Functional Areas of Business: Clemency Prior’s Ice Cream Case Study

Analyzing the operations management of a company, it should be mentioned that the operational function includes actions, as a result of which products and services provided to the external environment are produced. Thus, the functions of operations are inherent in every company’s structure, otherwise they simply cannot exist. In that regard, the notion of operations implies the process in which all the activities of the organization are included, contributing to the overall competitiveness of the organization. This paper analyzes the functional areas of the business, based on the case study of Clemency Prior’s Ice cream business. The paper analyzes the key issues that the company is facing in such areas as marketing, operations, and human resource management, along with providing recommendations on the decisions that should be taken to promote the further development of the business.

Overview of the Case

The case is about a family business venture in which a moderately successful ice cream company is facing a dilemma. The dilemma is mainly about a possible development in the company’s strategic visions, where being reluctant at first to use supermarkets as distribution channels, the company relied mostly on independent stores, actively promoting the position of the company in opposing supermarkets. Coming into a situation, where the expansion and the development of the company is inevitable, the company started to face a lot of issues starting from complaints from retailers, and to necessary investments due to the problems of capacity. The aforementioned is combined with the plans of the company to reach a turnover of £18 million by 2014. In that regard, it can be seen that the main forces that are promoting the necessity for change in the company are mostly compatible with the main characteristics of this era, i.e. volume and variety and accordingly with no compromises to quality. (Brown et al., 2005).

Key Issues

The key issues that Clemency Prior is facing can be divided into the several categories, which can be related to different areas of management.

• Financial Management – The financial management is basically, the ability of the company to finance the company’s operations and have sufficient revenues. In that regard, in the case of Clemency prior this can be related to two key issues, one of which is the need for investments driven by the possible expansion of the production line, and the other thing is the decrease in net profit margin from the previous year, resulted from the firm reaching its capacity in manufacturing.
• Human resources management – The HR management is directly related to the core competences of the firm (Brown et al., 2005), and accordingly, is one of the main approaches to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce. In the case of Clemency Prior, the key issue is related to such factors as the need for expanding the staff of the company and the related organizational implementations in terms of policies and rewards, and the necessity of a culture change in the company, where the friendly atmosphere in the company might be suitable for a small scale company, but nevertheless, the forgiving attitude associated with such atmosphere should be changed when the company is operating on a large scale.
• Distribution and supply – The definition of distribution can be summarized as “ensuring the availability of the right product, in the right quantity and the right condition, at the right place at the right time, for the right customer, at the right cost.” (Greasley, 1999). In the case of Clemency Prior, the distribution is concerned mainly with the location, i.e. independent stores versus supermarkets, and accordingly the cost. The new distribution channels imply increasing the capacity of the manufacturer and possibly a new system of payment, where the cash flow might be affected due to supermarkets usually delaying their payments. In the case the company agrees to the offer of the supermarket to include their production, another aspect that should be reconsidered is the system of logistics and inventory. With the increased demand, the current system implemented in managing inventory within the company, where the demand is not regulated but rather the production is held in stock, is not suitable.
• Marketing – The marketing issue in the company can be related to the way the company will approach the introduction of the new flavours, the type of flavours and the reasonability to do so. The lack of proper market research might have served the company well so far, but with the intention to expand the capacity and the demands for new flavours requires that the company to assess the position of the products in the market as well as distributors and customers demands.

Recommendations

The key financial actions that should be taken by Clemency are related to improving the cash flow in the company. It can be seen that the current cash flow of the company might be affected by the decision of the company to pay the suppliers immediately while the payments of distributors are delayed. In that regard, it should be recommended that the company change the relations with distributors and suppliers by creating Incentives for faster payment for distributors, while raising the prices for selling on credit and thus raising the profits of the company. Additionally, increasing the net profit margin can be achieved by controlling the costs, the prices and the volume. The prices will be regulated based on the relations with the distributors, i.e. on credit or cash. The volume of the production will be regulated through the increased capacity of the production and accordingly the increased number of customers served through introducing new flavours. The costs can be decreased through raising the effectiveness of the supply chains, so fewer products can be held in stock, and accordingly saving on storage. The latter will solve distribution operations as well.

Operations actions, on the other hand, might be concerned with the need to increase the capacity of the production. The adjustments of the capacity in this case will affect the competitiveness of the company through price, speed, and quality. In this case, the company must establish a long term capacity, which should be adjusted in middle terms. Investing into technology, in a case of a guaranteed contract of distribution with the supermarket chain, will justify the returns of the investments in the long term. Accordingly, “[h]having established long-term capacity, operations managers must decide how to adjust the capacity of the operation in the medium term… [which] usually involves an assessment of the demand forecasts over a period of 2–18 months ahead.” (Slack et al., 2007). Additionally, the transformation process should involve changing other aspects including marketing, personnel, logistics, the structure and the culture.

Taking the HR aspect of the company includes inserting new policies of rewards. In that regard, the business environment that started as mutual participation in building the business should be shifted into more formal relations. Thus, what has started as a reflection of McGregor’s theory Y, should involve theory X by stressing productivity, incentive schemes and a fair day’s work’. Accordingly, a mixture of soft and hard HRM will allow the company to value its employees and at the same time control the productivity of the employees with corresponding measures. In what concerns the culture of the company, it can be seen that HR, management and culture can be directly interrelated in terms of their dependence on each other. This change in culture can be related to a change in the business model of the company. The initial model was the family model, low decentralization and low formalization at the time of foundation, where the power, the authority, and the rules were concentrated within one person, Clemency Prior. The proposed model is the machine model, i.e. a model that can be characterized by an emphasis on a high degree of formalization and a high degree of centralization. (Burton et al., 2006) In that regard, in case the management of the organization will be changed simultaneously along with the expansion, the cultural change is inevitable, specifically in the case the company will be managed by an external agent. Breaking the settled rules will be one of the urgent issues during the changes in the organization (Charan, 2006).

Finally, taking in perspective the contract deal with the supermarket chain and the increase in the capacity of the firm, the marketing aspect can be a vital factor in a company’s operations management. Marketing is directly linked with operations, where they are aligned together in a way that marketing is successful when successful operation management is supporting it. In the present case study, the marketing strategy should be changed due to two factors, i.e. the introduction of new products-flavours and the cooperation with supermarket chains. In that regard, the company should conduct a market analysis to analyze whether there is a demand for new flavours on the market, and if so outline which flavours should be used. The scale of marketing should correspond to the increased capacity of the company, creating the demand, based on which this capacity should be adjusted in the middle term.

Conclusion

It can be concluded that the presented case study reflects the common aspects that mostly small firms face during their transformation process. This transformation is inevitable for any company which has a stable and constant growth. The transformation applies to most of the operations within the company’s activities taking the business into another level. Nevertheless, an important notion that was not approached in this report is the factor of risks associated with such transformation. It might be implied that, the company reaching its capacity along with the existing offer of expanding the distribution channels minimizes the risk factor, enabling smooth transformation.

References

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