Business Management - Flame Away - Case Study Example

Business Management Name: Student ID: College: Course: Tutor: Date: Words: 2520 Table of Contents Executive Summary…………………………………………………………………….…3 Introduction……………………………………………………………………………. …3 Company Background………………………………………………………………….…4 Mission Statement……………………………………………………………...…4 Business Goals…………………………………………………………………....5 Ethical Problems and its Causes……………………………………………………….....6 Alternative Solutions…………………………………………………………………..…7 Conclusion……………………………………………………………………………..…8 Recommendations……………………………………………………………………..…9 References………………………………………………………………………………10 Executive Summary Business organizations are usually focused to enhance their competitiveness in the market. In order to attain this business organizations are required to develop mission statement and organizational goals which ought to be achieved within a certain period of time. Flame Away has established an effective mission statement which addresses the interests of all its major stakeholders. Besides, the company has established three major goes which should be attained within a specific period of time. However, the company is being faced with the problem of uncompetitive pricing system. In order to address this issue, the company has decided to outsource some of its products from foreign markets where cost of labor is cheap. In this regard, the interest of employees of the organization is undermined thus causing ethical issue. There are other three alternatives which can be utilized by the organization to solve the ethical issue. These alternatives include partnership with suppliers, use of advanced technology in production and automation of supply chain. These alternatives aim at reducing the cost of production and operation which will lower the prices of the products thus preventing outsourcing of products. However, partnership with major suppliers is the most recommended alternative for the company to improve its pricing system without affecting the interests of any stakeholder negatively. Introduction Business organizations are usually supposed to observe ethics and social responsibilities while carrying out their normal operations. Failure to observe ethics and social responsibility is likely to lower the competitiveness of an organization. In order to meet its goals and objectives, managers of a business organization is supposed to factor the interests of all stakeholders while making policies. Flame Away Company is not an exception of business organizations which are being faced ethical issues while carrying out their activities. The company is facing the problem of developing a competitive system which will address the interests of all stakeholders. As the company decides to outsource some of its products, it is evidence that the interests of employees will be injured negatively thus affecting the competitiveness of the organization. In this regard, effective alternatives need to be developed and implemented to address the pricing problem. In order for a business organization to prosper in a competitive market, the interests of all stakeholders need to be effectively addressed (Johnson, 2006, p.154). Company Background Flame Away is one of the companies in the safety industry that caters for all types of markets by offering various products ranging from industrial smoke detectors to emergency blankets. The company has decided to distribute flyers which provide more in depth list of all products available as well as the stores on which the products should be acquired. As a result the company has experienced increased market share for the past one year of its operation. The head office of the company is located in Brisbane. Besides, the company has two small manufacturing units which are located in Melbourne and Perth. However, the products of the company are not only sold in local market but also in international markets. Though the company started operating for the past five years, its management team has laid down effective strategies which have enabled it to successfully penetrate various foreign markets. These foreign markets include North America, Sweden, France and New Zealand. Mission Statement In order to remain focused in its business operations, the company has established an effective mission statement. The mission statement is supposed to guide all functions of the business organization in order to attain desired goals and objectives. The mission statement of Flame Away Company reflects the way business is conducted currently and should be conducted in future in order for the organization to remain competitive. The mission statement was constructed to appeal to all stakeholders including investors, customers, employees and suppliers. Failure for a mission statement to address the interests of all major stakeholders may lead to collapse of business organization (Gilliland & Skarlicki, 2007, p.208). As a result, the mission statement of Flame Away Company is as follows: “Flame Away strives to provide high standard, quality goods for all customers. We aim to give our clients competitive prices that will no compromise in quality or effectiveness. We believe that it is possible to make all environments safe, whether that being at home or at work The Company aims at providing good working condition to employees, maximizing profitability to meet the interests of investors and treating our suppliers with dignity and honesty.” Business Goals It is crucial for business organizations to establish specific goals which should direct the functions of an organization within a certain period of time. Goals enable both managers and employees to be motivated in attaining the m thus enhancing the productivity of their respective organizations. In this regard, the company has established various goals which it intents to attain in the near future (Gilliland & Skarlicki, 2007, p.204). 1. To enhance the market share by 35% by penetrating rural Australian market within a period of two years This is the first goal which the company aims to attain in two years time of its operation. The company intends to expand its operations in the rural Australian market in order to enhance its productivity and profitability. Bearing in mind that the company currently is located in the major cities of Australia, penetrating into rural market of Australia will be of great importance to the organization. Such a move will broaden the area on which the products will be distributed. It is evident that in rural Australian market the competition is very low thus the company will dominate the rural market (Gilliland & Skarlicki, 2007, p.205). 2. To increase the sales volume by 25% per annum for the next three years The company intends to increase its sales volume immensely for the next three years of operation. This will be attained through expansion of operation to cover rural markets in Australia as well as other urban areas in foreign markets. Besides, the sales volume of the company will be increased through effective marketing strategies employed by the company. For instance, the company will develop effective website to market its products and collect opinions from customers across all markets (Kotter & Schlesinger, 1979). 3. To increase the profitability of the company by 20% per annum The company is focused at increasing profitability every year. This can only be attained through increased efficiency in production. In other words, the cost of production must be minimized without affecting the quality of the products or services. Moreover, the profitability of the organization will be increased by enhancing sales volume of the organization. Increase in sales volume leads to increase in revenue thus high profit (Gilliland & Skarlicki, 2007, p.207). Ethical Problem and its Causes Flame Away Company is being faced with an ethical problem which may throw it out of the market if not well addressed. The pricing system of the company is not competitive enough to ensure sustainability. As a matter of fact, the company is facing reduced sales volume due to uncompetitive pricing system. In other words, the prices of the products of the company are generally above the industrial average prices thus causing customers to switch to other firms. In order to address this problem, the company intends to outsource some of its services and products from regions where labor cost is low. However, the outsourcing strategy causes ethical problem since it infringes the interests of some of the stakeholders of the organization (Gilliland & Skarlicki, 2007, p.197). Business organizations are supposed to consider interests of all stakeholders when making policies. Any policy which fails to address interests of a certain group of stakeholders is likely to cause ethical problem within an organization. By outsourcing some of services or products from region with cheap labor, the company will be minimizing cost to maximize its profitability thus meeting the interests of investors and lenders. However, the interests of employees will be undermined thus causing ethical problem. Investors of an organization are usually interested on business organizations which make high profits since their share values are likely to go high. Creation of wealth is the major interest of investors. On the other hand, employees are usually interested in working in an organization which offers job security and good working condition (Aadesh, 2009). Outsourcing some of the products is an indication that some of the current employees of the organization will be rendered redundant. In this regard, the business organization will be forced to dismiss some of its employees thus causing ethical issue. Maximizing the profitability of an organization by lying off employees is a strategy which causes ethical issues within an organization. As mentioned before, the interests of employees are to have security of their jobs and be provided with good working condition. Denying employees one of these aspects in order to satisfy the interests of other stakeholders is unethical which need to be addressed effectively before the competitiveness of the organization is substantially lowered (Aadesh, 2009). Outsourcing of products in order to minimize cost undermines the interests of local community since job is taken away from people living around the community to foreigners. Bearing in mind that the community play a major role on the survival of a business organization, its interest need to be observed. The community provides business organizations with human resource which can not be outsourced. Moreover, the customers of the organization are within the community thus the business may lose customers due to lack of considering the interests of the community while making its policies (Aadesh, 2009). The major cause of this ethical issue is the fact that the cost of production in Australian market is high thus making the organization to adopt poor pricing system which shuns customers away. High cost of production leads to increase of the prices in order for the organization to attain its profitability goals. However, increase in prices shuns customers away thus reducing the sales volume of the organization. As a result, the organization is left with no option than to come up with ways to minimize its cost of operation and production. One of the ways of reducing cost of production is outsourcing products from regions where the cost of labor and raw material is low. However, this strategy fails to meet the interests of existing employees of the company since their job security is threatened (Aadesh, 2009). Alternative Solutions It is crucial for the organization to utilize more effective strategies to solve the problem of uncompetitive pricing system without interfering with the interests of employees. As a result, various alternatives can be utilized to ensure that the pricing strategy of the organization is effective without causing ethical problem of lying off local employees. To start with, the company should adopt other strategies of minimizing cost of operation and production without affecting the interests of employees negatively. Partnership with suppliers of raw materials is one of the major strategies which the company should embrace to reduce the cost of production. Once an organization builds a concrete partnership with its major suppliers, the cost of raw materials is likely to be low even during bad economic conditions. Due to low cost of raw materials, the company will be in a position to offer its products at reasonable prices thus attracting and retaining more customers (Barney, 1991). Utilization of advanced technology is another alternative for the company to minimize the cost of operation and production without affecting the interests of employees. Use of advanced technology in operation and production is likely to increase the efficiency of production and operation thus satisfying the customers’ needs effectively. The quality of products and services is likely to be enhanced by adoption of new and advanced technology in production and operation. The company needs to carry out extensive research in order to identify the most advanced technology in the market. Customers are usually willing to purchase products which are of high quality and sold at a reasonable price. In this case, use of advanced technology will increase the output rate within an organization thus reducing the cost of production per product. As a result, the price of products will be reduced without negatively affecting the profitability of the organization. Besides, the quality of products and services will be enhanced thus attracting many customers (Dess, 2004, p.127). Besides, the company can also address the problem of uncompetitive pricing through reduction of supply chain cost by automating the process. Automating the supply chain will enable customers to order products directly from the firm. In this regard, the intermediaries in the supply chain will be minimal. Bearing in mind that each intermediary leads to increase in prices of products, the automation of supply chain will lead to substantial reduction of prices. As a result, the interests of employees will be observed since they will not be laid off. Besides, the profitability of the organization is likely to increase due to increased sales volume (Barney, 1991). Conclusion Ethical problems within an organization arise when the interests of a certain group of stakeholders are not considered during policy making process. In this case, it is evident that an ethical problem affects Flame Away Company for failure to consider the interests of employees while making outsourcing decision. Though the company has established some goals and objectives, the goals may not be attained if the ethical problem is not effectively solved. The company has three strategies which it can employ to address the issue. These issues if well implanted, can able the company to regain its competitiveness. Failure to address the ethical issue will lead to poor productivity since the motivation for employees will be lowered. As a result, the sales volume of the organization is likely to be lower in the long-run. In this regard, the company must use at least one of the alternatives to lower the cost of production and operation thus enhancing the pricing system without affecting negatively the interests of employees. Recommendations In order to solve the ethical issue arising from outsourcing, the company should partner with its suppliers. Besides, the company should automate its supply chain. These strategies will enable the company to reduce the cost of production and operation thus improving its pricing system. In order to partner with suppliers, the company should make a written agreement with all its major suppliers to ensure that the prices don’t fluctuate often. Besides, the company should reduce the number of suppliers to the minimum number possible. Moreover, automation of supply chain requires development of company website which allows customers to order products online and also make payments online. The company should hire highly skilled information technology personnel to develop the website (Johnson, 2006, p.178). These two recommendations will enable business organization to consider ethics in carrying out its operations. Reduction of cost of operation is going to lead to effective pricing system which appropriately addresses the interests of customers. In this regard, customers will be willing to purchase company’s products. As a result, the sales volume of the company will be boosted substantially thus meeting the interests of investors. Moreover, the interests of employees will be preserved since they will not have to be laid off to make the pricing system competitive. It is evident that the problem of uncompetitive pricing system can be effectively solved without affecting interests of any group of stakeholders effectively (Horte & Hakan, 1997). References Aadesh, G. (2009). The game plan for HR professionals. Business Today, 18(9), 84-84. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. Dess, G. (2004). Strategic management creating competitive advantages. New York: McGraw-Hill Professional. Gilliland, S. & Skarlicki, D. (2007). Managing social and ethical issues in organizations. ISBN 1593115555: IAP. Horte, S. & Hakan, Y. (1997). The firm’s and its customers’ views on order-winning criteria. International Journal of Operations and Production Management, 17(10), 1006-1019. Johnson, C. (2006). Ethics in the workplace: tools and tactics for organizational transformation. ISBN 1412905397: SAGE. Kotter, J.P & Schlesinger, L.A., (1979). Choosing strategies for change. Harvard Business Review, 14(1), 85-92. Read More