DigiMaxCon: The of the Shrinking Margins - Case Study Example

Strategy for DMC (DigiMaxCon) Module Table of Contents Introduction 3 Mission ment/Strategy 3 Problems 3 Information andAssessment: 3 Recommendations: 6 Conclusion 7 References 8 Introduction Managing operations and production in modern companies that manufacture electronic goods is much challenging task because goods produced in such concerns have volatile market further competition in such companies exaggerate situation. As DMC is striving hard to increase margins in order to stable its economic position where all stake holders of the company can forecast their expectation from the company. Mission Statement/Strategy Mission statement “Increasing sale of company in order to achieve stable sales pattern and improved margins” Problems The way DMC is doing business is not ideal one in this type of industry where day by day new product are launched, and where obsolesces of technology is very frequent but in spite all of these issues DMC is doing traditionally with any proactive thinking for the future , DMC is not quick enough to respond quickly to market changes which result in decreased margins R&D function in DMC is not up to the mark which is a strong necessity of each company in this industry which result in high development cost and reduced margins Is on increasing trend therefore without this function DMC will not be able to increase sale revenue in longer run. (Stonehouse, 2015) Information and Assessment: As per study of DMC current situation CEO of the company is looking for ecommerce sale of products in order to dilute its worse economic situation so he met with VP of IT and discuss the viability of the plan although plan is good on paper that in short period it might improve margins but in long run it would require restructuring in its entire business because it’s not just the matter of IT and sale department but changes would also be inevitable for manufacturing, R%D and finance department Concern of the CEO for margins problem and decreased sale (from 8500M to 8050) have stressed the sales VP, for which CEO have evolved the idea of electronic trading which is not bad enough but the problems is that it is a shot term approach towards such problems instead of taking this issue as a temporary matter DMC should evolve a centralized plan of which E trading should be a part. On manufacturing side all expect them to do something out of the box but the concerned VP is of the view that they were already performing extraordinary which is wrong because fig show entire different picture as there cost of sales have been increasing constantly which is evident from statement of comprehensive income figures, but problems is not the simple reason of lower sales and increased cost of sales but actually the problem is inefficient R&D function as this is industry of technology where each new product obsolete the older one. Hence DMC have to be very much serious about this function if they want genuinely to e as competitive as other top most one. (Porter, 2015) As for as supply chain function of the DMC is concerned generally the picture drawn in the situation show no apparent problem in its function but in fact it also need overhauling because it is also responsible for increase in cost of sale, further in case of electronic sale the problem is not only the supply chain management but pricing of raw material is also a contentious issue therefor DMC should have to maintain a list of approved vendors from whom DMC have to buy it raw material and further DMC should also establish its raw material standard specification so that it become easy for DMC to switch between different vendors, and on the other hand before implementing ecommerce thee should be detailed study of its economic feasibility and other area such as storing facility, production capacity and financial resources. Like other areas of the company finance department also feel the same heat of below par performance although finance VP is very much confident about some good news from his side but all this is just expectation not the news, due to lower sale and higher cost and overall loss of more than 1000 million dollar the company has now the only choice to reduce its operating cost which obviously much hard for the staff that may also demotivate the employee because it’s not just the fault of employee who bear such cost but mainly its possible due to lack of strategic plan, as if all this is proactively managed the position of company would be a profit earning organization, further due to uncertainty involved in its product market demand it is also a difficult task for the finance department to calculate the exact return on capital employed which would create difficulty in negotiation with financial institution, (Helo, 2015) Human Resource function would also have to bear the loss of the company by either downsizing or out sourcing, because a change in HR strategy often mean lay off of employees but this would demotivate exiting employees and is not a recommended technique in this sort of situation because in company life sudden losses and specially in IT environment are usual phenomenon therefor while addressing this situation we should assume the broader aspect of the company and see the company in long term approach, hence neither the downsizing nor outsourcing is the solution to the problem but only solution is strategic planning for all upcoming activities and proactive management of resources instead of reactive approach. Information technology function is also facing problems due to reactive approach of the company as per information provided IT department is now working on improvement of its infrastructure but still now it is facing budgeting problems means DMC is still unaware of its priorities which is due to lack of any strategic plan, as per current situation of DMC it should fix its priorities in order to resolve it issues of low margins and abrupt sales, as IT department is looking for implementing business intelligence which would not only reduce cost but also streamline the workflow that result efficiency of organization which should be encouraged, and further as DMC is launching ecommerce for which company is creating a website on which ROI is difficult to calculate and further it is also difficult to predict volume on such sale. Research and development in DMC is not performing up to the mark, if R&D were a good function of DMC then it would be profit earning organization as in this type of industry only those companies can reach to top most position who invest in R&D otherwise there is no room for those companies who lack on this ground. Recommendations: Keeping in mind the type of industry in which DMC is operating it is inevitable for DMC to work with a proactive approach means there should be a strategic plan to move on, otherwise there is no other way to overcome issue of low margins and abrupt sales, as all VP’s are under pressure and they genuinely want to bring the company out of this worse economic situation, my recommendations are: prepare a centralized plan which involve input from all departments that how they can help in overcoming such worse economic situation allocating proper budget for improvement of infrastructure for technology that DMC is using further if business intelligence can be implemented in DMC it would an excellent job because it would reduce cost and streamline business process, further as per current situation of DMC BI is a much needed option because it would result in early reduction of cost and stream line the workflow R&D should be given due consideration as it is matter of great importance for DMC and it should not be taken for granted Further ecommerce is also a good option for improving sales but before doing so an integrated plan should be necessary for doing so. There should be a strategy for continuous development by incorporating steady sales, further consideration should also be given to figures shown in financial statements as it has an impact on our financial soundness, as decrease in shareholders’ equity and net assets by amount shown in tables show worse economic situation: 2012 2011 2010 2009 Total DMC shareholders’ equity 7,700 8,400 7,900 4,900 Total assets 14,700 15,250 14,800 11,500 Without use of any window dressing for F/Ss’ DMC should go for real changes instead of temporary measure. Conclusion Technically DMC is not facing any problem, the main problem is the industry in which DMC operate because in this industry each company has to be proactive to the constantly changing demands of its product, and R&D should be the core function of each company in this industry and this function should be capable to provide new and improved products but at the same time reduce cost of production, (which can help DMC in reducing its margin problems) Further DMC is also lacking strategic plan to proactively manage margins issues due to which VP’s of each department is uncertain that what exactly are expected from them as they all are working up to the mark but due to recent economic position of the company they feel stress that how we can improve margins. As in current situation all VP’s are under stress just because of lack of plan. Therefor in order to address this issue there should be a centralized plan involving each department by providing them tasks that result in achievement of desired result. References Helo, P. (. (2015). Managing Agility & Productivity in the Electronics Industry. Retrieved March 24/3/2015, 2015, from httpHelo, P. (2004). Managing Agility & Productivity in the Electronics Industry. Industrial Management & Porter, M. E. (2015). (2008).The Five Competitive Forces that Shape Strategy.”. Retrieved March 24/3/2015, 2015, from http Porter, M. E. (2008).The Five Competitive Forces that Shape Strategy.” Harvard Business Review, Stonehouse, G. a. (2015). Competitive Advantage Revisited: Michael Porter on Strategy. Retrieved March 24, 2015, from http Stonehouse, G. and Snowden, B. (2007). Competitive Advantage Revisited: Michael Porter on Strategy Read More