Management Forecast and Capacity - Math Problem Example

Problem solving report Name Course Institution Professor Date Table of Contents Table of Contents 2 1.Introduction 2 2.Objectives 3 4.2 Increasing number of ice cream flavors 8 5.Options 9 6.Conclusion 10 1. Introduction Charles and Gillian opened a farm that had a double impact on the public. Their main aim was to minimize cost, maximize profits as well as prevent themselves from experiencing very heavy losses. In this connection their aims led them towards establishing facilities that would act as a source of entertainment to the tourists. This perspective of doing business was quite unique and unusual different from the normal operations of the firm that included ice cream distribution that was being manufactured in a small factory behind the firm, a milking parlor that encompassed use of the latest technology in place for milking cows and a guiding tour for the firm (De Wit and Meyer, 2004). Despite the fact that the business is doing well this paper seeks to address the major and serious issues that the owners are facing in relation to competition and constraints regarding capacity. 2. Objectives There are key objectives that Gillian and Charles aimed at focusing upon in relation to the problems that were being faced in the business. They include; increasing the farm’s profitability, increasing the number of ice cream flavors from four to ten and Gillian’s decision of attempting to increase visitors by 50% in the year 2008 leading to increase improvement of returns on farm tour assets. Charles and Gillian are against any additional investment since that would mean putting in more capital that would result to borrowing at interest rates of up to 15%. 3. Identification and analysis of the major issues 3.1 Management Forecast and capacity Management Forecast and capacity is a major issue in holly farm. Engagement in superior demand management by application of pricing structure can be a way of boosting and the number of visitors in the farm. Pricing and cost management are important factors worth consideration in demand management. Regarding the holly farm it can decide to offer structures that support half day visits of visitors. In this case it could be that people arriving after 4pm to be give some discount on their charges. Additionally to manage capacity discounted fees can as well be offered to people arriving at 11am willing to stay there for some few hours and finally leaves before arrival of the large groups. From this point of view it would be ensured that throughout the quieter periods more visitors are received. In a similar manner capacity management can be managed by setting high prices during the weekend and keeping prices low on week days. This could aid in making sure that more people make visits on Fridays and Mondays, periods when the farm is quieter rather than on the weekends when there are a lot of business in the farm. 3.2 Analysis target market Understanding the target market is quite crucial for any given organization. In this case it important to consider sales made to know who should be target. In this case forecasted sales of ice cream derived from customers were as follows: shops Forecasted 2008 sales of ice creams in dollars % of the total (420,000) Retail shop 260,000 61.9% Farm shop 160,000 38.1% Given the expected 2008 sale of 260,000 dollars sales of ice cream from the retail shops and 160,000 dollars from the farm shops it would be demonstrated that nearly 38% sales are derived from the farm’s customers. That is; Total expected sales for the year 2008 = 420,000 Farm shop sales as a percentage of the total = 160,000 / 420,000*100 =38.1% In this case if the sales from farm are increased by 50% in the future then there would be sales of 64.8% if and only if the sales at the retail shops are as well reduced by the same percentage which is basically not the target market of the Holly farm business. Increment of farm sales by 50% - (160+80 = 240) Reduction of retail sales by 50% - (260-130 = 130) Total = 240 + 130 = 370 Therefore the new sales from farm would be- 240 / 370*100 = 64.8% In this case it would be therefore advisable for the Holly farm business to focus more on increasing the farm shop customers who are basically the visitors and the market to be targeted. 4. Responses to the questions 4.1 Capacity constraints within this business Increasing the number of visitors to the farm by 50% in one year seems to be quite challenging. However possibilities do exist for the number to be increased but there are quite a number of constraints in line with the achievement of such growth that is being targeted. In connection to this equipment is a constraint. It relates to the factory that manufactured ice cream. In this case the equipment being a constraint limited the quantity of production of ice cream in a day to 350 litres. Additionally, the deficiency in variation of ice cream flavour and the intense as well as aggressive marketing that was being carried by other competitors led to lower generation of business from the customers that it was expected. The idea that within one year the farm is only open for 7 months to visitors. On the other months the situation of the weather makes it not safe for visitors to take rides and animals are kept inside. This something that Gillian would not be able to deal with in single year given the little time frame and the fact that the capital investment is unavailable that could be used to build indoor facilities to facilitate viewing by visitors and sheds for the animals at the farm. Another constraint is time where by it would not be possible for the firm to be open to visitors for more that four days. This is due to the fact that workers in the farm would be quite busy with farm work hence would be in a position to handle visitors. In this case for the farm to remain through out the entire week additional staff would need to be hired. Promotion coach company visits In an assumption is made that the figures below in relation to coach parking bay, coach seats, car parking bay are all at their maximum the following calculation supports the idea of promoting coach visits instead of car visits. Parking bay capacity number of seats Total number of visitors Number of coaches 6 Number of passengers 40 (6*40) 240 Number of cars 40 Number of passengers 4 (40*4) 160 Capacity management is quite important for the farm in order to achieve the stated objectives. In this case car flexibility is an important consideration. In order to boost the capacity of the parking area the farm should consider arranging the car spaces in such a way that the coaches can be parked across two or three car spaces where cars are parked. This is because if we take for instance 4 car parking spaces they will bring an average of 16 visitors while a coach will bring 40 visitors. As such if the farm allows spaces meant for car to be used for coaches it could focus upon ensuring that it attracts more coach groups during the weekends hence boosting the effective capacity of the parking area for cars. Generally this approach would be quite significant in boosting the overall visitor farm capacity. On the same note by the farm offering discounted charges for the entry of coaches more profits will be realized. Another way through which Gillian would be able to manage capacity or rather improve it is through addressing the issue of queuing at the milk shed. This would involve making sure that capacity is smoothened in the area. A way that may be used to achieve this would be through ensuring that each visitor that goes to the milking shed goes directly to the shed immediately they arrive and as they book for the viewing process. Basically this would aid customers in avoiding to queue thus reducing any discontentment as a result of the length of the queue. Further more it would make sure that customers are not kept waiting for long to view the milking shed. In this case the idea of addressing the issue of queuing would offer support in the process of increasing the number of visitors to the farm from a general point of view. Need arises for Gillian to make a decision in regards to whether promotion would be fostered to the markets such as schools and families to trips to the firm or instead coach firms (Forray and Woodilla, 2002). From average it is indicated that out of two coach customers one purchases a litre of a box of ice cream while a car that has four occupants the same amount of ice cream is purchased. With this data it is indicated that there is room for proper decisions to make as averages are not the best for making considerations as to who should be targeted in market (Denis, Lamothe, and Langley, 2001). The firm requires additional staff as well if the numbers of flavours that are being manufactured are to be increased to ten from four. Need for analysis would also be a requisite to accurately forecast the quantities to be produced of the flavours if the number is to undergo increment. Marketing researchers would serve a purpose in the determination of what kinds of flavours that customers demand to avoid expansion to ten flavours in a way that is not outright. There is the likelihood of Gillian being forced to offer discounts to coach firms that make visits to the farm. At this time it is not quite possible to decide at whether the farm engagement should be with the coach farms since it has not yet been identified as to how many passengers should be in each coach firm. This makes it impossible for the calculation of profits from the sale of ice cream and other products considering the entrance fees (Hambrick, 2004). If an assumption is made that cars were used being half of the means through which customers visited the farm and the rest of the half coaches were used then the use of coach trips would bring in more profits for the farm. The reason behind this argument is that in capacity coaches carry more people as compared to cars which have a capacity of approximately 4 people each. Therefore 4.2 Increasing number of ice cream flavors Before making any decision of increasing the number of ice cream flavours to 10 from 4 it is quite important that Gillian weights and assess both the merits and the demerits of this action. To begin with Gillian should put into consideration the idea whether there is existence for the market for the ten flavours as well as whether there is a sense of feasibility if the farm engages in the production of 10 flavours. The idea that capital investment is impossible for this farm implies that any extra production would result from increasing the force of labour. Though this being the case the level ice cream production would still be limited to 7000 litres being the level of inventory in regards to what the freezer can hold. Further more it would be demonstrated that production of new flavours would be at the expense of the old ones. This may be viewed as being advantageous if customers for the farm seek one or two flavours besides those already in the market. Need for market research would bear some great importance in confirming this. On the other hand the idea of increasing the number of flavours may result to customers being unsatisfied. This may be in situations where the farm may have incidences of stock outs of certain flavors because of the presence of many flavors that are being produced. 5. Options To find out what alternatives are present for Gillian information regarding the situation of the market as well as various aspects of competition should be gathered and complied (Balogun, Huff, and Johnson, 2003). Though in connection to this the main issue may be basically a problem arising from the current number of visitors that are being received and how the number may be raised. Additionally information from market research would be quite beneficial for the farm. This is due to the fact that assessing either one or two more flavours based on the information from research while at the same time ensuring that the level of staff remains the same would highly benefit the business (Balogun and Johnson, 2005). It would provide an opportunity for the Holly farm to increase their offerings in terms of flavor in the long run period a time when they are able to increase their production or rather easily high inventory levels. A key towards the growth of a business is increasing sales continually through increased business generation from each customer focusing the increase on creating direct contacts with the customers. 6. Conclusion The holy farm case study assesses the capacity as well as the resource constraints that small businesses face which are able to diversify their ventures attracting more customers as they come with other complementary business in their ventures (Clark, 2004). In this case it is retailing of ice cream and business of tours. This case on Holly farm presents that Gillian faces a challenge in making key decisions regarding increasing the number of customers who visit the farm as well as how to increase the sale of ice cream in retail. Due to the fact that capital investment is not an appropriate alternative for the business the implication is therefore increasing the number of customers is limited to the activities of promotion that would enable for the attraction of more customers for the sales of ice cream as well as tours. The data and information available to Holly farm is not in a position to support any decision that has already been described for instance storage constraints would impact on the idea of increasing flavours manufactured from 4 to 10. In this case Gillian should look for more data regarding the audience to be targeted and in relation to increasing the number of flavours of ice creams then the business should first of all engage and conduct it from a small scale point of view after conducting intense research on demand in the market. 7. References Balogun, J. and G. Johnson (2004). ‘Organizational restructuring and middle manager sense making’, Academy of Management Journal, 47(4), p. 34-67. Balogun, J., and Johnson, G. (2005). ‘From intended strategies to unintended outcomes: The impact of change recipient sense making’. Organization Studies, London, Thousand Oaks. Balogun, J. Huff, and Johnson, P. ( 2003). ‘Three responses to the methodological challenges of studying strategizing’. Journal of Management Studies, 40(1), P. 23-90. Chow, I., Holbert, N., Kelley, L. and Yu, J. (2004). Business Strategy – An Asia Pacific Focus. London: Prentice Hall. Clark, E. (2004). ‘Power, action and constraint in strategic management: Explaining enterprise restructuring in the Czech Republic’. Organization Studies De Wit, B. and Meyer, R. (2004). Strategy: Process, Content, Context. London: Prentice Hall Denis, J-L., Lamothe, L. and Langley, A. (2001). ‘The dynamics of collective leadership and strategic change in pluralistic organizations’. Academy of Management Journal, 44(4), p. 12-65. Floyd, S. and Lane, P. (2000). Strategizing throughout the organization: management role conflict in strategic renewal. Academy of Management Review, 25(1), p. 154-177. Forray, J. M., and J. Woodilla (2002). ‘Temporal spans in talk: Doing consistency to construct fair organization’. Organization Studies, vol. 23 no. 6, p. 899-916. Hambrick, D. (2004). The disintegration of strategic management: It’s time to consolidate our gains. Strategic Organization, 2(1), p. 92-98. Read More