In yours organization, change is inevitable if profitability is going to be maintained and winning the trust from the bank. Change is not only in the people’s lives but also in our organizations. in your organizations a lot needs to be changed to avoid the problems that are being experienced currently. The change that should be implemented will take many dimensions in the short run and long run.
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Tough measures need to be taken to make the company afloat. Your company throughout has been successive but in recent times they have experienced a decline in market share for your brands. Unfortunately these changes are due to cutthroat competition in the industry of your operations. In business, gentlemen you have to know that in order to sustain the status quo or survive in this highly competitive environment it is not cheap but very expensive.
To maintain this standing in the market, you have to spend more money in various activities such as advertising, inventory management, and improvement of quality, re-branding, brand extension, differentiation, and vertical integration with suppliers, expansion and going international. This will enable you maintain and sustain the market interest in your products and services, although this is vital in the long run, if spending is not checked therefore you should strive as much as possible to maintain the existing customers and continue making new ones too.
Analysis of global households’ brands
The company has been performing very well under block drug name before changing to the current name, global household brands. The company took a credit facility from a bank and you agreed with the bank that you were going to maintain sales of 50 million the first year, 55 million the second year and 70 the third year. The agreement further stated that earnings before tax and depreciation were going to be maintained at 7 million first year, 8 million second year and 11 million third year.
However the results of the 1st year has become very disastrous something that needs strategic plans, to get out of the mess. Observation from the result the company reported profits which was six percent lower than what was expected, there was an increase in wastage in one of the brands, the quantities produces also reduced to less than 60% of the previous production standards, quality was also compromised, more worse key staff members left the organization, customers also did not earn their interest of 6 %. Freight costs were also out of control and there is fear that some of the customers may leave the organizations.
If the bank happens to call the loan, the company will be in great mess which may take time to show out. They may also liquidate. This is a dangerous scenario for this organization. These indicators may or may not show that the internal effectiveness and efficiency of the company is declining. The conclusion is not yet firm because other indictors may be indicating that the company is in a position to improve the result.
How to improve the organizations performance
From the statement provided by the directors of this company, they are in an industry that has big spenders who are able to capture the market. To turn around the company a lot needs to be done which will ensure the organization achieves sustainable growth through building a more flexible and strong corporate structure to meet the challenges introduced by existing and entry of potential competitors.
Short term strategies
In order to return the company into normalcy by reducing freight costs, maintaining existing talented employees, attract new customers to take and existing customers to take discounts and reduce debts the company needs first to deal with the human resource department. This is where there is a problem. Then they will deal with stock control, improve quality.
- Human resource – more than ever human resources strategies and objectives should be integrated with the organizational goals in order to achieve maximum results. Human resource is one of the key success factors in implementing any strategy in the organization. Therefore they must support any organizations ideas. To begin with the incompetent, head of operations and purchasing should be fired and a more competent person put in his position because he is incompetent it appears is the reason why freight charges go up, discount are not taken up, production is of poor quality and is far below capacity. Once this man has been removed the new recruitees will be required to contain wastage increase production to capacity, improve quality and manage stock effectively. Other measures that will be taken in the Human resource department in the short run to maintain profitability is creating a good conflict resolution mechanism that employees will use in solving their conflicts. There should be introduction of performance appraisal where an employee if rewarded according to effort put to achieving organizational goals. Gentlemen to achieve this, you must be ready to sacrifice your personal interest of any manner in relation to employees because promotion transfer will be determined by this performance appraisal system that will be set in. I need to state here that several factors affect the effectiveness of performance appraisal and this are job related criteria, performance expectations, standardization of performance, continual communication and the process itself. It is a difficult exercise but gentlemen you have no option but to take these routes
- Stock control – Another strategy that needs to be taken in to improve performance is stock control. At the moment freight costs have gone way out of control and to control these risks and keep it minimal various decisions must be made. To begin with, inventory management should be based ion production, storage and freight costs. These costs must be minimal. The company should adopt economic quarter approach in managing the stock. This will ensure that the stock that is in stock is enough to sustain production at the same time is at lower cost as well as purchases made from outside are not at a higher cost. There should be always a review of the policy in relations to economic quarter quality. If the freight costs have gone up and the company is normally using economic quarter quantity approach then you should think of implementing just in time approach to manage stock. However, just in time approach will require a long term decision of entering into vertical integration with suppliers as well as entering into strategic alliances with suppliers by ensuring that the suppliers are able to supply the goods the time they are needed. However this requires a huge financial outlay.
- Renegotiating the terms of the loan – you should think of approaching the bank to renegotiate the loan as you recognize the business. Without this approach, the company may find it difficult to implement short term or long term strategies to improve the performance because the credit facilities from the bank will always be there and if the terms are not negotiated the bank may move in and liquidate the business. Therefore I will urge the management to approach the bank and renegotiate the terms as they re-organize the business.
- Re-branding – another short term approach that should be adopted by the management is rebranding where these products that have reached the maturity level are re-branded and the existing customers are informed of the changes and to some customers will view the product as a new product in the market. This in the short run will attract new customers and help maintain the existing customers.
- Improve quality – quality should be improved immediately. This is because the improvement of quality will ensure that the customer continue to patronize the company products. Most customers may be running away because the company is currently compromising quality. If a company does not sell quality products, customers will run away and they will be driven out of business.
Long term strategies
As the short term strategies will help to fight out fire, long term strategies will help put measures in place that will ensure the fire is prevented instead of putting in out. Among the long term strategies that should be adopted by the company, include human resource management, brand extension, differentiation, diversification, collaboration, expansion, and cost management.
- Human resource management – to improve performance in the long run and in the short run, HR plays and important role. In the world today every company is empowering their employees. To empower employees is making them responsible for their actions. Ladies and gentlemen, you should come up with empowerment policy where employee is allowed to make decisions in the areas of their production but to certain of limits. Employee empowerment attracts, maintains, and motivates employees. Another issue that should be considered by the management is the introduction to senior employees the share of improved profits in terms of stocks issues. Stock issue to employees will make them work harder because they will believe that they are part and parcel of the company.
- Brand extension – the existing brands should be extended as a strategy of ensuring the company has many brands in the market that will cushion the company profits when one brand is performing poorly. Customers always are loyal to brands, if the brand in question is of good quality. It is important for the management to think of brand extension as a way of increasing the products.
- Diversification – diversification may sound as brand extension but in real sense I am asking the management to diversify into various plans rather than sticking to this specific plans.
- Differentiation – another strategy that the company should adopt is differentiation strategy where products of this company are differentiated with the products of other companies. Differentiation will ensure that the customers see something unique in the products of the company and this will help the company in overcoming competition. This also will ensure the company meets the needs of many people.
- Joint venture- the company should enter into joint ventures with other institutions or acquire rights to produce other brands of other companies’ especially foreign companies; this will ensure they increase the market share within the country. They should also enter into joint with other international companies to take advantage of integration growth like China, India, Indonesia, Iran and other African countries where economic growth is experienced.
- Capital investment – in the long run capital investment should be made by investing in technology especially in the area of production and reduce the costs as well as the quantities produced. Capital investment should be in form of new technological equipment to upgrade the existing production system. This will reduce the 7% wastage and increase production quantities to capacity.
- Expansion – competition has become very stiff in the home country therefore what is remaining is expanding to international market, where the product are in need as well as expanding the products and services that you offer in the market.
- Collaboration and integration: The Company should collaborate with international players in order to acquire new knowledge and improve production. Integration will mean that the company has relationship with various stakeholders in the industry.
Ladies and gentlemen, If your organization adopts the above strategies, you will remain a success in the market and many companies will try to look for techniques of success in your company. In today’s business environment you need to revolutionize in order to create new opportunities and success. This is a reality that you must take with seriousness to ensure that the company is a success story. If you maintain the status quo as you operate currently, gentlemen I fear that the organization may be forgotten by time. Therefore it is time for the organization and the board to run how to succeed and how to fail. There should be continuous innovation from your side because the market is very competitive.
As competition is becoming more and more intense the company that is a leader like global household brands, should not afford to waste opportunities of exposing themselves. You must ensure your research and development department is ahead of competitors and resources that are available and are integrated and efficiently used to attain the goals of the organization. All said advertising should not be forgotten. If you forget advertisement, it is like forgetting to tell the audience who you are. As the workforce becomes varied and as competition within industries becomes more intense, the need to effective and efficiently manage human resources to gain, develop and sustain competitive advantages is becoming more important. In integrating the blue ocean strategy to its overall strategy, Global Household brands must not forge that the most important factor in order for such strategy to succeed it its human resource.
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