Introduction
The aim of any kind of business is to make profit. Companies do the best that they can in order to realize the best results. They try to minimize their production costs in order to be able to present the minimum price possible for their products in the market. Nevertheless, they encounter problems here and there that finally increase their costs and hence they raise the prices.
As a result, they fail to meet the target of their sales, as consumers tend to compare prices of related goods in the market and rest on the cheaper ones. First mover companies may seize the opportunity to maximize their sales before other companies come on board but if their commodities are expensive, they do not make enormous sales.
The fact remains that, consumers do not frequently buy expensive goods given that people do not have equal potential financially (Miller & Stafford 2010). Therefore, any company or organization that seeks to make profit should apply tangible strategies to ensure a maximum growth. T
his can be achieved through trying as much as possible to minimize the costs of production in order to make wonderful profits. In addition to that, they should be innovative and produce goods and services that are of reasonable standards. They should be in a position to compete with other companies producing similar products.
Purpose
The purpose of this paper is to present the problems affecting the Oz Company, which specializes in the production of clothing products to be able to compete with other companies producing similar goods. It is located in Australia, a country where people have high tastes for different types of clothes. The company is almost grounding since it is facing stiff competition from Chinese companies producing similar products.
The products of these companies have found their way into the country, and have posed a great threat to the existence of the local companies producing similar goods. Their clothes are of high quality and they come at a cheaper price compared to other similar but local goods.
This makes consumers to run for them knowing that by doing so, they are grounding the local companies producing the same. Any given company must consider coming to the level of the consumers in terms of price in order to make tremendous sales (Miller & Stafford 2010).
Direction/ Objectives
The objective of this paper is present tangible solutions to the problems affecting this company. By the end of it all, it will be in a position to act in the right way, which will bring about consistent growth. By pointing out the problems that affect the company, solutions can be taken to ensure that they do not persist. Therefore, the company will be able to produce high quality clothes, which will stand the existing competition in the market.
The paper focuses on making the management of the company understand that the proper strategies should be taken in order for the business to prosper.
A large amount of capital should be employed; the workers should be fairly treated to maintain them and ensure that they do their work to their level best (Jackson, Schuler & Werner 2011). In addition to that, quality products should be produced to make sure that they capture the attention of the customers. It is only by applying all those essentials that the company will succeed.
The scope
Internal factors affecting the Oz Company
The company’s labour costs are too high and there is too much inflexibility in its labour utilisation. This could be because of the nature of the country because it is not suitable for a low-skilled labour intensive industry like Oz’s. In addition to that, the government has imposed very high payroll tax.
Therefore, the company is not in a position to maintain a high number of employees given that it has to pay tax on each one of them. Without the proper human resource, a company cannot realize its goals since it will not be able to execute all the duties effectively (Jackson, Schuler & Werner 2011).
The government of any given country plays a very important role in determining the success of the local companies. By imposing high payroll tax, it limits a company from employing enough human resources. Forcing the companies to pay high company tax adds to the pain as all that adds to the expenses. At the end of it all, the company will end up making very little profits when all the expenses are subtracted.
The government may claim that it is concerned with the rising unemployment in the country but be the one fostering it. High pay roll tax will definitely make a company limit the number of employees and as a result, they will be overworked (Jackson, Schuler & Werner 2011). Similarly, company tax rates remain high and there are no hopes of them coming down since the government seems to have ruled out any farther cuts.
Another problem that is letting the company down is the production of commodities that lack originality and are not seen as fashionable. Underwear lines are commodity type products and it would not be sensible manufacturing them with the existing cost structure. The situation is so bad such that the large retailers have started cancelling their orders.
This is because their customers are not in a position to pay the high prices that the company imposes on them. It would be better for the company to consider the manufacturing of premium high fashion products. This will enable the company to compete effectively with products from international companies.
A company with the intention of capturing an ample number of customers should ensure that its products are of high quality and reasonable prices (Ireland, Hoskisson & Hitt, 2008).
The failure of the Oz Company to make competitive products has added to its possibility of grounding. Non-competitive products results to fewer sales and out of this, the company cannot make enough profits to pay its workers. That coupled with the fact that the goods come at a high price in the market reduce the success of the business.
There are many expenses that are incurred in the course of production of the goods that and that significantly raises its production costs. As a result, the entire burden is placed on the consumer who has to bear the high prices in order for the company not to sale at a loss.
External factors affecting the company
Oz clothing is one of the companies that are being affected by the economic downturn and international competition that are affecting our Australian manufacturing operations. The company is not in a position to compete because Chinese companies on the same line are beating them by producing high volumes of basic clothing items. Their products come at a lower price and many consumers are running for them.
On the contrary, the productivity of Oz is too low and its production costs are too high leading to high costs of its products. For the company to keep going it should consider outsourcing all its manufacturing (Kummel, Weygandt & Kieso 2011). The other option is to establish its own plants in China but this would be difficult because it does not have the needed capital.
The company has unpaid bank loans and its shareholders would not allow it to take more. Capital is a necessity in the starting of a business. Therefore, Oz should improve its efficiency in order to deal with the domestic manufacturing problems affecting it.
Australian company problems can best be solved the abolishment of low-skilled labour intensive industry. This strategy will not come easily as the Clothing Workers Union (CWU) will fight against it. This is because the union has lost a large number of members and whose financial situation is worse than that of the Oz Company.
The Australian government will definitely not support this since it has used millions of dollars in this kind of industry. It will not take it lightly since many people are going to lose their jobs. The union will pressure the government to force all the companies that take on that line to drop it. In addition to that, the issue will have a lot of political influence since politicians fear losing votes.
They cannot publicly support the move given that the people they are seeking votes from are going to lose their jobs. Most economic issues affecting different countries have a lot of political influence (Ireland, Hoskisson & Hitt 2008). The politics of a given country can lead to collapsed economy as it affects different areas of production, which bring about economic growth.
The government may stop reducing tariffs and increase the companies’ protection from Chinese competition but that would be very difficult in the current global economic crisis. The Australian government has spent billions of money in trying to kick-start the economy, and is worried about its debt situation. Taking that move would also affect the country’s trade relations with China.
The politician will definitely suggest an alternative to the plan. They may talk about becoming more innovative and competitive, but end up doing nothing to help achieve that. Recently, the Australian government has had various changes in the Industrial Relations, which may lead to cost increases and greater union power.
That way, the Oz Company may end up having even less flexibility in managing its staff than it does right now. The government of any given country plays a very great role in determining its economic status (Organisation for economic co-operation and development. 2007).
Australian Council of Trade Unions may do the company a great favour by pushing for a “buy local” campaign. This would require the federal, state and local governments to give preferences to Australian made products but that would risk breaching international trade treaties.
Therefore, it would be difficult for the federal government to agree to that because it would mean that it would be advocating protection and free trade at the same time.
Any country that restricts products from other countries from finding market in it undermines international trade and is likely to face the same situation (Kummel, Weygandt & Kieso 2011). It appears that the company can no longer rely on government assistance via subsidies and tariff protection to be bailed out. Therefore, it should different strategies that will result to substantial growth, which will lift it.
Trade union power is likely to increase and that would promote its ability to fight against low-skilled labour intensive manufacturing. In addition to that, company tax rates may not be made more competitive and the commodity-type products will not be competitive if manufactured in Australia. The Chinese companies have a great market since they sell their products in their own country and outside including in Australia.
The Oz clothing company can consider doing the same but the big problem would be lack of capital. To make the matter worse, major customers continue seeking even lower prices, directly sourcing more, and more of their products from China.
Therefore, in order to offer Chinese companies stiff competition the Australian companies should focus on design and fashion, innovation and small-batch manufacturing. Products that display quality innovation and design (Miller & Stafford 2010) always attract consumers.
There is a great need of value-added brands, not volume. Therefore, the Australian manufacturing operations should be closed and all the machinery and equipment sold off but the greatest problem is with the union. For example, the Pacific Brands has suffered threats from the Transport Workers Union that they would not allow the company to sell their manufacturing equipment to China.
Transport determines whether goods will reach the targeted customers or not and its delay causes adverse effects (Kurtz & Boone 2011). Therefore, the union and the politicians will definitely raise the matter of the company’s senior executive remuneration. The real problem is that governments have for far too long protected the clothing and textile industry.
Therefore, the companies that are in this line of manufacturing have become fat and lazy. Now that the good old days are gone due to the economic downturn and globalisation, the companies are now in problems. They will have to learn to work again, instead of living on government handouts.
Taking on the suggested move will greatly affect the more than six hundred factory workers it employs. These people are human beings like any other and they have families and more so children to take care of.
Strategy
For faster movement of products between the manufacturers and the consumers, they should be presented to the market at a reasonably cheap price (Great Britain, 2009). This is only possible when the production costs are trimmed down effectively.
Expenses should be minimized as much as possible since they count a lot in the increments of the costs. When the cost of production is kept low, the products will be sold at a low price and many people will afford to buy them. There will be a continuous movement of the product and that will ensure that the company produces more and more hence making high profits.
The company should consider manufacturing Premium high products. This kind of products are characterised by innovative design and niche marketing (Ireland, Hoskisson & Hitt, 2008). Therefore, the company will be in a position to attract more customers and hence make more sales.
This way it will be in a position to compete with those Chinese manufacturers who have lower costs, expertise in mass-market manufacturing and no workplace rigidities. In short, all the companies should consider exiting low-skilled labour intensive manufacturing that is widely spread in the country. It is only through this that they will be able to produce quality products that can pose the much-needed competition.
After all, as said earlier, all forms of business aim at making a profit. The presentation of quality products in the market increases the chances of making higher profits since the goods will not be left lying on the shelves for a long time. The movement of goods determines when the next batch will be manufactured or released to the market and all that determines the amount of sales made at the end of it all.
Human Resource
The human resource department is one of the most important in any given company or organization. It ensures that the there is enough skilled work force and their rights are taken care of. For any company to succeed it has to have a competent team and this can only be achieved through motivating the workers through various ways (Mathis & Jackson 2010).
They should be given the best pay package possible, which should come with different allowances. There should be transport and medical allowance, which are the most important for any given employee. In addition to that, they should be given some time off in the course of their duty.
The off period should be paid and if by any chance that particular employee is called to work during that time, he or she should be paid double. Through all these, the company will maintain its employees.
Stakeholders’ analysis
Several stakeholders have different interests and all of them compete with one another. In this case, the most important stakeholders are the Clothing Workers Union, which seeks to save jobs, minimize falling and to support the manufacturing sector. The Oz clothing company looks forward to minimizing loses and sustain its business activities. It will do this by applying different strategies, which will enable it turnaround for the better.
The other stakeholder is the federal state government, which controls and minimizes trade and thus negatively affecting the companies. It imposes a variety of taxes that add to the expenses of the company therefore raising the production cost of commodities (Organisation for economic co-operation and development, 2007).
Recommendations
In order to succeed, the organization of the company should restructure in order to minimize the staff (Kummel, Weygandt & Kieso 2011). This will reduce the amount of payroll tax that it pays to the government. The amount of money paid to the employees in terms and wages will be reduced. This way the company will have reduced the total amount of expenses it incurs in the process of producing the goods.
Therefore, it will be in a position to record a reasonable growth, as profits will automatically go high. It should also have a clear focus and this can only achieved through setting goals that have to be achieved at the end of a specific period.
Properly trained staff ensures that a company produces quality products that capture the attention of many customers. Therefore, the company should consider retraining its staff every now and then to ensure that they are equipped with the proper skills to meet the demand of the consumers.
Conclusion
Any business aims at making profit. For this to be realised various strategies have to be put in place (Feldstein, 1995). Oz clothing company has failed in this is facing serious problems which threaten to bring it down. Its products cannot stand the stiff competition in the market presented especially by Chinese companies producing similar goods. The government has also played a significant role in the problems of the company.
It has imposed high pay roll tax, which has raised the expenses of the company, and the company tax it requires them to pay has done equally the same. The government increases a company’s cost of production by imposing high pay roll tax and company tax (Organisation for economic co-operation and development. 2007).
The company must consider manufacturing products, which are of high quality and present them to the market at a reasonably cheap price. It should minimize is staff and keep retraining those available to equip them with new skills. The employees should be treated with a lot of care in order to maintain them. They should be given a good pay package, allowances and sometime of to refresh their minds.
The option of dealing with Australian company problems is the abolishment of low-skilled labour intensive industry. This will be limited by the Clothing Workers Union, which seeks to save jobs since taking that initiative will lead to lose of jobs for very many people.
References
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Kummel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Financial accounting: tools for business decision making. Hoboken, N.J: John Wiley.
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