D' Aquino Final Main

8/9/2019 D' Aquino Final Main

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Case 5 : DAquino Quimica Do Brasil S.A.

Group B

DAquino produced a wide range of products. It produced about 150chemical products and over 540 stock keeping units (SKUs). On

December 31, 2003, the company reported operating profit of about US$ 1.5 million on sales of almost US $14 million.

When the financial reports sent from the companys Brazilian subsidiary, DAquinosCFO, Rene Gagnaire took some important decisions. The figures were the firstcomprehensive review of the figures since the new general manager, Phillip had takenover in November 2002. The board approved one year assignment of Jacques Nanot,operation manager to assist Migault. This was done to bring Brazil subsidiary up tostandard.

The board expected Nanot to review operations and in thirty days to present an action

plan which would contain the ways to improve the companys operation and to takeadvantage of Mercosure market opportunities. With the prospective expansion of ofMercosure it has become important to reposition the Brazilian operations. The boardviewed 14% return on sales as an achievement that would bring the subsidiarysoperations into strong ground.

History of Mercosur

With the Latin American Free Trade Association (LAFTA) in 1960, the concept offree trade and one market place for South America began formally. Contradictoryviews on free trade and country protectionism caused the dissolution of the

organization and the creation of the Latin American Integration Association in 1980(ALADI). Actually ALADI was based more on the individual initiatives of themember countries rather than cooperative agreements. The transaction betweenLAFTA and ALADI effectively extinguished any free trade agreement for all SouthAmerican countries. However, it planted the seeds for future regional trade blocs.Mercosur or Mercosul is a Regional Trade Agreement (RTA) among Argentina,Brazil, Paraguay and Uruguay founded in 1991 by the Treaty of Asuncin, which waslater amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to

promote free trade and the fluid movement of goods, people, andcurrency.Mercosur/Mercosul origins trace back to 1985 when Presidents of Argentinaand Brazil signed the Argentina-Brazil Integration and Economics CooperationProgram or PICEThe development of Mercosur was arguably weakened by the collapse of theArgentine economy in 2001 and it has still seen internal conflicts over trade policy,

between Brazil and Argentina, Argentina and Uruguay, Paraguay and Brazil, etc. Thefree movement of individuals has been a matter of practical controversy. In addition,many obstacles are to be addressed before the development of a common currency inMercosur.The history behind trade agreement among South American nations

As Argentina and Brazil were transitioning to democratic rule, two key bilateral

agreements extended the commercial relationships between the two countries. In1979, an agreement was signed over the use of the Parana River waters; in 1986, a


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bilateral trade agreement was implemented. At the same time, there wasan increasing degree of integration between the economies of Argentina

and Brazil and the economies of Uruguay and Paraguay.

After a series of negotiations between the governments of Brazil, Argentina, Uruguay,and Paraguay, the Mercosur Agreement was signed on March 26, 1991. Subsequently,associate memberships were extended in 1996 to Bolivia and in 1997 to Chile.

Characteristics of the agreement

Mercosur is a customs union, defined as an agreement among two or more nations toeliminate trade restrictions with each other and to adopt a common trade policy withother nations with a common external tariff. That is, the same customs duties, quotas,

preferences and so forth, apply to all goods entering the area, regardless of whichcountry within the area they are entering. However, there is no effort to allow freemovement of labor among the countries or to adopt common monetary or fiscal

policies.From 1991 to 2003, Mercosur gradually eliminated tariffs on many of the productsand services that crossed the borders between the member countries. At its inception,the goal was to have the removal of all tariffs within the Mercosur countries by 1995.This goal was later postponed to 2006.

Accomplishments

Several economic and political achievements have been possible due to the Mercosur.Mercosur helped to triple trade from 8% in 1991 to 25% in 2002. In addition to this,the Mercosur countries have strengthened efforts for Latin American integration oneconomic, social, and political issues. These accomplishments made Latin America agrowing economic powerhouse, despite continuing economic and governmentalinstabilities.

The Problems of Mercosur Agreement

The Mercosur agreement had to go through some problems as well. Although theagreements target was to create a common market, it failed to address some basiceconomic and political realities among the member countries. The regions economiccrises were primarily driven by poor fiscal policydeficit spending by governmentsdue to high pensions and civil servant wages, tax collection problems, default onexternal debt, and devaluations of respective country foreign exchange rates.


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Challenges

Because of the problems mentioned above member countries had to facea range of challenges. Member countries dealt with significant foreign exchange ratedifferences and fluctuations between member countries, which affected the pricing ofgoods that were traded. These fiscal and monetary policies were driven by the selfinterest of each country, rather than any coherent or integrated Mercosur policies.Also, the differences in the size of the economies of the member countries contributedto inherent conflicts.

The Headquarters of DAquino

The Brazilian subsidiary of Berre Chimique, DAquino has a small production facility

in Santo Andr, So Paulo from the beginning. The headquarters operation wasresponsible for coordinating operations for the four Mercosur countries- Brazil,Uruguay, Paraguay and Argentina.

All production was done using the patented chemical formulas passed on from theFrench home office and standardized production procedures. At headquarters,decisions were made about pricing, expansion, marketing, and inter-country transfersof personnel. All country organizations had to pay some portion for the headquartersadministrative services. They were charged 3% of total country revenues.

Costs of the manufacturing plant in BrazilAlthough initial sales were focused in Brazil, DAquino gradually expanded itsoperations to include Argentina, Uruguay, and Paraguay. The costs of themanufacturing plant were allocated to each country organization, using formulas thatwere calculated independently for each of the three main product lines (floor finishes,disinfectants, and liquid soaps). Each product line was allocated fixed costs plus avariable portion of costs. The variable costs were allocated as a proportion of therevenues related to that particular product line in each individual country. Thevariable costs related to Argentina, Uruguay, and Paraguay were slightly higher thanBrazil due to the added transportation and insurance costs in distributing the products

to the warehouses in those countries.

Company response to challenging environment

In each country, a marketing company president (MCP), who was effectively thecountry sales manager, led the selling and distribution of chemical products withineach country. The overall strategy of DAquino was to gain market share tostrengthen the company even at recession to take advantage of the next economicexpansion.

Since there was economic downfall in the Mercosur area, the company responded to

this challenges in the following way- (1) Positioning its warehouses near cities drivingeconomic growth in the respective countries, (2) Producing a wide range of products


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for the diverse customer base, (3) Hiring and maintaining sales staff withindustry experience and vast customer contacts based out of the

warehouses, (4) Having the MCP participate in local political processes,and (5) Retaining and maintaining all key customers. This strategy enabled DAquinoexpansion over the years only.

Portfolio of services provided by DAquino

Customers are provided with variety of services by the company operating in differentplaces in the Mercosur region. DAquinos repair department provides services tocustomers for the warranty repair, the maintenance, and the machine applications. Italso provides on-site training in the product application that is the company regularlysends teams to customer locations to demonstrate how products used to get is benefits.

For example the team would show how floor strippers and waxes should be applied toachieve the greatest product yield possible. So beside different products the companyalso provides a range of services to the targeted customers.

The primary product lines at DAquino

DAquino has 150 formulations so far. These formulations however have beengrouped into three primary product lines for the customers. And these are basically,(1) floor finishes, (2) disinfectants, and (3) liquid soaps. The product lines at

DAquino were of various types which ranging from floor waxes designed to sterilizehospital floors to citrus sprays engineered to prevent fruit discoloration.

Furthermore, DAquino operations in each country sell or lease the floor finishingequipment usually to the large commercial clients over there. The equipmentoperations are managed locally, rather than at the headquarters level. So the productlines were diverse for DAquino.

The diverse customer base of DAquino

DAquino had a diverse customer base. It sells a variety of product lines as well asprovides a portfolio of services to the targeted customers who are of various types.But commercial customers accounts for the majority of DAquino sales. Thisindicates that general people buy D'Aquino products or uses their services more ondaily basis. The customer base included shopping malls, machine-part manufacturers,sanitation engineers, and housewives.

This diversity of the DAquino customers came primarily from the wide range ofproduct lines and portfolio of services available to them. The services it providesincludes warranty repair, maintenance, and machine applications and so on. And the

product lines include mainly floor finishes, disinfectants, and liquid soaps forapplying in various purposes by the users.


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Sales generated by retail distributors and long-term

contracts

The company generated approximately 40% of sales through the retail distributorslocated throughout each country including Brazil, Argentina, Uruguay and Paraguay.Sales representatives were constantly sent out to distributors to make sure thatDAquino products were correctly displayed and also positioned at the distributorslocations. Distributors sites ranged from mom-and-pop operations to supermarketsand wholesale warehouses specialized in cleaning business supplies.

The company generated the remaining 60% of sales from long-term contracts toshopping centers, large government business offices, and other business clients. These

contract orders were delivered on a fixed schedule. On average the orders weredelivered twice a month. The average order amount for these orders was US$20,000.

The mom and pop establishments

Majority of DAquinos distributors had the mom-and-pop establishments. Theseenterprises were small and occasionally located at a domestic residence. They carrieda variety of unrelated product lines along with DAquino products to sell to theirrespective customers. It was not very unusual to see DAquino products shelved alongwith agricultural sprays, pool cleaning chemicals, and pet shampoos because most of

the DAquino products were floor finishes, disinfectants, and liquid soaps. Theaverage size of an order from one of these distributors was small. The distributorswould buy one or two products from the company per invoice at an average dollaramount of approximately US$40.

Supermarkets and wholesale warehouses

Supermarkets and wholesale warehouses were far larger comparable in size to atypical U.S. supermarket. Product lines at these establishments were well defined.DAquino had selected shelf space for their products and it was very common to seesuch designated shelves. The reason was to promote their products to their respective

customers.

Though the number of daily orders was about the same as the mom-and-popoperations, supermarkets and wholesale warehouse customers would order moreactually. Most of the time they would make an order of ten to fifteen products perinvoice at an average dollar amount of US$4,000 per invoice. Therefore more

purchase occur here than in mom-and-pop enterprises basically.

Warehouses in the Mercosur area

DAquino had warehouses in all the countries where it operated including Brazil,

Argentina, Uruguay and Paraguay. Each country maintained their warehouses for theinventory of product received from Brazilian factory. In Brazil, four warehouses were


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maintained in different places. These warehouses were in (1) SantoAndre, (2) Rio de Janeiro, (3) Belo Horizonte, and (4) Porto Alegre.

Four warehouses were also used in Argentina, which were located in (1)Buenos Aires, (2) Cordoba, (3) Rosario, and (4)Mendoza. Paraguay had twowarehouses for the maintenance of the inventory. These warehouses were located in(1) Asuncion and (2) Concepcion. In Uruguay, only one warehouse in Montevideowas needed and was maintained for inventory management like the others did.

Proper distribution of the right product to the right recipient

The order distribution processes were firmly established and worked efficiently. Thecustomer placed orders via e-mail, fax, phone, or courier to either a sales

representative or directly to the sales office. The order was entered into the order-processing system, creating an invoice. In the shipping department the products wereretrieved from the shelves and marked with the invoice number from the printout. Theinvoiced products were then separated and placed in a holding area untiltransportation arrived. The majority of orders were collected by locally contractedtransportation services at the end of the day. Sometimes sales representatives would

personally pick up an order and deliver it to the customer in order to ensure that theorder was completed and the customer received the right product.

Operational results of DAquino in the Mercosur area

The business was very cyclical, comparative to both the cost of factors of productionand to the market demand. The price was increasing due to pressures from the oil

prices around the world. It was a challenge for the company in controlling productcosts as well as distribution challenges throughout the Mercosur area. Not only didthese market forces challenge the company, but DAquino also needed to evaluate theregional geopolitical situations especially where they were operating.

The reason was to ensure the safety of the company from the frequent regionaleconomic and political emergencies. But still DAquino made significant progress ingaining market access in the various markets it served. For example it had

approximately 15% market share in Brazil, 13.5% market share in Argentina, 12%market share in Paraguay and 8% market share in Uruguay.

Operations of DAquino in Brazil

The operation by DAquino that was started in Brazil, Santo Andr, had been strongfrom the beginning. It had a good market share which was approaching 15%. Theoperation was successful in terms of increasing sales in Brazil. The reason for whichthe operation was successful was (1) being located closer to the production facilityand (2) able to maintain lower inventory levels.

Since the operation was carried out near the production facility it had better access toproduct technicians for modifying the formulas when required. On the other hand, it


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was possible to keep lower inventory levels because the shipping time toits warehouses was much shorter. In 2003 the financial performance for

Brazil was the strongest in the Mercosur area. The company had 11.6%returns on sales in this region for the year 2003.

Effects of recession on the operations in Argentina

Outside Brazil the operation had large growth in Argentina. It had an estimated 13.5%market share in the country. But the market share in Argentina had declined in the lastthree years due to downturn of the economic condition. Due to this economicdownfall sales were less than expected. In fact, a massive economic contraction that iseconomic downfall was occurring throughout the Argentine economy. In addition, themarket also had more strong competitors than in the Uruguay and Paraguay markets.

Argentina had declining sales and low margins which was really disappointing for thecompany operating over there. Though Brazil had a successful operation going on inits region for the company but Argentina was getting affected by the economicdownfall. Also Paraguay and Uruguay were on the same track. DAquino haddeclining sales for the last three years.

Operations in Paraguay and Uruguay

There had been economic crisis in Paraguay. So the company positioned its tradepolicy. It was as to some extent more protectionists. But due to the better qualityDAquino products gained a good share in the Paraguayan market. It maintained a12% market share. This success was however limited by distribution costs throughoutthe country. On the other hand, the position of DAquino in Uruguayan market wasvery weak. It could not acquire much of the market share. It had an estimated 8%market share only. DAquino had the lowest market share in Uruguay. Moreoverdeclining profitability was also a concern in the Uruguayan operation. Since both thecountries were under recession it was a challenge for the company to come up withnew changes to overcome the problem caused of recession in this region.

Nanots preliminary information and challenges

The Mercosur area was suffering from low volume sales due to recession excludingBrazil. Therefore it was obvious that an action plan was required to overcome therecession problem. Jacques Nanot got the results of operations in different countriesfor DAquino for the year 2003. Although each of the country operations was

profitable but were not reaching the corporate goal of 14% return on sales. Also therewas an indication that the market might not improve in 2004. Nanot had only thirtydays to present an action plan to Berre Chimique management. He has to present a

plan about how to better control the resources in the four markets- Brazil, Argentina,Uruguay and Paraguay. For that, he needs to better understand the cost structures ofthe various markets, the product line profitability and the diverse needs of thecustomer base that DAquino already had formed.


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Group B

Theme

DAquino does not have an established Human Resource Management Department inthe organization. The fact that they have a reputed parent company like BerreChimique, they should have had it. Their one and only production unit in Brazil is

producing for all the four Mercosur countries. Due to this, the transport cost isincreasing quite significantly, because the goods need to be transported to the otherthree countries. The South American Mercosur countries are also facing unstableeconomic conditions which are leaving significant impact on the operations and

profitability of DAquino.


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Main Issue

As the corporate goal of DAquino Quimica Do Brasil is to achieve a 14% return onsales, along with excellence in every aspect of the organization, will the company beable to sustain through the unstable economic conditions it is facing currently and useits resources efficiently to achieve the corporate goal?


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SWOT ANALYSISSWOT analysis plays a significant part in any company. Any company has someinternal strengths and weaknesses, with some external opportunities and threats.Internal factors can be better controlled than external factor as companies do not haveany control over it. To survive in the changing environment any company needs toknow or be aware of what are its strengths, weaknesses, opportunities and threats sothat it takes advantages of its strengths and opportunities to eliminate or decrease itsweaknesses and threats. In short, SWOT analysis helps to identify what are thecapabilities and capacities of a company.

STRENGTHS

A company should be aware of its core capabilities and sources of competitiveadvantages. Core capabilities are the critical skills and processes that an organizationexecutes so well that its reputation builds around it.

DAquino is a subsidiary of Berre Chimique, which is a global player in the chemicalproduction and distribution industry, being under of that kind of corporation surely is

the strongest part of it

Berre Chimique is a French Chemical company based in Berre, France, withworldwide chemical operations. In operation since 1954, it is a global player in thechemical production and distribution industry. Although its chemical products cover avast range of applications, its South American operations, based in Brazil, focus oncommercial, industrial, and residential specialty cleaning products. Berre Chimiqueopened a subsidiary production facility capable of meeting the growing SouthAmerican consumer demand. DAquino Quimica do Brasil S.A. (DAquino) startedoperations in March 1974.

As DAquino is a stem of a corporation that is involved in worldwide chemicaloperation specialized in chemical production and distribution, it gets the benefit of theestablished goodwill of the original company that already exists in the market. Thusfewer struggles should have been required for the new company to grab the attentionof the customer and it should have been easy for them to achieve the customer trust.So, it was strength of the company.

All production in DAquino was done by using the patented chemical formulas passedon from the French home office and standardized production procedures and thus the

products of DAquino were of high quality


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All production in DAquino was done using the patented chemicalformulas passed on from the French home office and standardized

production procedures. It was processing the base chemicals accordingto the formula, packaging the finished goods, and distributing the product to thewarehouse facilities. As a result of following these procedures, the productsDAquino was producing were of very high quality.

Because of these high quality products, DAquino was capable to satisfy and retainthe customers. We see the proof of this in the Paraguay market. In Paraguay, althoughParaguay positioned its trade policy as slightly more protectionists due to itseconomic crisis, DAquino products gained and maintained a 12% market share inParaguay due to the quality of the products. It was a strong point for the company.

DAquino was producing a wide range of products that appeals to a diverse customerbase, attracting and reaching to a diverse customer is another strongest part ofDAquino

By 2003, DAquino produced about 150 chemical products. The product lines atDAquino were quite diverse, ranging from floor waxes designed to sterilize hospitalfloors to citrus sprays engineered to prevent fruit discoloration. Its 150 formulationswere categorized into three primary product lines: floor finishes, disinfectants, andliquid soaps. Additionally, DAquino operations in each country sells or leases floor

finishing equipment to large commercial clients. Although commercial customersaccounted for the majority of DAquino sales, the customer base was diverse,including shopping malls, machine-part manufacturers, sanitation engineers, andhouse-wives.

So, the company was more capable to satisfy and retain its customers with its widevariety of products. Its customer base was as diverse as its product line. As a result,they were able to serve a large market share and also they had the opportunity to graba larger wallet share of these market shares by offering products of multiplecategories and benefits. These provided the company with an additional advantage.So, we can regard it as strength.

DAquino also provides a large portfolio of services to its customers. By offering this,they get customer reliability and a long term relation with the customers

Along with the wide range of products DAquino also provides a large portfolio ofservices to its customers. Only for this purpose DAquino maintains a repairdepartment. DAquinos repair department provides services to customers forwarranty repair, maintenance, and machine applications. Additionally, they have on-site training facility for their customers. DAquino provides on-site training in productapplication, wherein the company regularly sends teams to customer locations todemonstrate how products such as floor strippers and waxes should be applied toachieve the greatest product yield possible.


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By offering these services, the company gets the customer reliability that

they care about the customer even after purchase. This post purchaseservices are helpful to build a long term relationship with its customers and thus retainthem for a long period of time. They also can ensure the maximum performance oftheir products by providing these services. It helps them to position its products,services and the company as a whole as a superior one compared to its competitors.Hence, we can definitely say that it was strength for the company.

It was hiring and maintaining sales staff with industry experience and vast customercontacts based out of the warehouses. It is a strong point for the company. Because,the employees could deal with the customers in a more efficient manner, as they knew

what to do to impress these customers and how to do that

DAquino was maintaining a large work force. The company had 283 employees, 333commercial representatives, and 330 distributors. DAquino was hiring andmaintaining sales staff with industry experience. So, the employees had a clearunderstanding of the customer segments. So, they could make new customersexperiencing the first purchase and make them permanent customers by retainingthem for a long time by building long term relationship with these customers andsatisfying them.

It was a strong point for the company. Because, the employees could deal with the

customers in a more efficient manner, as they knew what to do to impress thesecustomers and how to do that. So, the customers were better served by theseemployees and thus the company could get and retain more customers through theseemployees.

It positioned its warehouses near cities that were the drivers of economic expansion inthe respective countries. As they were located either in or near main cities or theeconomic drivers of the country, the transportation costs and distribution costs werelower for the company

DAquino had numerous warehouses in each country it has operation in. Each country

maintained warehouses for the inventory of product received from the Brazilianfactory. In Brazil, four warehouses were maintained in Santo Andre, Rio de Janeiro,Belo Horizonte, and Porto Alegre. Four warehouses were also used in Argentina,located in Buenos Aires, Cordoba, Rosario, and Mendoza. Paraguay had twowarehouses, in Asuncion and Concepcion. In Uruguay, only one warehouse inMontevideo was needed for inventory management. All these warehouses werelocated either in or near the main cities.

This strategy was one of those that enabled DAquino to expand its business over theyear. So, certainly it was strength for the company. They were located either in ornear main cities or the economic drivers of the country; the transportation costs anddistribution costs were lower for the company. Because, most of their large


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customers- shopping centers, large government business offices, andother business clients, supermarkets and wholesale warehouses were

near by. The delivery time was also minimized as the distance was low.

DAquino was based in Brazil, which allowed them to steadily build its market sharethroughout Brazil and to become the leading producer and exporter of chemicals inLatin America

DAquino was one of many multinational companies basing operations in Brazil totake advantage of the Mercosur customs union. Being based in Brazil allowedDAquino to steadily build its market share throughout Brazil and then expand withinthe Mercosur market area. DAquino successfully took advantage of its Brazilian

location to become the leading producer and exporter of chemicals in Latin America.As a result, after 20 years of operations, DAquino established itself within theMercosur market with production facilities in Brazil and marketing companies inBrazil, Paraguay, Argentina, and Uruguay.

The base location was thus strength for DAquino. It was a perfect base for thecompany to build its market share through out the country and expand its businessinto other countries in the same region. And as we have seen, DAquino was able totake the full advantage of its appropriate location. And became a strength forDAquino.

The normal order distribution process of DAquino was firmly established and, onpaper, worked efficiently. The established order-distribution process helped thecompany to deliver the right products to the customers at the right time

In DAquino, the normal order distribution processes were firmly established and, onpaper, worked efficiently. The customer placed orders via e-mail, fax, phone, orcourier to either a sales representative or directly to the sales office. The order wasentered into the order-processing system, generating an invoice. In the shippingdepartment, an employee would retrieve the products from the shelves and mark themwith the invoice number from the printout. The invoiced products were then separatedand placed in a holding area until transportation arrived. The majority of orders were

collected by locally contracted transportation services at the end of the day.Sometimes sales representatives would personally pick up an order and deliver it tothe customer in order to ensure that the order was completed and the customerreceived the right product.

This established order-distribution process helped the company to deliver the rightproducts to the customers at the right time. The customer could avail any means froma wide variety of choice. So, they could reach the company easily and moreconvenient for them. So, they could prove themselves to be reliable and responsible.Thus, we can say that it is strength for DAquino, as it established order-distribution

process which helped the company to deliver the right products to the customers at theright time


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DAquino was able to capture a significant amount of market share in all

the countries it had operation in. They have healthy market shares in themarkets it serves and it is undoubtedly strength for the company

The Brazilian operation had been strong from the start, with market share approaching15%. Brazils financial performance for 2003 was the strongest, with an 11.6% returnon sales. The Argentina operation experienced the most significant growth outsideBrazil within the Mercosur area, with an estimated 13.5% market share. AlthoughParaguay positioned its trade policy as slightly more protectionist due to its economiccrisis, DAquino products gained and maintained a 12% market share in Paraguay dueto the quality of the products. Uruguay had the lowest market share of all the marketsfor DAquino, which was even e 8% market share according to estimation.

As in all business, when a company has a healthy market share in the markets itserves it is undoubtedly strength for the company. The above discussed data is theevidence of their existence in good physical shape in the markets, where they operate.

DAquino was conscious enough to send sales representatives to the retail distributorsto ensure that DAquino products were correctly displayed and positioned at thedistributors location

Approximately 40% of sales of DAquino were generated by retail distributorslocated throughout each country of operation. Distributors sites ranged from mom-

and-pop operations to supermarkets and wholesale warehouses that specialized incleaning business supplies. Where, the mom-and-pop establishments constituted themajority of DAquinos distributors. But, these distributors did not exclusively sellDAquino products, they carried a variety of unrelated product lines. So, the companywas sincere enough to send out sales representatives constantly to distributors. Theywere sent to ensure that DAquino products were correctly displayed and positioned atthe distributors locations.

Sending these sales representatives to the retail stores provided the company with anadditional advantage that they could ensure a prominent place for the companys

products in the distributors locations. Thus, the products could be sited in a place that

snatches the customer attention.


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WEAKNESSESS

In addition to knowing its strengths, an organization must recognize its limitations.Whether limited by a poorly equipped production facility or a sales force that merelyquotes prices and delivery dates, a business that acknowledge its weaknesses forcesmangers to assess their processes and systems.

The variable costs related to Argentina, Uruguay, and Paraguay tended to be slightly

high. So, the profit margin was lessened. So, we can regard this centralizedproduction facility to be a weakness for the company

In DAquino, the manufacturing plant, based in Santo Andr, produced all thechemical products sold throughout the Mercosur region. The costs of themanufacturing plant were allocated to each country organization. Specifically, each

product line was allocated fixed costs plus a variable portion of costs. The variablecosts related to Argentina, Uruguay, and Paraguay tended to be slightly higher thanthose associated with Brazil due to the additional transportation and insurance costs indistributing the products to the warehouses in those countries.

Due to this higher transportation and distribution costs through out the countries otherthan Brazil, the costs of the products was going up. The success of these countrieswas also less for this cause. So, the profit margin was lessened. So, we can regard thiscentralized production facility to be a weakness for the company.

Operational excellence and identification of logical expansion opportunities was amanagement issue, because, there were opportunities still left over in the operationaland market expansion sector, where improvements could be done through skilledmanagement decisions. So, it acts like a weakness of the company.

The management of DAquino was struggling to find out the way to be excellent in

the business operation. As, they thought there were areas in their operation, whereimprovements were needed. They were also trying to discover the opportunities toexpand their market. In order to do so, the management of DAquino was quiteconscious about their operational activities in which sector they should work on.

The above stated fact clearly shows that there were opportunities still left over in theoperational and market expansion sector, where improvements could be done throughskilled management decisions. So, it acts like a weakness of the company.

Approximately 40% of sales were generated by retail distributors located throughout

each country, which were not exclusively sell DAquino products


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Although commercial customers accounted for the majority of DAquinosales, the customer base was diverse. Approximately 40% of sales were

generated by retail distributors located throughout each country. But,these distributors did not exclusively sell DAquino products. These enterprises weresmall, sometimes located at a domestic residence, and carried a variety of unrelated

product lines. It was not uncommon to see DAquino products shelved withagricultural sprays, pool cleaning chemicals, and pet shampoos. Moreover, theaverage size of an order from one of these distributors was small.

So, the distribution channel of DAquino was not working well in favor of thecompany. They were killing the time of the sales representatives and also could notsell a handsome amount of product. Moreover, the dignity of the products weredegraded by assossiating them with wrong category of products. This was one of the

reasons that the company was not doing so well up to their expectation. So, the retaildistributors acted as a weakness for the company.

The average size of orders from both the small enterprises and the large supermarketsand wholesale warehouses customers were small. The distribution channel thecompany was using was not doing a good job for the company

Distributors sites of DAquino ranged from mom-and-pop operations tosupermarkets and wholesale warehouses that specialized in cleaning businesssupplies. But, the average size of the orders from both of them was small. The averagesize of an order from one of these distributors was smallone or two products per

invoice at an average dollar amount of approximately US$40. Supermarkets andwholesale warehouse customers would order ten to fifteen products per invoice at anaverage dollar amount of US$4,000 per invoice.

As, the average size of the orders from the distributors was small, we can again saythat the distribution channel the company was using was not doing a good job for thecompany. The distribution channel was proved to be inefficient in many cases. So, thecompany should think about this acute weakness of the firm and take correctiveactions to get rid of it.

Argentinas result of 2003 was disappointing with declining sales and low margin.

Argentina was positioned just after Brazil in terms of market share. If such a strongmarket shrinks, it would be a weakness for the company in future.

Though, the Argentina operation experienced the most significant growth outsideBrazil within the Mercosur area, with an estimated 13.5% market share, Argentinasmarket share had declined in the last three years due to a massive economic downturn.The sales of the year 2003 were less than expected due to economic contractionsthroughout the Argentine economy. The market also had more robust competitorsthan in the Uruguay and Paraguay markets. Argentinas 2003 results weredisappointing, with declining sales and low profit margins.


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In Exhibit 9, the result of 2003 clearly shows that the sales of Argentinawere declining. As a result, the profit margin was going down as well.

We observed that Argentina was the second best market for thecompany. It was positioned just after Brazil in terms of market share. If such a strongmarket shrinks, it would be a threat for the company in future. So, the declining salesand the low profit margin is a great weakness for DAquino.

The distribution costs and thus the centralized manufacturing unit were limiting thesuccess of Paraguay market. So, the lack of regional manufacturing unit was aweakness.

The Paraguay market was already going under an economic crisis. The company hadto position its trade policy as slightly more protectionist due to this reason. Even,

DAquino products were able to gain and maintain a 12% market share in Paraguay.The reason behind this was the high quality of the products. But, his success waslimited by distribution costs throughout the country. The Exhibit 10 demonstrates anobvious evidence of that. So, we sea that in spite of a good market share captured by

providing the good quality product, the company was not doing well in Paraguay. Thereason is only the high transportation and distribution costs. This is nothing but a

barrier to the success.

Though, the high transportation and distribution cost is an element of the externalenvironment for the company, we found it to be a weakness. The reason is simple,

because if the company could establish a subsidiary manufacturer in the local country

instead of carrying it all the way from Brazil, the transportation cost could be lessenedby a huge amount. Thus, the centralized manufacturing unit established in Brazil wasa limiting factor for the factor for the company. And, the lack of regionalmanufacturing unit was a weakness.

Unfortunately, economic progress in each of the markets of DAquino slowed in2003, which has created a pressure on the company internally

Already all the markets of DAquino except Brazil were not being able to perform upto the expectation. Moreover, it had been observed that the sales of these marketswere even declining. As a result, the profits were going down. As, all the markets,

where the company had operation was going through this bad economic conditionthey naturally had an additional pressure than of their competitors who may not haveoperation in all these countries with economic downturn.

The management of this company was having an extra pressure on their head of theeconomic threat, they may be less efficient to concentrate on other facts like- productdiversification, customer satisfaction and superior service. And thus, this externalthreat can become an internal weakness of the company solely.

DAquino was not reaching the corporate goal in terms of return on sales. When theprofit margin is declining every year, it is a great weakness for a company, so does forDAquino


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The result of operations for DAquino for 2003 shows that although each

of the country operations was profitable, there was much concern thatthey were not reaching the corporate goal of 14% return on sales. Furthermore, profitshad declined from the 2002 level, and there were indications that the market might notimprove substantially in 2004. In fact, a decline in sales for the fourth quarter of 2003in all markets except Brazil was noticeable. It was a trend that was worrisome for thecompany.

If any company is unable to fulfill the set goal, it is upsetting information for theauthority. And when they observe that the profit margin is even more declining inevery year, the company should have no other option but to improve its businesscondition in any way. In order to resolve this problem the company should examine

the hole business plan thoroughly and find feasible ways to solve it. This is not only aweakness, but also can be the most crucial issue of the company.

In Uruguay, where the market share was already the lowest for DAquino, theprofitability was even declining. This is marked to be a weakness of the company

Uruguay had the lowest market share of all the markets for DAquino, with anestimated 8% market share. Declining profitability was also a concern in theUruguayan operation (Exhibit 11). The declining profitability is definitely the mostalarming fact for any company, whose main intension is to gain profit through their

business operation.

The factors that were causing this problem include both internal and external flaws.As, we all know, the management has little to do in the case of external issues. But,the internal problems and flaws behind it should be identified and rectified soon.Thus, this is marked to be a weakness of the company.


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OPPORTUNITIES

External and internal environments present both driving and restraining forces.Opportunities may occur suddenly. With the past pace of globalization andtechnology changes, what may initially present itself as an opportunity may become athreat if organizational responsiveness is too slow or not well planned?

To meet the growing South American consumers demand for Berre Chimique

products they opened a subsidiary production facility in Brazil

After twenty years of exporting to Brazil, Berre Chimique opened a subsidiaryproduction facility capable of meeting the growing South American consumerdemand for Berre Chimique products. DAquino Quimica do Brasil S.A. (DAquino)started operations in March 1974, based in a small production facility in Santo Andr,So Paulo.

Its South American operations, based in Brazil, focus on commercial, industrial, andresidential specialty cleaning products. All production was done using the patentedchemical formulas passed on from the French home office and standardized

production procedures. Process the base chemicals according to the formula, packagethe finished goods, and distribute the product to the warehouse facilities.

The strengthening and potential expansion of Mercosur had become a goldenopportunity for DAquino. Because, Berre Chimique made an agreement withMercosur countries that includes mainly Brazil, Argentina, Uruguay, and Paraguay,which could be a great opportunity for DAquino

With the strengthening and potential expansion of Mercosur, it had becomestrategically important to reposition the Brazilian operations. As Argentina and Brazilwere transitioning to democratic rule, two key bilateral agreements extended the

commercial relationships between the two countries. In 1979 there was an increasingdegree of integration between the economies of Argentina and Brazil and theeconomies of Uruguay and Paraguay. After a series of negotiations between thegovernments of Brazil, Argentina, Uruguay, and Paraguay, the Mercosur Agreementwas signed on March 26, 1991.

Berre Chimique is a French Chemical company based in Berre, France, withworldwide chemical operations. In operation since 1954, it is a global player in thechemical production and distribution industry. After twenty years of exporting toBrazil, Berre Chimique opened a subsidiary production facility in Brazil. To expand

business all over the world Berre Chimique make an agreement with Mercosurcountries that includes mainly Brazil, Argentina, Uruguay, and Paraguay.


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In Brazil, four warehouses were maintained in Santo Andre, Rio deJaneiro, Belo Horizonte, and Porto Alegre. Four warehouses were also

used in Argentina, located in Buenos Aires, Cordoba, Rosario, andMendoza. Paraguay had two warehouses, in Asuncion and Concepcion. In Uruguay,only one warehouse in Montevideo was needed for inventory management.

DAquino established the opportunity of normal order distribution process forcustomers to place orders by using technology

The normal order distribution processes were firmly established and workedefficiently. The customers are able to place orders via technology such as; e-mail, fax,and phone. Also they can place orders through courier to either a sales representativeor directly to the sales office. The order was entered into the order-processing system,

generating an invoice.

In the shipping department, an employee would retrieve the products from the shelvesand mark them with the invoice number from the printout. The invoiced productswere then separated and placed in a holding area until transportation arrived. Themajority of orders were collected by locally contracted transportation services at theend of the day. Sometimes sales representatives would personally pick up an orderand deliver it to the customer in order to ensure that the order was completed and thecustomer received the right product.

The Brazilian operation of DAquino had been strong from the start and in the year

2003 its financial performance was the strongest, which creates a great opportunityfor them to success in long run

The Brazilian operation of DAquino had been strong from the start, with marketshare approaching 15%. All production was done using the patented chemicalformulas passed on from the French home office and standardized production

procedures. Process the base chemicals according to the formula, package the finishedgoods, and distribute the product to the warehouse facilities.

The Brazilian operation had benefited from being located closer to the productionfacility, with better access to product technicians and it also was able to maintain

lower inventory levels because the shipping time to its warehouses was much shorter.Brazils financial performance for 2003 was the strongest, with an 11.6% return onsales.

Within Mercosur countries the Argentina operation of DAquino experienced themost significant growth outside Brazil, if they can use this growth; it could be a hugeopportunity for them

The Argentina operation experienced the most significant growth outside Brazilwithin the Mercosur area, with an estimated 13.5% market share. When recession

occurs and economic condition was not stable in Mercosur area, subsequently only


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Argentina operation was able to earn some profit for DAquino ratherthan Paraguay and Uruguay.

The overall strategy of DAquino was to gain market share to strengthen the companyand ensuring it would be able to ride the economic waves within the economies of theMercosur area and the Argentina operation of DAquino was able to execute theoverall strategy of DAquino that was revealed evidently in the financial report.


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THREATS

Threats are negative external environmental factors, which influences anorganizations decision. External factors are not controlled by the organization and tosurvive every organization needs to be very alert about its threats and how they canovercome this problem. Organizations should be proactive rather than reactive andshould be aware of what are the competitors moves and should take necessary actionin advance to face those moves.

Competition occurs nationally against brands such as Lever Brothers, SC Johnson and

Procter & Gamble in the industrial chemical products market

DAquino competed nationally in the industrial chemical products market againstbrands such as Lever Brothers in floor finishes and waxes, SC Johnson indisinfectants, and Procter & Gamble in soap liquids. These brands are well recognizedfor their products as well as their quality and services all over the world.

The main economic activities of DAquino have expanded from manufacturing anddistributing specialty chemical products to include selling and servicing floor buffingmachine equipment for cleaning and maintenance, and providing technical assistance

in the form of product application procedures. The company had 283 employees, 333commercial representatives, and 330 distributors. By 2003, DAquino produced about150 chemical products and over 540 stock keeping units (SKUs).

The Mercosur agreement failed to address basic economic and political realitiesamong the member countries, which could be a threat in the long run for DAquino

Although the agreements key principles were to create a common market, it failed toaddress some basic economic and political realities among the member countries. TheMercosur agreement heightened the sensitivity to each countrys conflicting economicinterests, which were magnified during the economic downturns in the region and

rapid contagion effects when crisis struck one country within the union.

The regions economic crises were primarily driven by poor fiscal policydeficitspending by governments due to high pensions and civil servant wages, tax collection

problems, default on external debt, and devaluations of respective country foreignexchange rates. Member countries dealt with significant foreign exchange ratedifferences and fluctuations between member countries, which affected the pricing ofgoods that were traded. These fiscal and monetary policies were driven by the self-interest of each country, rather than any coherent or integrated Mercosur policies.Also, the differences in the size of the economies of the member countries contributedto inherent conflicts.


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Due to a massive economic downturn in the last three years theArgentinas market share had declined unexpectedly, this is an alarming

threat for DAquino

The Argentina operation experienced the most significant growth outside Brazilwithin the Mercosur area, with an estimated 13.5% market share. Although Due toeconomic contractions throughout the Argentine economy 2003s sales of Argentinasmarket were less than expected, and its share had declined in the last three years dueto a massive economic downturn.

The Argentinas market also had more robust competitors than in the Uruguay andParaguay markets. As a result it becomes difficult for Argentina operation to maintaintheir significant growth outside Brazil within the Mercosur area. In the year 2003 the

financial reports of Argentinas were disappointing, with declining sales and lowmargins.Declining profitability of Uruguayan operation can increase threat for DAquino. Butif they cannot able to achieve the expectation and in future it can became a threat forDAquino.

Being based in Brazil allowed DAquino to steadily build its market share throughoutBrazil and then expand within the Mercosur market area. Uruguay market had thelowest market share of all the markets that for DAquino, with an estimated 8%market share and declining profitability was also a concern in the Uruguayanoperation.

DAquino was one of many multinational companies basing operations in Brazil totake advantage of the Mercosur agreement that was signed by four countries includesBrazil, Paraguay, Argentina, and Uruguay. Although Uruguay market had the lowestcompetitors than Argentina and Paraguay as well as had enough opportunity to make

profit for DAquino but cannot able to achieve the expectation and in future it canbecame a threat for DAquino.


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HUMAN RESOURCE ISSUES

Human resource issues are the issues of the given case that are related with humanresources. These issues can be internal or external. Some of the issues affect thehuman resource of the company directly others affect the company indirectly.Thehuman resource issues are very important elements for a company. To achievesuccess in business an organization should carefully consider human resourcemanagement issues as employees are the driving force of an organization. Therefore

any problem related to HR should be solved first. If the organization is to achieve theefficiency in the companies operation and establish itself as a market leader it shouldconsider the following issues of HR and should take some action based on that HRissues. The human resources issues associated with Silica Glass, Inc. are discussed

below.

WELL ESTABLISHED HUMAN RESOURCE DEPARTMENTREQUIRED:

The human resources field demands a range of personal qualities and skills. Humanresources, training, and labor relations managers and specialists must speak and writeeffectively. The growing diversity of the workforce requires that they work with orsupervise people with various cultural backgrounds, levels of education, andexperience. They must be able to cope with conflicting points of view, function under

pressure, and demonstrate discretion, integrity, fair-mindedness, and a persuasive,congenial personality.

The HR department is the most essential department for any given organization. The

human resources in other word employees are the key elements of any organizationfor any success that any organization wants to achieve. This is why If anyorganization is to function properly and look for the efficiency at the highest level,there is no alternative of establishing the HR department. Moreover, it is theresponsibility of the human resource department to best utilize the human resources ofthe company.

D Aquino Qumica Do Brasil S. A does not has any dynamic human resourcedepartment. We know that Human resource department is responsible Human-Resource Management. It serves 5 key functions. They are:


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Recruiting the right employees for the right job in the right time

Setting an attractive yet meaningful compensation strategy and

packages for different levels of employees,

Establishing benefits that will encourage employee performance,

Establishing a sound relation among the employees and the employers of theorganization.

Providing Training & Development Program.

Evaluate the performance of the employees along with the management

Maintaining performance appraisal to bring efficiency among the employees.

Human resource managers should conduct these activities effectively, legally, fairly,and in a consistent way. They should aim to improve the productive contribution ofindividuals and simultaneously attempt to attain other societal and individualemployee objective in terms of recruitment and selection. it is important to considercarrying out a thorough job analysis to determine the level of skills/technical abilities,competencies, flexibility of the employee required etc.

In any organization Human Resource Management can achieve the optimum use ofhuman resources and to achieve the correct number and types of employees needed tomeet organizational goals. Additionally, it provides the basis for establishing and

maintaining effective HR programs and for coordinating the various HRM functions.For this reason, DAquino needs a HR department to have the accurate number ofemployees with proper skills in its different distribution and service centers all overthe world. The company needs a well functioning HR department in its head office.Moreover, they need to have HR units in it's every branch. Without a proper HRdepartment it is very difficult to allocate skilled employees and manage them

properly.

TRAINING & DEVELOPMENT PROGRAM SHOULD BE

PROVIDED TO EMPLOYEES FOR BETTERPERFORMANCE:

Training program is a must to improve employee efficiency in performing their taskand for the best understanding of organizational goals and objectives for theemployees. Training and development managers and specialists conduct and supervisetraining and development programs for employees. Management should recognizethat training offers a way of developing skills, enhancing productivity and quality ofwork, and building worker loyalty to the firm, and most importantly, increasing

individual and organizational performance to achieve business results. Training iswidely accepted as an employee benefit and a method of improving employee morale


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and that is why, enhancing employee skills has become a businessimperative. Managers and leaders nowadays realize that the key to

business growth and success is through developing the skills andknowledge of its workforce.

To achieve the standard that is set by D Aquino, training facility is mandatory foremployees. The primary reason for training is to make employees understand thegoals of the organization and the works they need to perform. The training facilitywill also be able to boost the employee morale and make them more confident abouttheir capability of performing any difficult tusk at any situation which in turn helpsthe company as the employees starts to perform and perform better than the

competitors and that will result a boost in the productivity.

Training is needed to cope up with the complexity of the work environment, the rapidpace of organizational and technological change, and the growing number of jobs infields that constantly generate new knowledge, and thus, require new skills. Inaddition, advances in learning theory have provided insights into how adults learn,and how training can be organized most effectively for them.

On the other hand, without offering the training facility the employees will not be ableto work in an innovative way as their will be no scope to acquire knowledge abouttheir work. That will result in an unproductive and inefficiency in the company outputand ultimately will hurt the company very badly. No company would like itsemployees to be less productive and inefficient in performing their tasks. Thereforethe organization should evaluate the employee performance and should identify thelacking of employees by doing skill tests regularly and should offer some training

based on the specific needs. This whole program should be run by the HR departmentand only can be done after the HR department is established. While studying the casewe found out that D Aquino provides on site training in product application, whereinthe company regularly sends teams to customer locations to demonstrate how

products such as floor strippers and waxes should be applied to achieve the greatestproduct yield possible. But D Aquino does not provide any training facility for thoseemployees who train the customers about the best use of the product.

DAquino does not have many Training & Development program for its employees.The company provides its employees and sales representatives to the distributionfacilities and sometimes teams to customer locations to demonstrate productapplication such as demonstrating the products floor strippers and also how waxesshould be applied to achieve the greatest product yield possible.

DAquino has a wide variation in its products, so it is very important for the companyto provide extensive training to the employees based on the demonstration they are to


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make to the customers such as demonstrating the products floor strippersand also how waxes should be applied to achieve the greatest product

yield possible. Moreover, as the employees have to deal with thecustomers, they need to behave in a certain manner and should be trained about howto approach different customers and the standard they should maintain. It is veryimportant because they represent the company and that is related to company image.Any misbehaviour by the employee can put a negative impact about the companywhich will result in a fall in the sales and will ultimately hurt the company in a badway. In addition, D Aquino also provides a large portfolio of services such as, therepair department provides services to customers for warranty repair, maintenance,and machine application. For such services the company needs to provide trainingregularly as the technology is changing on a regular basis. Therefore, the companyshould establish a training program for these employees and the program should be

designed by the HR department after the evaluation is done by the department.

WELL-DESIGNED COMPENSATION PACKAGE CAN HELPDAQUINO TO RECRUIT, RETAIN AND MOTIVATE ITSEMPLOYEES:

A well designed compensation package is very vital for a company, that is, in the

sense that the compensation strategy should attract and retain the best employees ofthe market. Committing a mistake in forming a compensation strategy will result in aformulation of weak compensation package which can be devastating for thecompany as the offer wont be attractive to the employees and will chose anothercompany. Ultimately the company will lose its potential employees and will lose

productivity. So coming up with an attractive compensation program is not enough,communicating it with employees is equally important to prove its effectiveness. Inevery company there is compensation program for their employee. Different companyhas different compensation plan their employee, which is according to their companystrategic plan, employee need and also to create employee motivation activities.Generally the service-based companies are totally focused on the quality of service,

marinating good relationships with the customer and doing the right job on the rightplace and in a proper way. So to get the best job from the employee organizationshave to plan a compensation plan in such a way that meets both the organization'sability to pay and any governing legal regulations.

As DAquino does not have any human resource department so their wholeemployees compensation plan has been maid by the higher authority. They did notmaintain any human resource department that can evaluate the employeescompensation system which is very much important. They did not do any salarysurvey to se their compensation plan. As they did not maintain any human resource

department so they may face problem to attract and retain qualified customers.


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Moreover, in designing the compensation strategy the company,DAquino should focus on the economical condition of the company where it isoperating and according to that it should formulate a strategy. Setting a optimisticcompensation package and irrelevant to the countries economic perspective can causethe company to lose a lot of money.

Though, DAquino has no HR department, its compensation plan is not appropriate aswell as fair. The company can hire employees but those employees will not be the

best among the market because the hiring process is not evaluated and not doneaccording to the procedure. D Aquino is operating in the Latin America and recently

the economy of the region has faced economic crises primarily because of the poorfiscal policy, default on external debt and devaluation of respective country foreignexchange rates. Compensation package of this company should be changed in reactionto these changes. Only an appropriate compensation will motivate its employees towork for the betterment of the company.

MAINTAIN A GOOD RELATIONSHIP AMONG EMPLOYER ANDEMPLOYEES TO INCREASE PRODUCTIVITY AND ACHIEVECOMPANY GOAL:

An organization should always remember that setting a sound relationship among themembers of the organization is extremely important in order to make the organization

perform in a superior way. The right compensation program including right benefithelps an organization to attract efficient employees and retain them, which is an assetfor an organization. But a sound and healthy relationship among employer andemployees help the chemical company, DAquino to understand their commonobjectives for their company and accomplish the goal in an effective and efficientway.

In an organisation, unions play an important role in maintaining relationships betweenan employer and employee. In this regard, DAquino has no labor union that playeffectively in order to fulfil the demands of employees. Top management as well asthe lower level employees should come forward to establish and maintain a soundrelationship for the betterment of the company and to make the company prosperous,successful and profitable in the long run.

When the employees have a good relation with the top level management, they try alltheir perform to increase their productivity, improve their performance and they play


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RECOMMENDATION:

ESTABLISH AN EFFECTIVE AND EFFICIENT HRDEPARTMENT:

Human resource departments are definitely needed in every organization in order tomake sure everything in running correctly. Whether everybody is properly

compensated or not, whether everything is handled and managed properly, andwhether everything is actually being carried out the way it is supposed to be carriedout is all a part of the HR department.

Problems:

We have found that DAquino was facing problems due to economic downturn andalso took steps in economic expansion. On of their respond to the challenge washiring and maintaining sales staff with industry experience and vast consumercontracts based out of the warehouse. But they do not have the perfect methods forhiring and maintaining the work force.

On the other hand we have found that the head-quarter was responsible for controllingall the coordinating operations for the four Mercosur countries. But as there was noHR department they were facing problems in case of managing their stuffs whichresulted to fall their sales along with market share.

Recommendation:

The best solution for this problem is to build an effective and efficient HumanResource Department. An active human resource management team will help theorganization to sort their work and build the path for the company success.So not only the DAquino but also every international company must have Human

Resource Department.

Why recommendation?

By making a HR department available, it would also enhance and motivate theworkforce and the sales people, as they would have a feel of safety. An HRdepartment always means being properly compensated, and being rewarded for their

performance, and therefore the people would feel a sense of safety once the HR teamis implemented.


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As DAquino has expanded its operations to include Argentina, Uruguayand Paraguay, so it is not a national company. It has become an

international company. As there is a big chance of globalization so thecompany has to hire people from the different culture. In an educated human resourceteam can realize the difference of the culture and mentality of the employees also.In addition, it would enhance the productivity and the profitability of the wholeorganization. It would make sure that all the employees and the sales representativesare properly taken care of, which would mean that the employees would be convincedmore of staying with this organization, and would feel a sense of security. This senseof security would prevail, as the employees would know that their performance would

be compensated by rewards, which would give them internal satisfaction of workingwith this organization. The HR department would also play a critical and veryimportant role in determining the companys success, and thereby it would be

possible to attain the heights by reaching out into more secure markets. As well as forthe possibility of work force diversity, so a well-established HR department ismandatory for DAquino.

FORM A REGIONAL HEADQUARTER IN EVERY COUNTRY:

Problems:

The Headquarter of DAquino and its subsidiary were located in Brazil. From there allthe decisions regarding pricing, expansion marketing and inter country transfers of

personnels were made, which was not actually a very wise decision. Since there wasonly one headquarter in the whole continent of South America, it was not giving theindividual countries proper chances and possibilities to communicate with theHeadquarter and thereby also with their business. Therefore, the proper allocation of afew new headquarters country wise should be established.

The Brazilian subsidiary was headquartered in Santo Andr, which is where theproduction facility continued to operate after its inception. The headquartersoperation was fairly small, and responsible for coordinating operations for the fourMercosur countries. At headquarters, decisions were made regarding pricing,expansion, marketing, and inter-country transfers of personnel. All countryorganizations were charged 3% of total country revenues to pay for headquartersadministrative services. It shows that the work load is only in one shoulder. This oneand only head-quarter controls all the operation in Brazil, Uruguay, Argentina andParaguay. It is really very hard to control four big countries by only one head-quarter.

In addition, DAquino currently has 283 employees, 333 commercial representativesand 330 distributors. For a company regulating the operation of hundreds of workers

in 4 different countries, just one headquarters based in one of the Mercosur countriesis not sufficient to operate and coordinate the regional activities of all the 4 countries.


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Recommendation:

The solution to all these interrelated problems with administration and productioncould only be solved by letting the Mercosur countries operate individually. Thereforeit would be mandatory to set up a head-quarter not only in Brazil, but all thesubsidiaries that are operating in the Mercosur countries. This could eradicate the

problems, and make sure that operations can be dealt with individually, and someresponsibility can be headed down, to places where they are more important.

It is also a very untactful technique of letting the headquarter deal with the

employment of the crew. For the production facility it is one thing, and actually quitelogical that the HR department would chose HR department of the headquarter wouldchose them, however, for the individual units it would be wise if that could be done

by the individual countries, rather that the headquarter. This would spare theheadquarter, and thereby the whole organization, unnecessary costs, which could beallocated somewhere else. Therefore individual headquarters could decide what typeof skills would be required for the managers and the other people working in theadministration and on the ground, as the countries all vary in lifestyles, and have alldifferent ways of marketing and advertising.

Thus the problems could be eradicated if another, if not a few, headquarter could be

set up that would make it possible for the employees to have a better link and relatemore to the organization, to make performance more rewarding in terms of reward, to

be prepared for unstable economic problems, which the countries could faceindividually, and it would definitely stand out as an incentive for the employees whocould reap out more benefits in terms of combined efforts.

Why recommendation?

This solution of setting up more headquarters in the continent of South America

would definitely come to the benefit of DAquino, as it would enhance certain veryimportant factors. These factors, as already mentioned above would include the

benefits of the employees and the cutting and saving costs that the main headquarterwould endure. Therefore it would be a very necessary step to at least set up new headsubsidiaries that would allow the countries to make individual decisions and wouldalso allow the employees to have better opportunities in terms of work, pay and

performance, which are all interrelated.


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PRODUCTION AND MANUFACTURING PLANTSHOULD BE ESTABLISHED IN A SUITABLE

AREA:

Problem:

The only production facility available for the production of DAquino products waslocated in Santo Andre, which was in Brazil. That was a very difficult issue regardingthe communication with the countries like Argentina, Uruguay and Chile. Thevariable costs of these countries shot up always, as they had to deal with the hightravelling costs.

The problem with only one production facility, which was located only in Brazil, wasthe high variable cost of the products, which gave the respective countries a lesseroverall profit. This was mainly due to the high transportation charges and costs whichwere always charged by the government of each country.

As there was only one headquarter it was making problems in case of communication.Because all the responsibility of production and distribution was operated by only oneheadquarter which is only in Brazil.Keeping consideration to the prospective data of Argentina, it should be made aserious issue to think about the establishment of a new production facility somewhere

which is suitable for DAquino to operate, so to make it possible for the countries likeChile, Uruguay and Argentina, to reap as much benefits as possible from marketingthe products of DAquino in the respective locations, with more profits and lessvariable costs.

The main problem that should be encountered should be considering the Argentineanmarket. Although Argentina was a very prospective market for DAquino, it was verydifficult for them to increase their market share .This was mainly due to the problemstated above.

Recommendation:

The solution of reconsidering the variable costs and making Argentina stronger as it iswould definitely be the establishment of a proper manufacturing plant. Definitely, this

production facility, although providing the whole country, is a very old one, and

might have certain demerits in terms of production, regarding its technologies.Therefore, it would be a very good idea to set up a new production facility that would


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enable the workers to work in a better and perhaps safer environmentwith all the chemicals around.

It is true though that setting up a new production facility in the suitable area wouldinvolve very high costs. However, it would also give the people in Argentina,Paraguay and Uruguay a lot of advantages, and thereby also the product, which wouldalso trigger employment in that country.

Why recommendation?

Although it would take high costs in short term but for the long term this

recommendation of establishing a new production facility would definitely be theright one as it would enhance the whole profit and margin base for Argentina and theother southern countries in South America. It would make it possible to cut out on thevariable costs as much as possible as the production facility would make it possible toeradicate the extra transportation costs and the extra insurance costs, which have beenincurred all these years. It would not only be a very cost effective decision, but itwould allow be one that would enhance the benefits of the national boundaries.

ESTABLISH RESEARCH & DEVELOPMENT SECTOR ANDHIRE THEBEST EMPLOYEE FOR THAT DEPARTMENT:

Problem:

DAquino has to remain competitive in order to survive in the global and nationalmarket. It has to compete with brands like Lever Brothers in floor finishes and waxes,SC Johnson in disinfectants and Proctor & Gamble in soap liquids. Therefore, withoutcontinuous improvement of product quality DAquino will not be to gain huge marketshare as well as make profit in the long run.

Recommendation:

To maintain and meet the increasing demand of customers and keep competitive withthe renowned companies, DAquino should establish Research and Developmentdepartment to research and produce new products for customers to meet theirincreasing and changing demand.

Why recommendation?


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Continuous improvement is the ultimate solution to remain competitivein the market. In this regard, the company should conduct a survey of

people to know the tastes and demands of people in different areas,different countries of the world. To improve the product quality and develop newproducts, DAquino should establish R&D sector where the right employees shouldbe hired who can show their creativity in researching, improving and developingproducts and its quality.

ESTABLISH LONG TERM RELATIONSHIP WITH LARGE

BUSINESS CLIENTS AND OTHER CUSTOMERS:

DAquino was providing a large portfolio of products to it customers, which includedrepairing facilities and machine application classes, on site training on certain productapplication, and certain demonstrations, which included a diverse set of customers.These customers included a wide range of people from shopping malls, machine partmanufacturers sanitation engineers and homemakers.

Problems:

The higher business organizations and the government mainly received the largeorders by DAquino. From there they used to accumulate around $20,000, comparedto the merger amount of $ 40, which they used to get from the sales by superstores.Thus, it is a very important issue to keep these big business contracts in hand, evenduring economic instable situations.

Economic instabilities is the main problem maker in this situation. DAquino washaving a stable 60% of their total revenue from the business-to-business transactions.Therefore, it would be a very big problem that DAquino would face if they lost their

sales due to issues like economic instability.

We knew that DAquino competed nationally in the industrial chemical productsmarket against brands such as Lever Brothers in floor finishes and waxes, SC Jhonsonin disinfectants and Procter & Gamble in soap and liquids. For this reason, anothervery important issue to be considered would be the lack of technology, which theinstitution faced. Since that is the case, the big clients might switch over to any othercompeting brand.

Recommendation:

The solution to the problem of missing big business partners would definitely be therecommendation of signing and fixing certain contracts and memorandum of


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understanding. Being able to go into contracts with the governmentwould definitely be of an upper advantage for DAquino. Having any

type of mutual contracts with the Government ensures and secures theorganization with an upper hand in many factors.

Why recommendation?

Memorandums would be the perfect way to enhance mutual benefit betweenDAquino and other organizations, and would enhance and help them even insituations of economic instability, as the contracts would exist, and they would notneed to fear about the lost money, that they have been worrying about all these days.

Therefore, it would be of utmost importance to fix certain agreements as soon aspossible.

This solution of agreeing on certain contracts, especially with other big businessorganizations and the Government, would be the right decision, as it would take of alarge burden off the mind of DAquino. It would enhance them with an assured profitand would make sure that their goodwill remains in the market. It would also be ofutmost importance, as having contracts with the government would aid theorganization to get out of certain unwanted problems, which could always be takencare of by the government.

ESTABLISH OWN RETAIL OUTLETS FOR EFFECTIVEDISTRIBUTIONFACILITY:

Approximately 40% of sales were generated by retail distributors located throughouteach country. Distributors did not exclusively sell DAquino products. Consequently,sales representatives were constantly sent out to distributors to ensure that DAquino

products were correctly displayed and positioned at the distributors locations.Distributors sites ranged from mom-and-pop operations to supermarkets and

wholesale warehouses that specialized in cleaning business supplies.


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Problems:

As there is no verification in case of the products of DAquino and other companiesproducts it was very much hard to differentiate chemicals of DAquino. That makesthe consumers confused about the products. It is one of the reasons for declining thesales.

We have found that the mom-and-pop establishments constituted the majority ofDAquinos distributors. These enterprises were small, sometimes located at adomestic residence, and carried a variety of unrelated product lines. It was notuncommon to see DAquino products shelved with agricultural sprays, pool cleaning

chemicals, and pet shampoos. The average size of an order from one of thesedistributors was smallone or two products per invoice at an average dollar amountof approximately US$40.

Recommendation:

The best solution for this hesitation is to build their own retail outlets so thatconsumers can focus only on the products on DAquinos products. That will help toincrease their sales and make strong their declining market shares. It is a marketing

concept that if a company wants to build their image in consumers mind the companymust take effective steps so that whenever they want to buy a product their mind saysthe name of the product automatically. So if DAquino establishes their own retailoutlets they will be benefitted by consuming their products

Why recommendation?

The market shares will be gained again. Lack of specific retail outlets can make thecustomers and large business clients recognise and buy its products and help to

acquire the largest market share internally as well as externally.

ATTRACTIVE COMMISSION PLAN FOR SALES

REPRESENTATIVES:


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One of the major goals of a business is to earn profits and the profits

come from the pocket of the customers. If you can not impress yourconsumers the business will not earn its goals and grain the image. But the impressionof the customers relies on the motivation of the employees. The more the employeesare attached with company the more they attached with the customers.

Problem:

We have found from the case that the market share of DAquino is reducing day byday. This is one of the results of dissatisfaction of the employees. The company sells

their product through sales representatives and only one market manager isresponsible for all the distributions and product

D' Aquino Final Main

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