According to the information provided by the French IT Company, the following are possible causes of the losses encountered:
- Over staffing
- Poor organizational structure
- Corruption
- Presence of trade unions
- Lack of proper auditing units
- Stiff competition
One of the likely problems that the company might be going through is the problem brought about by a large number of employees in full and part-time employment. This becomes a problem in that the company has to spend a large portion of its output on paying the employees’ salaries and other benefits that are owed to them. For this reason, the company will not have enough money to use for the expansion and renovation of the company. As the machines get old their efficiency also goes down resulting in low output which causes the company to start making losses. Large numbers of employees are big challenges to the management; this is due to varied ideas that exist between individuals. As a matter of fact, it will become very hard and even impossible to come up with urgent decisions that pertain to the running of the company. Due to the long process that is to be followed in making such decisions some important organizational decisions are delayed resulting in some of these losses. The higher the number of employees the more complex is its organizational structure. This is then followed with high expertise so as to deal with such kind of staff. The implication of this process will result in the hiring of more experienced personnel that are in most cases expensive.
This problem can be solved by reducing the number of employees in the company. It should be done in a manner so as to have an understanding among employees and their employer, so as to avoid conflicts, the company can provide good term to early retirement hence encouraging as many people as possible to retire, for example providing such people with good retirement benefits, golden handshake to those that retire before their real retirement time.
Another remedy is the use of machines. Some departments can be reduced into a single unit by the introduction of machines that can cover a larger workload as opposed to individual workers. For instance, the use of computers as opposed to the use of a manual filing system will cut down on the number of employees in an office since it requires only a single person to operate the entire office.
This problem can be eliminated by the use of modern technology in management. The use of electronic communication systems can help this firm to cut down on the number of its employees. The use of emails for example can replace the work that is carried out by many office attendants in this firm.
This will cut down the amount spent on paying these attendants and therefore reducing the deficits made by this firm.
The companies’ organizational structure needs to be considered. This is due to the location of the company. It’s located only in major French cities. By so doing the company will cut itself from many consumers of its products. There are many consumers in rural areas that might never receive this service. The company should therefore decentralize its organizational structure so as to have outlets in small centers and districts. This will diversify its services so as to reach all classes of people in society. The more they sell their goods and services the higher the profit, which will help them deal with the current crisis they are facing.
The acquisition of the company was not very clear. It appeared to have been acquired illegally as it was against M&A wishes. This shows some acts of corruption involved in the company that leads to the loss of the firms’ finances. It is clear that the management of the firm is corrupt. According to Katariina Nilsson Hakkala & Pehr-Johan Norbäck & Helena Svaleryd (2008) is clear that affiliate local sales will decrease with corruption and affiliate exports will increase. Therefore corruption has a negative impact on the probability of a foreign firm investing in a country. This problem can be solved by ensuring that correct steps are taken when selling or making any transaction that relates to the company. Proper records should also be maintained so as to facilitate cases of corruption on demand. Those found guilty of any corrupt deals should be judged as provided by the law.
The presence of trade unions is another problem that the company faces. This is due to the demands that the union makes especially when these unions make demands that will force the company to raise the workers’ income. Any rise in employees’ income should be accompanied by a rise in output. With trade unions, this may not apply hence causing losses in the company. This can be solved by striking agreements between the employees and the company so as to avoid conflicts that might result from their salaries and other demands that may destabilize the company.
One of the major problems that the firm mighty is experiencing is the lack of proper audit units. Elhanan Helpman (2004) says that audit is paramount in any organization that seeks quality performance and output. Without this, the management may misappropriate its funds, over budget or under budget. Some managers may even misuse the firms’ resources which may lead to losses to the firm. This can be managed by establishing a proper audit unit both within the firm from outside the firm.
The company has experienced a lot of competition from other big and small companies. Across the years of its existence, other companies have been emerging that deal with the same line of production. This has reduced its area of operation that leads to a decline in its profit margin. This is a major challenge that the company should deal with to reduce these losses. Nicholas Economides and Steve C.Salop (1992) give an analysis of competition that exists between complementary goods and services and how they can be integrated into a single system. The Company should diversify its operations so as to provide goods and services that will be of the upper hand to their competitors. The company should come up with smaller retail points so as to close up channels available to their competitors.
The company may also be encountering a problem with its management strategies. According to David McClelland (1998) employees’ needs are in varying degrees and this mix of motivational needs will characterize the person’s behavior. This becomes a big challenge especially when its employees are demoralized. With such employees, there will be a lot of losses of tools and machines accompanied by poor output. Therefore this company needs to come up with a strategy that will look at staff welfare so as to provide motivation to them. The company should put measures that will ensure that its employees are motivated. Motivated people will constantly seek improvements and always working at their best. With such workers in a company, we will have it achieve its goals and hence in the long run record-high profits.
References
- Elhanan Helpman. Importance of internal auditing business firms, American Accounting Association, Oxford University Press, 2004
- Katariina Nilsson Hakkala & Pehr-Johan Norbäck & Helena Svaleryd. “Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms,” The Review of Economics and Statistics, MIT Press, 2008
- McClelland. Motivational needs theory. New York, Wesleyan University Press,1998
- Nicholas Economide and Steve C. Salop. Competition and Integration among complements, and Market structure. New York, Blackwell publishers, 1992