Human Resources, Finance and Marketing at Cuero Limited - Assignment Example

College CUERO LTD Case Report Table of Contents Company Profile 3 Individual Report – People (HR) Performance 4 Introduction 4 HR Performance Appraisal, Recommendation and Conclusion 4 Factories 4 The Retail Shops 6 The Distributing Division: Balcombe 6 Mail Order Business: Imberholme 6 Individual Report – Supply Performance 7 Introduction 7 Supply Performance 7 Recommendation and Conclusion 8 Individual Performance – Marketing Performance 9 Introduction 9 Marketing Function 10 Recommendation and Conclusion 11 Individual report - Financial Performance 12 Financial Ratios 12 Liquidity Ratios 12 Gearing Ratio 12 Asset Utilisation Ratio 12 Efficiency Ratios 12 Ratio Interpretation, evaluation and comparison 13 Bibliography 16 Case Report Cuero Ltd Company Profile Cuero Ltd has been operating in the UK since the last 7 decades or so. The company excelled in shoe manufacturing till the 1990s but as soon as the shoe manufacturing industry saw a fall, the company lost its excellence, there had been many reasons for this but the main reason of this downfall was because of the negligent nature of the “Wood Brothers” considering the business to be a “Cash Cow” and just chewing out the profit without investing much into the business. The company has owned 3 different factories to aide its production. These 3 factories produce different types of shoes which are targeted for different market segments. There are 60 retail shops which the company uses to sell its shops and other accessories which it offers to its customers, these accessories include leather handbags, umbrellas, key fobs and other leather goods. Besides this, Cuero Ltd operates a distribution centre (Balcombe) not only helps them to distribute their own products but it also helps in distributing other associated products of its competitors, this gives Cuero Ltd a strong and dedicated distribution channel. Along with this distribution centre, the company runs a mail order business that helps in the promotion and marketing of the shoes and accessories produced and sold by the company. The performance of Cuero Ltd is to be appraised and evaluated on the basis of the 4 major organisational performance areas of analysis. These four major areas include; HR Performance issues; Financial Performance issues; Marketing and Supply Management issues. All of these areas of analysis are evaluated in separate individual reports to ascertain whether there are any issues/problems in that functioning area and how can that issue be resolved. Individual Report – People (HR) Performance Introduction This report analyses the performance of the people employed by Cuero Ltd. Besides the people directly by the company, other personnel whose activities may affect the business of Cuero Ltd is also considered. The Human Resource performance is appraised using the Critical incident method where the performance of the staff is appraised after assessing the positive and negative areas of their work. After the performance is analyzed, suitable recommendation as to the improvement of this function are also stated. HR Performance Appraisal, Recommendation and Conclusion Human resource is defined as "The people that staff and operate an organization"; as contrasted with the financial and material resources of an organization. Human Resources is also the organizational function that deals with the people and issues related to people such as compensation, hiring, performance management, and training. A Human Resource is a single person or employee within an organization”. (Tracey, 2004; Susan M. Heathfield) Cuero Ltd, as a whole organisation with different sectors comprises a large number of personnel, assessing the perfomance of the employees at an individual level is a difficult task and may not be appraised reliably, although there are certain things and procedures that can help in appraising the performance individually. The performance of Cuero Ltd’s different operations are appraised individually i.e. the Factories, the retail shops, distribution centre and the mail order business. Factories Cuero Ltd owns three different factories; The Catesby factory, The Kilsby factory, The Buckhorn Weston factory. The Catesby factory has 130 employees of which 100 relate to direct manufacture of the shoes manufactured in that factory. The research carried out during Josiah Saint’s era clearly indicates that production in the Catesby factory was on a linear basis, after the products are completed, each and every individual product is inspected to ensure the quality of production. The major issue with the Catesby factory is that it hires a old age staff in its production line. Although these employees are highly skilled, they might not be manufacturing shoes to the optimum level. There might be some chance that hiring some young skilled employees may boost and increase the productivity of the Catesby factory. The second issue with the Catesby factory is that it has large amount of life expired capital equipment which might be increasing the costs of the finished product as it has been costly to maintain such life expired equipment. Such equipments are difficult and costly to maintain, besides the costs associated with the maintenance of the capital equipment, these type of life expired capital equipments may also cause danger and scare for the employees operating those equipments. These type of sub-standard equipments may also lead the company to face legal fines which may arise as a consequence of the violation of the health and safety regulations. The best alternate of avoiding such fines and reduce the maintenance cost would be to invest in the capital equipments. The staff canteen has 6 employees which are indulged in cooking and cleaning, they buy their goods from the local shops and the invoices are sent to the company directly. There seems to be no check and balance in this event to avoid any fictitious invoice being raised and sent to the company. A supervisor should be present to avoid such discrepancies. Besides the Catesby factory, the Kilsby factory too lacked capital investment hence leading to high maintenance costs for the entire company. Rejection rates in the Kilsby factory are low as the shoes offered were not thoroughly checked by their c\respective customers e.g. military, railway maintenance companies. The Kilsby factory had hired 180 employees of which 150 were involved in direct manufacturing. The remainder of the employees were involved in other supporting activities. The third factory (Buckhorn Weston factory) focused on the production of children’s shoes. This factory manufactures a large variety of shoes for the children’s segment. Like the Catesby factory, the Buckhorn Weston factory also had severe wastages because of the sophisticated manufacturing methods. Unlike other factories this factory has less maintenance cost because of the plant managers nature of hiring competitive local contractors through the bidding process. This bidding process helped in eradicating the extra maintenance costs for the company. The issues that relate to the factories of Cuero Ltd are that there has been severe dependability over the work of Bryces Ltd, there has been major costs that have been paid for to Bryces Ltd without proper authorisation and accountability. The staff hired in the factories seems to be working below the optimum level and there are many staff members who either do not exist or are not working in the factories. The Retail Shops The sixty retail shops are supervised by their respective retail managers and there are 12 staff based at the head office. The hiring in these retail shops is conducted by the shop manager. The workers in the retail shops do not have sufficient knowledge of the fashion trends because they might be hired by the shop manager in accordance with his own preference, there seem to be a lack of goal congruence between the shop manager and the marketing manager. Both these functions should be properly aligned so that it can work in the best interest of the company. The Distributing Division: Balcombe The distribution division has 13 lorry drivers, 1 depot manager, 10 store staff and four administrators. The 13th lorry driver seems to be of no use as there are only 12 Lorries available for distribution hence he should be made redundant. The Lorries are life expired hence they require high maintenance, either the company should invest and buy new lorries or they should entirely outsource this division via a tender. The company seems to be hiring drivers at a very high wage rate because of the odd timings. The investment in the purchase of Lorries would mean that the 4 administrators held for the maintenance of these lorries can be fired or their number reduced as the new lorries would require less maintenance. Mail Order Business: Imberholme The mail order business has 60 employees that were involved in setting the price and then providing goods to the sales representatives, the staff in this division can be reduced by the application of internet mail order service. This would also help reduce the problem of the handling and processing the cash as the credit card payment would be made directly to the bank and the bank can be instructed to remit it into the company’s bank account. Individual Report – Supply Performance Introduction “Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers” (Thomas Wailgum). Supply chain management helps in reducing the holding costs of inventory for a company through proper integration of the buying and the selling functions of the company. This proper integration helps in avoiding any costs that may occur due to damage to stock, theft, stock becoming obsolete, etc. (Blanchard, 2007) Supply Performance There have been clear discrepancies in the supply performance for the company. The major issues highlighted within Cuero Ltd are; The purchasing are randomly carried out in the company by different people who may not be entitled to any such authority. Raw materials are bought from different suppliers from the administration staff and these staff members are not properly supervised. There are no prescribed list of suppliers for the company to purchase the raw material from and no tender is put up for any purchase to take advantage of better costs and quality form various list of suppliers. The purchase made at different levels in the organisations is usually contested by other administrator for the purchase. The goods and services acquired by the company are usually acquired at the terms and condition dictated by the supplier. This leads to increased costs being sustained by the company at the expense of the staff’s negligence. The purchasing framework agreements are not adhered to when any purchase of a good is being made. This further leads the supplier to dictate his terms when supplying the goods to Cuero Ltd. When any employee is hired, the service level agreements are not properly dealt with. This leads to unauthorised hiring of staff which may not be needed in the regular course of the business. This negligence clearly aligns with the increased number of staff being hired within the company. The orders in excess of £10,000 pounds were signed by Mr. Wood who was a close aide to the Claytons. This increased authority may have lead to frauds being committed by Mr. Wood and all these frauds might have gone unnoticed. There had been no sign of forward buying that would have helped in reduction of costs of any particular raw material. Recommendation and Conclusion The random purchase of raw materials by different staff members may entice the staff members to notice the lack of controls in the company and to focus on buying raw materials for their own and then selling it in the open market. This sort of behaviour can be reduced by authorising only few staff members in the procurement department and this authorisation should be further supervised by any other officer to reduce the incidence of any fraud. A tender should be advertised in the local newspaper to attract all the potential suppliers. Each supplier’s quote should be compared with all the other offers and one final supplier should be selected who would offer favourable rates and conditions to the company. This process of tendering and selecting the supplier should be carried out by some senior representative with the consent of the owner of the company. The terms and condition of all the suppliers should be considered and only those suppliers should be favoured who offer the company with better and favourable terms. As there are various suppliers available for the local cattle industry, it would be rather easy for Cuero Ltd to dictate their terms onto the suppliers. The bargaining power of Cuero Ltd seems to be much strong than its local suppliers as it is the only shoe manufacturing business in that particular area. The nails too would not be a problem as there is close proximity of the iron and steel factories within the location. A large number of iron and steel factories in the vicinity also enhances the bargaining power of Cuero Ltd over its nail suppliers. Besides these raw materials, Cuero Ltd is already forcing their terms on to the local neighbourhood by providing them with low wages as it seems that the rate of unemployment in the area is quiet high. The service level agreements (SLA) should be properly enforced in the organisation to ensure that unnecessary staff members are not paid. Besides this, the SLA should be properly made with the consent of the marketing and the HR function, the HR and the Marketing department do not seem to work in coordination. This coordination should be enforced to ensure better appointment of staff within the organisation. Strict enforcement of the framework agreement should be made within the organisation. Any amount above a specified limit e.g. £10,000 should be signed by two authorities so to avoid the risk of fraud. Any huge or material amount should be signed by these two authorities and an approval should also be sought from the owner. Forward buying should be encouraged within the company; this forward buying would reduce any future losses to be made on the purchase of raw material. This future buying should only be encouraged when there might be any chance of any future upward change in the prices of the raw materials. Thus it would be better to lock in to a rate earlier than the actual purchase is to be made. This rate would be a bit higher than the underlying/current rate of the goods. There is a clear lack of supply performance at Cuero Ltd and the application of a better supply chain management system would enhance the company profits with clear reduction in the costs. To make this supply management system more effective it would be better to integrate the supply system with the appropriate purchase system. All this can be possible with the use of IT tools that can help in raising purchase order directly from the factory to be sent to the procurement department. Individual Performance – Marketing Performance Introduction Marketing is considered to be the process of promoting, selling and distributing any particular good or service. All these functions constitute within the definition of marketing but the basic aim and purpose of marketing is to create awareness in the eyes of the customer so that the product may seem appealing to him/her and this enhanced appeal to the customer may lead them to the buy the product or service eventually. “In the fast-moving world of business, definitions rarely stay the same. Marketing has been described as the management process responsible for identifying, anticipating and satisfying customer requirements profitably.” (Chartered Institute of Marketing). The definition includes identifying all issues of the customer before hand and addressing them in such a manner that they satisfy the customer leaving a good image of the company plus making a profit if the product is sold. Marketing Function The marketing function at Cuero Ltd does not seem to be in line with the definition provided. The marketing function in the company seems to be stuck up and does not seem to operate in a proper and independent manner. The marketing department seemed to work in accordance with the instruction received by the senior management of Cuero Ltd. The marketing department was not given the independence to bring innovation into the products design and features. The merchandisers were strictly ordered to focus on promoting the existing designs produced by the company and any changes in the design of the product were to be made by the owner of the company. This has been a great flaw in the marketing function. Although evidence is easily available to ascertain the success or failure of any given product, the marketing department had not been able to either discontinue that product or to bring changes to that product. Promotion too had been limited by the senior management to focus upon the existing target markets for the company. There has been no change in the target market since the inception of the products and the promotion too is to be carried out using the traditional methods of advertising. There has been no marketing programme carried out for the industrial shoes, only those buyer/customers were focused who were not interested in innovation and were in pursuit of cheaper prices at the expense of quality. The Buckhorn Weston factory’s product managers were in charge of the design, promotion and sales of the children’s shoes manufactured in the factory. Prospectful areas have not been focused upon in prior years due to the rigid culture of the organisation. Despite the success of the sportswear product which had greater prospects in the market, the company did not focus on marketing and selling them in the market, rather they were sold through the mail order business. Recommendation and Conclusion The company’s lack of interest in the marketing department portrays the marketing function as a useless function. This department has not been able to display its real character. The marketing function should be properly utilised within the company to ensure better goodwill for the company. There are many issues with the company that need to be addressed. The marketing department should be given liberty in their operations. They should be allowed to put forward their comments and expertise towards the designing, distribution and the sale of the shoes. Proper branding should be implemented within the organisation as branding can help the customers to differentiate the product line of Cuero Ltd from its competitors. This would further help in enhancing brand loyalty with the help of high quality products being sold to the customers as branding is “the marketing practice of creating a name, symbol or design that identifies and differentiates a product from other products.” (Entrepreneur) The marketing department should be allowed to focus on possible alternatives and they should be encouraged to focus on growth strategies available for Cuero Ltd. The Ansoff’s Growth Vector matrix would certainly be a useful tool for the company’s marketing department to ascertain future growth direction and strategies for Cuero Ltd. This matrix would help the company to identify risk implications of the strategies to be followed, which in turn would highlight key areas that would need monitoring and control. The company should focus on the prospectful sports shoes and their design should be prepared after extensive market research and survey so as to ensure that any further products to be launched by the company end up being a success. The current success or failure of sports shoes under the brand name of “Nikki” and “Springbok” should be evaluated and that product should be stopped which has ended being a failure within the market. The marketing department should also use techniques such as “Brand Proliferation” to give names to the other products that are being manufactured by the company and the industrial shoes should also be promoted so as to attract any different customer segment for it. Other techniques such as the Boston Consultative Group (BCG) Matrix should also be used to ascertain the current product portfolios. The BCG matrix would help to identify a balanced portfolio and to identify which product to invest and which to divest out from. Potential strategies for each product can be ascertained using the BCG matrix. (Sandhusen, 2008) All in all, the marketing function has not been working properly in the company and the way that it had previously operated reflects it to be a burden upon the company. Proper work carried out by the department in the research and designing of the product would lead to further profitable results for Cuero Ltd. Individual report - Financial Performance Financial Ratios Liquidity Ratios Ratios Calculation FY 2009 Calculation FY 2010 Current Ratio 19250/16500 1.17 22151/19100 1.16 Quick Ratio 19250-8000/16500 0.68 22151-10790/19100 0.59 Gearing Ratio Ratios Calculation FY 2009 Calculation FY 2010 Gearing Ratio 25000/21750*100 114.9% 26050/18981*100 137.2% Asset Utilisation Ratio Ratios Calculation FY 2009 Calculation FY 2010 Fixed Asset Turnover Ratio 41500/44000-3500 1.02 times 40879/42980-2530 1.01 times Inventory Period 8000/21000*365 139 days 11100/22640*365 174 days Efficiency Ratios Ratios Calculation FY 2009 Calculation FY 2010 Average Collection Period 10750/41500*365 95 days 11100/40879*365 99 days Average Payment Period 14500/21000*365 252 days 17000/22640*365 274 days Ratio Interpretation, evaluation and comparison The ratios calculated above demonstrate the financial position of the company. According to the ratios calculated above, the results do not seem to favour Cuero Ltd. The company’s financial performance is still distressful and it requires major changes. The liquidity ratios calculated above suggests that the company has not performed well in the year 2010. The current ratio illustrates the company’s ability to pay off its debt obligation as they fall due from the respective current assets that it currently holds. The ideal position for any company is to have a 2:1 current ratio which would mean that the company’s current assets are twice that of its current obligations and the company can sell off its current assets to meet those obligations. The quick asset ratio determines the company’s ability to pay off its debt using its most liquid assets i.e. those assets that can be converted to cash in a quick manner. The ideal quick ratio position should be 1:1, meaning that the company should hold equivalent amount of liquid assets to that of its current liabilities. On the basis of the liquidity position the company’s performance has deteriorated in the year 2010 as compared to 2009. The gearing ratios reflect the company’s capital structure, any company having greater debts than its equity would definitely face the extra interest charges and they would add up to the companies liabilities, this would also make the company to face severe bankruptcy issues if those interest charges are not paid up. Cuero Ltd’s gearing ratio has increased for 114% to 137% suggesting that the company has obtained more debt finance and this could lead to serious liquidity issues for the company. The fixed asset turnover ratio suggests a company’s sales increase with respect to the investment in its current assets. Cuero Ltd’s asset turnover ratio has also deteriorated in 2010 as compared to 2009 suggesting that the company’s £1 investment in fixed asset gives a turnover of 1.01 as compared to 1.02 earned in the year 2009. The inventory holding period has also increased suggesting that the company stocks up its inventory and takes up a specified time period to get it sold off. The Inventory period has also worsened for Cuero Ltd suggesting that company may face severe holding costs and may not have enough cash to maintain its working capital position steadily. The average collection and payment period shows the time required to receive and pay debtors and creditors respectively. Cuero Ltd already faced poor credit control policy and these ratios clearly supplement that. The average collection and payment period have both worsened for the company and this may lead to major liquidity crisis for the company. The company should try and focus on getting their debts quickly to ensure that enough cash is available to pay off the necessary debts. Although the increased average collection period is good for the company but this may have long term consequences for the company such as Cuero Ltd might not be able to get any suppliers on credit. Hence it would be beneficial for Cuero Ltd to pay its suppliers quicker to ensure strong supplier relationship with the supplier. Weaknesses in the Ratio Analysis Technique The major limitations of using ratio analysis as a method of appraisal are that it may be difficult to compare different activities. Ratio analysis more meaningful if it is compared with other competitors in the same industry. Different accounting policies in different companies may make ratio analysis difficult Interpretation is key of ratio analysis. Usually ratios are not interpreted properly hence they portray a different result. Ratio analysis only focus on the quantitative aspects of a company hence it is necessary to have some qualitative information such as non financial performance management issue to draw conclusion on any given matter. (Morley, 1984) There are chances that the arrival of Brunnel may have some impact upon the company and may lead the company to head towards a positive goal with a brighter future for the company but this may take some time and company does not seem to have much time as it is getting closer towards bankruptcy. Brunnel should try to work upon this by taking quick remedial work and get some quick results for the company to make it survive. Bibliography BLANCHARD, D. (2007). Supply chain management: best practices. [Wiley best practices]. Hoboken, N.J., Wiley. 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