics in this case the effects of poor management on the collapsed Kenya Castel Breweries Ltd, making a list of alternative terms and above all creating a mind map to help think around the subject. A mind map is a very important especially in formulating hypotheses for the study. The hypotheses guide the study giving a rough idea on the expected results (Patton 2002). The methodologies above are aimed at collecting vital information for the case study. The information intended for statistical review has to be in relation with the research question and should be guided by the hypotheses as derived from the literature review and expected results. The research plan will provide data that will be used statistically to gather prove of objectives to be met. Statistical review process can involve analyzing the data collected. All questionnaire and interview with similar responses will be grouped together and analyzed for familiarity. The responses shall then be evaluated based on concrete arguments and facts. Numbers can be used as a statistical test. Numbers represent the views of the majority thus reflecting the situations as it exists on the ground. Therefore, the review has to give more consideration to the number of responses with similar ideas. This is for the sake of the qualitative data. The main reason why I will include questionnaires and interviews is to get this qualitative data. I can record the one-on-one or group interviews so as to analyze the data later. Sampling is another method of analyzing data that I will employ. This will help in the literature review and collection of quantitative data such as statistical numbers of the managers who worked at the company, the number of employees in every department, the quantities of beer brewed every year, the number of shareholders among others. Documents and articles addressing the study question are sampled for accuracy and relevancy to the case study. Upon conduction of a good research, the expected results should positive. This is because most of the objectives and interventions proposed reflected issues that affect similar companies. Therefore, they one way or the other reflected the majority’s suggestions considering those complications. Problems/risks anticipated Having come up with appropriate methodologies, it is important to note that the research may face a number of problems and challenges. This is because the procedure of finding concrete information is always hard. The implication of this is that one should be prepared to undergo all that it takes to achieve the objectives of the dissertation. Most of these problems and risks are brought about by the type of methodology one decides to use to gather information. For instance, using interviewing as the main methodology implies that one has to do more walking and socializing so as to gather the most information as he can and from different sources so as to compare their relevance to the study question. Having chosen administration of questionnaires and interviewing as part of my methodologies, a number of issues can be anticipated to be problematic and in one way or the other affect the study. Kenya Castel Breweries Ltd already collapsed a couple of years ago. This implies that most of the former workers of the company looked for jobs elsewhere. As such they are scattered. These people are my target interviewees as they are in the best position to prove of dismiss my hypotheses. It is anticipated that locating them may likely be hard. It may also involve more finances as I have to move from one area to the other in search of them. Talking of funds poses a major challenge as the issues of funds are always very instrumental in any research (Ross 1991). Another potential threat to my study is failing to get permission to access the company’s documents in its filing system. The company officials may not be willing to reveal the documents for fear of criticism. Similarly, they may fake the documents in the efforts of hiding the truth. One thing that I am sure is that getting access to these vital documents for my study will not be easy at all. Limiting factors The main research methodologies used in the dissertation were reviewing of the literature materials on the topic as recorded by other people, interviewing and administration of questionnaires to potential respondents. The methodologies have their own merits and limitations. For example for literature review, even though the merits exceeded the limitations, it is important to note that the accuracy of the dissertation entirely depended on that of the reviewed literature. It also restricts the research to the materials used. Another limiting factor as far as the study is concerned is the misleading responds for the questionnaires and interviews. This may be due to ignorance on the subject issue or manipulation by respondents so as to favor their views. The aspect of language barrier may also contribute towards this misleading information. The language interpreters used in this case may not give that first hand information as it comes from the respondents. The cases of misleading information will be major blows to my research objective as I will be forced to draw my conclusions from these responds, which may not represent the real situation as it exist on the ground. This will term my research ‘incomprehensive’. 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Ross, B 1991, Exploring Kenyan Market, Longhorn Publishers, Oxford University Press, Nairobi. Simiyu, G 2000, Leading the revolution in Kenya, Longhorn Publishers, Nairobi. Sultan, M 1998, Business ethics, Oxford Publishers, Nairobi. Read More