Background to the Business
Amouage is an Oman company that was founded by the Sultanate of Oman in 1983. It has its headquarters in Muscat, but its products are available in over 65 different countries around the world. It offers a wide range of products. In this study, the focus will be on the firm’s Operations Department and the product of choice will be the perfumes. The Operations Department’s role is to make the products sold by this company and accounts for 40% of the portfolio performance. The firm has a number of strong competitors in the global market. The table below shows sales of perfume made by Amouage in 2013 in markets outside the Oman market.
Table 1: Sales.
Customer Target
The perfumes manufactured by this firm specifically target the rich and upper-middle-class members of society who need a high value on every product they purchase. Customer needs that this department has to focus on can be given in a tabular form below.
Table 2: Weighted Customer Needs.
Most of these high-end customers value the quality of the products they purchase but are rarely bothered about the price of the products (Hill & Jones 2012). The price can be reasonably high as long as it delivers the value needed by clients. The Operations Department is capable of delivering high-quality products to meet the needs of the target customers but at high prices. Given that price is not a major issue to these clients, the department can meet the market needs in the best way possible. It will add more value to these perfumes to ensure that they meet the expectations of the targeted clients. This additional value may be offered in terms of having unique bottles for the perfumes, offering unique fragrances to meet diversified customer needs, and giving the bottles leather casing to make it more attractive and less vulnerable in case it falls. The additional cost of production can be passed to the clients in terms of pricing.
The Current and Desired Core Value Proposition
Amouage has been in operations for close to 35 years and its current and future core value proposition is the same. This department values its clients and seeks to continuously provide them with products that fully meet their needs despite the changing tastes and preferences. To do this, the Operations Department often conducts market research in order to understand changing customer needs. The department would then provide products based on these current needs in a way that outsmarts what the competitors offer in the market (Haberberg & Rieple 2007). This strategy has helped this firm to be one of the market leaders.
Marketing P’s and Key Success Factors
Marketing Ps
Table 3: Marketing P’s.
As shown in the table above, the perfumes must be of high value. They can be priced higher, but they must always be available at the point where these clients need them. Heavy promotion may not be necessary.
Key Success Factors
Table 4: Key Success Factors.
The experience of this firm in the fragrance industry and its team of skilled workforce are its major success factors. Its strong financial base and innovative management unit also make it stronger than some of its major competitors in the fragrance market such as Prada.
Audit of the Performance of the Operations Department
The Operations Department of Amouage is currently performing as per the expectations, but there is room for improvement. Most of the operational activities are managed from the headquarters in Muscat. As Freeman (2010) says, achieving operational success requires a detailed understanding of the market needs and having a workforce and leadership that is experienced and skilled in their areas of specialization. The following table shows operational activities that this department has recorded exceptional performance.
Table 5: Core Activities (Operations Model).
These core activities of this department were closely compared with some of the best practices in the industry, especially that of Gucci and Louis Vuitton known for their high-quality products. It was established that this firm’s strategy of obtaining raw materials was good, but needed some improvement. However, a number of issues about transportation were noted to be necessary, especially in terms of ensuring that products are delivered to the world market in time as expected by clients. Processing of the raw materials into the perfumes and adding value to the final product at this department was determined to be adequate, though it can be improved if mechanization is embraced by the production unit. Storage strategies used are good but can be improved further by adopting modern technologies when it comes to storing the delicate raw materials.
In order to improve the performance level of the Operations Department, it may be necessary to use Supply Chain as a managerial tool. The figure below shows primary value activities and secondary value activities that this department should focus on as defined in Supply Chain Framework
Figure 1: Supply Chain Framework.
As shown in the table, this integrated approach of managing operations starts by closely coordinating the inbound logistics by ensuring that the raw materials are made available in time. The operations (production of goods) should be based on clearly defined needs and should be done on time using the assigned resources (Cole 2007). The outbound logistics management would involve ensuring that finished products are made available in the market at the right time. Marketing, sales, and other services should also be closely coordinated to ensure that whatever is produced is sold off within the expected time.
Amouage’s infrastructure, human resources, technologies, and procurement may help in improving the outcome of the individual primary activities above. As Sekhar (2014) notes, the supportive value activities help in ensuring that primary value activities are done in an efficient and cost effective manner. For instance, having proper infrastructure within the production unit based on emerging technologies will ensure that the processing of raw materials into finished products (operations) are done in a coordinated manner. The production unit will be in a position to coordinate with the marketing department to determine demand and communicate to the supplies unit about the quality and quantity of the raw materials needed within a specified time (Hill & Jones 2012). A highly skilled team of employees and innovative managers can also help in ensuring that the activities in the value chain are undertaken in a skillful manner.
Resource and Capability Evaluation
In this section, it is important to evaluate the capabilities of the resources used by Amouage’s Operations Department, identifying some of the strengths and weaknesses. The following table summarises the resource capabilities.
Table 6: Amouage’s Resource Capabilities.
The table above shows that the strength of this film lies in its improved operations infrastructure and talented workforce that makes the production process simple and less time-consuming. However, this firm may need to find ways of adjusting its leadership strategies in line with emerging trends. It is also clear that in this industry, the financial reserves should not be considered a major strength.
Management Agenda
The Operations Department should take the next 36 months to improve its systems and structures in order to have a better performance in its operations. The changes that ought to be made are will not bring a radical shift from the way the current operations are being conducted, but it will need some adjustments. Issues such as reduced cost of operations and time wastage, the improved value of products, improve employees’ morale, and integrated operational activities are the main agendas in this reform process.
Table 7: Improvement Agenda.
A cost-benefit analysis of these five main improvement areas reveals that this firm will be forced to spend more to install new machines, train employees, and give them good remuneration. However, the benefits outweigh these costs in terms of improved performance and high quality of products delivered. As stated in the table above, to reduce time wastage, some of the processes in the production unit may need to be automated to improve speed, quality, and standardization. The initial costs of installing the machines may be high, but the benefits in terms of the reduced cost of labor and improved service delivery far outweigh the costs. When analyzing the target market, it was clear that these customers expect very high-value products. To offer this value, the operations manager, with information from the marketing department, will need to add value to the products to meet clients’ expectations. The cost of doing this may be high, but it comes with the benefit of increased sales in the market. Improving employees’ morale will mean spending more on them, but their improved performance will have a positive overall effect on the firm. Finally, integration of operational activities may need modernization of the internal communication infrastructure, but once this is done, the operations will run smoothly and without miscommunications.
Internal and External Linkages
According to Thompson and Martin (2005), internal and external linkages are very important in ensuring that the Operations Department delivers on its mandate in the best way possible. Internally within this organization, the Operations Department should strengthen its linkage with the marketing department. These two departments should work very closely in ensuring that customer needs are met in the best way possible. The marketing department’s employees are always in constant interaction with the customers hence they know what they need. This information about changing customer needs should inform the activities taken by the Operations Department. This way, the firm will always be in a position to deliver the best value to its clients (Sadler & Craig 2003). The Operations Department also needs a close linkage with the external suppliers, especially those responsible for delivering unique materials used in manufacturing the products or packaging the finished products. For instance, this department should have a close relationship with the English company responsible for making its bottles to ensure that changing customers’ needs are met. With such close coordination, this department can find it easy to adjust the quality and quantity of raw materials needed without having any constraints with the supplier.
List of References
Cole, G 2007, Strategic management: Theory and practice, Thomson Learning, London.
Freeman, R 2010, Strategic management: A stakeholder approach, Cambridge University Press, Cambridge.
Haberberg, A & Rieple, A 2007, Strategic management: Theory and application, Oxford University Press, Oxford.
Hill, C & Jones, G 2012, Essentials of strategic management, South-Western, Melbourne.
Hill, C & Jones, G 2012, Strategic Management, Cengage Learning, New York.
Sadler, P & Craig, J 2003, Strategic management, Kogan, Page London.
Sekhar, G 2014, Business policy and strategic management, I K International Publishers, Cape Town.
Thompson, J & Martin, F 2005, Strategic management: Awareness and change, Thomson Learning, London.