Sample_Case_Study.docx

7/30/2019 Sample_Case_Study.docx

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In 1990 the building facilities were valued at 2.00 million. As part of a strategic plan, abuilding company was set up by the family and the premises were transferred to the newcompany. The company then rented the premises from the new building company. Thisenabled the original company to pay cash and purchase a new company (a major customer),which was previously owned by a an international food company. Mathew Osbourne basedhimself in the new company and his son David, who had become familiar with all aspects ofthe business and had become a true business entrepreneur, was promoted to Managing

Director, responsible for the overall operation and running of the company as the parentcompany. This promotion was also influenced by the fact that prior to his appointment, fiveManaging Directors had been recruited and dismissed in a short period of time.

In the light of strong competition and market conditions, upon his appointment he was forcedto make major strategic decisions concerning the efficiency and the profitability of thebusiness. He began by restructuring the administration function and placing more emphasison the financial control side of the business and the use of Information and CommunicationTechnologies (ICT). He promoted a flexible production environment, through the purchase ofnew CNC machines that were financed partly through the sale of less flexible and unwantedmachinery and equipment. The company is located in the South East of England, has anannual turnover of 22 million pounds and employs 150 people from which, 92 work on theshopfloor. They are highly skilled and flexible with an average age of forty.

PRODUCTS AND CUSTOMERS

The company operates as a sub-contractor and manufactures parts and sub-assemblies forfilling, packaging and process equipments for its customers. The product range is notregular, and the company is attracting orders from different sectors of manufacturing. Thecompany is also considering the possibilities of providing design solutions for customersworldwide. Three major customers provide 50% of the business activities. The remaining50% is made up of six regular and 40 fairly regular customers. The company has

exceptionally good relations with its established customers that have been developedthroughout the years.

BUSINESS PROCESS

The Managing Director, who is responsible for the majority of managementprocesses, has all the personal qualities that are desirable for a successful Manager.With his leadership qualities and knowledge of the business, he has inspired self-confidence among operators, and chosen a right mix of skills and knit them into aproductive team with a common purpose. The above together with a semi-

consultative approach to problem solving has enabled him to gain the respect of bothinternal and external stakeholders. Further, it has made it possible for him todelegate the internal operational aspects of the business to the departmentalmanager and focus on the business issues that are more critical to the success of thebusiness.

Due to fierce competition from overseas, the UK market is declining by 10% everyyear. According to the company, there would only be a very limited market for theirindustry sector in five years. As a result, the company is limiting their investmentinitiatives to projects that are considered critical to business operations and areplanning to review their business strategy with a view to; maintaining and satisfying

the existing markets, attacking and capturing new markets worldwide, increasinginvestment in Information and Communication Technologies (ICT), and to expandand grow through strategic alliances and diversification. To maintain their market


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shares, the company competes with six similar size and thirty smaller size companiesfrom within the UK, from which about half are struggling. However, largeorganisations in this sector are doing better, due to their capabilities and resources.To remain competitive, the company focuses on providing a complete package fromdesign to delivery. It is a part of the company policy and its competitive strategy to;tenders for contracts that are small for bigger companies, have higher profit margins,

and are short termed and require a short manufacturing lead-time and consequentlya low work in progress investment.

A typical contract begins by following an enquiry or a request for tender by thepotential customer. If required, the company will then participate and work with thecustomers design team to ensure that the proposed specifications satisfy bothmarket and customers expectations. In the next stage, based on historical data anda pricing strategy described below an estimation of the product cost is calculated bythe Managing Director. After clearance of the customer and upon successful tender,the manufacturing team begin by providing a prototype version of the product toensure; an appropriate and cost effective approach to the production process, and to

ensure the suitability of the design. The latter often leads to some modifications andcost savings for the customer, upon which the customer is informed and theirapproval is secured. This approach has been very beneficial to the company and hasled to a good and long term relationship with its customers. Full production isfollowed after a meeting between the Managing Director, departmental managersand the manufacturing team, where targets and milestones are agreed together withquality requirements. The progress is then monitored to ensure the delivery of theproducts to the required specifications, on time, within budget and to the requiredquality standards.

PRODUCT PRICING

The Managing Director who is responsible for formulating marketing strategy and salesforecasts, decides on the pricing policy. This is usually influenced by a number of factorsincluding; order size and specification, customer, economic climate, competition andmarkets. The pricing strategy is cost-related and is based on break-even analysis or cost-plus-profit pricing systems, where, the cost of materials, processes and operations (hourlyrate) are added together with the cost of overheads and the expected profit margin on aparticular job. The profit margin and the cost of processes and operations (hourly rate) oftenprovide the flexibility required to satisfy customer perception and also a mechanism torespond to prices quoted by the competitors (figure 2).

As well as a well-established reputation for; good quality products and services, flexibility andthe speed of response to customer inquiries and requirement, some aspects of the pricingpolicy have given the company a competitive advantage over its competitors, including; thereturn of excess profit to customers and agreement with some customers on hourly rates forprocesses and operations.

Cost of

Materials

Cost of

Processes and

Operations (Hourly rate)

Cost of

Overheads

Profit

Margin

Figure 2; Pricing Policy


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CAPITAL INVESTMENT

In the past, Mathew andDavid, in response to oneor a combination of factors

including; companygrowth, competition, newproduct development,business opportunities,positive economic climate,and favourable purchasingconditions have alwaysinitiated capital investmentprojects (figure 3). Theinvestment in new buildingfacilities in 1978 was a partof a well planed strategyfor growth. The strategywas formulated in 1973 inresponse to a favourableeconomic environment, competition, and the desire for increased market share. Theacquisition of a new company (a major customer) in 1990 was heavily motivated by the needto ensure future orders, compatibility of operations with the companys existingmanufacturing operations, availability of finance,favourable purchasing conditions, and competitiverivalry. The investment in CNC machines wasbased on the need for flexibility with a view to;manufacturing capabilities, satisfying customer

requirements in terms of product variety and thespeed of delivery. The payback method was usedfor appraising investment, allowing ten years forbuilding facilities and up to five years for machineryand equipment. At present the company is onlyconcerned with capital investment projects thatenable them to gain competitive advantage andthose projects that are essential for completingcustomer orders speedily and more efficiently atcompetitive prices.

PERFORMANCE MEASUREMENT

The company consider performance measurementas a catalyst for company growth, and an essentialprocess that has an important impact on thesuccess of their business strategy and theachievement of their business goals and objectives.Due to the nature of its business activities, themeasurements focus on the financial indicators andare dominated by the cost of processes andoperations (hourly rate), chargeable to customers. The financial and non-financial measures(figure 4) are analysed by the MD on a weekly basis, and with other senior personnel fromwithin the company on a monthly basis. Copies of monthly company accounts, which are inthe form of a mini annual report together with productivity report are sent to the companyowner. A copy of the company accounts is also sent to the bank, but only when the figures

Financial

Company Accounts (monthly)Budgeted forecastWork-in-progress

Business

Order labour costsForecast accuracyContract performance (hourlyrate)

Customer

Pricing (hourly rate)

Learning

Labour productivity (hourly rate)Punishment

Figure 4; PerformanceMeasurement Systems

PurchasingCondition

Capital

Investments

CompanyCompetition

New Product

Economic

Climate

Business

Figure 3; Capital Investments


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arefavourable, or when requested by the same. The approach to performance measurementsystems is not systematic, and it is used for decision-making, performance appraisal andaccountability. They are initiated by the Managing Director and are reviewed on an on-goingbasis.

IT AND E-BUSINESS

IT is used extensively within the management function and processes. The ManagingDirector who is an IT literate, is well aware of the importance of IT and the contribution thatcan be made by ICT, as an enabling technology, including Computer Aided Design (CAD)and Computer Aided Manufacturing (CAM). However, the companys traditional work forceand the level of investment required to develop an effective IT infrastructure, have limited theprogress of IT within the company. The company would like to remedy this situation. But, thisis not something that can be achieved in a short period of time. Training, IT facilities, systemsand applications and finance are some of the key issues, providing the bottlenecks. Thecompany has recently upgraded their operating system to Windows XP. The Local AreaNetwork provides access to MS Office, Stock Control, Purchasing, and Personnel systems.The Wide Area Network provides access to e-mail and the Internet. The company alsobenefits from a host of stand alone and in-house developed applications including;Performance Measurement, Customer Database, and Contract Systems. As a part ofmarketing strategy, the company set up their web site in 1998, providing content. Since thenthe site has been upgraded by an IT personnel from within the company to incorporate e-commerce facilities, however, a number of internal and external stakeholders havequestioned its usability and its contribution to the company as a whole.

The desire for efficiency, productivity, service improvements, and competitiveness hasencouraged the company to recruit an IT Director in August 2007. Andrew France has a MScin E-business together with fifteen years experience in all aspects of ICT and a successfultrack record in managing various .com project. In a meeting with the MD and Departmental

Heads, he presented his vision of ICT for the company emphasising the need for a suitablestrategy for the digital environment, an integrated infrastructure, e-business, investment, andeducation and training.

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