The Rich Man Group Innovations - Case Study Example

BUSINESS RECOVERY PLAN Name Course Tutor University City and State Date All companies have their ups and downs. It is the natural order of business. The difference depends on how they react to these fluctuations and as well as their timing. Rich Man Group is no different; business has been experiencing stagnation. The management has decided to solve the issue before it is too late and too expensive. Although the company is still making profits, measures to turn around the downward trend of stagnation need to be put in place when it is still cheap and within reach to do so. With the business deteriorating at 20% drop in the sales, the best course of action would be to investigate the reason for the decline. A survey was taken as a consequent. The survey results show that the morale of employees is down. It has reached to the extent where some of our workers are finding jobs elsewhere. Even more, many people are of the opinion that the company's luxury products now look outdated, and the quality is no longer up to par. This is quite an alarming revelation considering that the luxury market is based on the ability to make customers spend a premium, a task that would not be accomplished using low-quality products. The Rich Man Group has taken his findings seriously and has come up with solutions and alternatives to recover the lost glory. One if the recovery measures would be an acquisition. Rich Man Group will acquire a new and upcoming luxury goods company that is projected to have potential. The ideal acquisition would be a company that has already released luxury products to the market that have received commercial success. Also, the company to be acquired should have a talent pool of creative designers that have fresh ideas that are disruptive to the market. The benefit of such an acquisition would be to give employees more responsibility and career development opportunities with the aim of increasing morale and retention. The more significant reason of purchase would be to breathe a new life to the Rich Man product sales. The acquisition would bring new talent on board that would extend their expertise and new perspectives to the existing products of our company; this would, in turn, improve the product sales. Moreover, the new company's products would be incorporated to Rich Man's portfolio. Using Rich Man's already established markets and distribution, the new products would reach a wider audience. This would lead to the benefits of economies of scale whereby, due to the bulk nature of the goods, they would be manufactured at a lower price hence sold at reduced prices. Additionally, the new items would be instrumental in tapping new customers to our company. Ultimately, sales would skyrocket, and the stagnation would be a thing of the past. In the event that there are no companies that fit the requirements of the acquisition or a scenario where companies fit the criteria, but they do not wish to be acquired, then Rich Man Group may consider merging with another company. The ideal merging company would be one that is of the same size as Rich Man or larger. It should also be one that complements our company in the sense that our weaknesses are their strengths and vice versa. Merging with a direct rival will also be put under consideration but only if Rich Man maintains overall control so as not to lose its identity and the signature that the customers have come to expect from our products. The benefits of a merger are similar to those of an acquisition as far as employees are concerned. The employees would get more responsibilities and more regions to cover; this would similarly improve their morale, their career development and even come with higher salaries. Merging with a company especially one that is established in the markets that Rich Man is yet to break into would be very beneficial. Rich Man would use this opportunity to be able to quickly enter the new markets and experience faster success due to the well-established brand of the merging company. It goes without saying that Rich Man products sales would rise significantly. Also, merging with a company of the same magnitude would make the merger to be an unstoppable force in the luxury goods market. The two companies would share risks of manufacturing, distribution, research, new product development and many more areas. The combined customer base would lead to better economies of scale which would lead to lower prices of luxury goods hence better sales and better position to compete. Furthermore, the collective talent pool merger would lead to more improved products, a scenario that would offset the issue of Rich Man's products looking outdated and having poor quality. Bargaining power of two big companies would increase tremendously. Markets will easily bend on the influence of such a merger, the market share and even the mindshare would be inclined to the advantage of the two companies. The effects of merging would be increased sales due to the consolidation of strength, increased employee morale due to bigger responsibilities with better pay, and worker retention and attraction of new talent would also be a consequence as well. Regardless of the outcome, whether the company does an acquisition or a merger, Rich Man will need invest in innovation. The current business stagnation could be blamed on the lack of demand for the traditional Rich Man products. This calls for new innovative products. It is normal for every product of any company to go through the four phases of the S-Curve. When a product is new, its absorption slows rises due to its lack of recognition among the target customers. After some marketing, the product is realized by the target audience and the sales abruptly shoot up. However, this upward trend does not last forever; a stage comes when the item supply meets the demand and the sales plateau. At this point, it is not worth pouring more marketing money into the product; instead, capital should be channeled to innovation. If the innovation does not come fast enough, the product demand collapses and goes in the tripling point; this is the phase the company's catalog is in. Fortunately, the catalog can be salvaged through innovation. Innovation can be incremental or disruptive with the latter being more risky than the former. Alternatively, products may not need to be changed; the processes and procedures behind them could be the subject of innovation. Rich Man aims to be the first in the luxury goods industry in the next ten years, this milestone cannot be achieved by playing catch up; the company will need to be a pioneering innovator. Unfortunately, this kind of innovation is barred with high risk and high cost of experimentation. However, if the innovative products get a positive reception from the customers, they lead to a great win for the company. First mover type of innovation facilitates more experience in the long term thereby giving Rich Man an edge over competitors who are late movers. Also, it will enable us an early advantage of capturing a market, without having to incur the cost of competing. Brand loyalty will also be cultivated before rivals catch up. Having a reputation of pioneers and innovators will bring about higher brand value among the customers, an aspect that may give Rich Man the leverage to charge a premium over competitors without negatively affecting product sales. With innovation having conspicuous benefits, it would be of utmost interest to incorporate it in the company. Rich Man will have to cultivate the culture of innovation into its talent pool. To realize this, the company will start to reward innovation. Any employee that uses their creativity to come up with something innovative that can positively affect the company's bottom line will be handsomely compensated. Such incentives are going to motivate employees to get innovative and also increase their morale as a bonus. Rich Man will also fund research that shows the potential of discovering innovative items or processes. Failure for research to realize expected results will not be punished. The company management will adapt a more listening culture, where employees can pitch ideas more freely and always be received by a supportive administration. Rich Man will desist from all kinds of counter effective measures that may hinder innovation. At the same time, innovation will not be limited to products design only but will widen its scope to cover distribution, manufacturing, and even marketing. New products designs will lead to attraction of new customer tastes and hence increase customer base as well as sales. On the other hand, innovation on behind the scenes processes, such as manufacturing, will lead to lower production costs of existing, as well as new products which will translate to better sales. Any kind of innovation related to the company business will be beneficial and incentivized. To actualize these innovations, outsourcing may be required. Outsourcing breaks the limitations of a company or the barriers of a home country. Not all countries are endowed with the same resources or expertise. Some countries specialize in one activity, another excels in a different activity for instance, China is renowned for its cheap yet efficient manufacturing, the USA is known for its eye-catching design. It is always wise to source materials or services from those that have mastered them. Rich Man group will start outsourcing manufacturing from outside countries. Different countries will be vetted, and the one that has the best deal will be awarded the contract. Countries like China have skilled labor that can churn out quality products at a cost lower than that of manufacturing in the United States of America or the United Kingdom. The aim of this is to reduce the cost of production while surpassing the current quality standard which is being labeled as poor. This move will make it possible for the company to maintain or even increase profit margins while at the same time reducing the price of the product. Designing can also be outsourced as well. It has been a rising trend where companies in China are outsourcing design from North America and Europe. Rich Man can outsource designing of some of its product lines to other companies. The initiative will give the products a fresh, modern aura and wipe the bad publicity of having outdated looks. Since design is subjective, it would not be wise to change the whole catalog in one exhaustive move. One design line will be chosen, and its design will be modified or overhauled. The market's feedback will be used to determine if the design is in the right direction. Negative feedback will be used to improve the design while positive feedback will be used to cement its merits. Raw materials will also be imported directly from the sources. Rich Man will cease the use of middlemen who hike the price so as to earn commissions. The company will prioritize with source countries that already have trade partnerships with our home country. Using this route will lead to cheaper imports due to partnership discounts and established channels. Similarly, trade partnerships between countries have the advantage of transit facilities already put in place. Ultimately, the products utilizing these partnerships are produced at cheaper costs and add value for the customer. Outsourcing has its fair share of problems. Most of these problems are in the form of added costs which include, freight, insurance, import duties and international travel of company officials to streamline activities overseas. These costs however fade in comparison of the savings made by using cheap manufacturing labor, or getting raw materials straight from the source. The freight related issues can be solved by outsourcing logistics to a company that has had experience with our import route. Eventually, the cost cutting benefits of outsourcing outweigh the few added costs. The only other issue of imports is related to currency value fluctuations. If the home country currency losses its value, then the imported commodity becomes more expensive. To curb this, it is advisable to quote prices using the stable currency. Once the newly designed products have been produced with efficient cost cutting methods using outsourced expertise, they will be taken to the markets. Rich Man Group will look into the possibility of franchising or in the least form, have third party distributors. The company will have contracts in place with other businesses that sell luxury goods. The ideal franchising partners would be those that are in the markets that the Rich Man Group has not ventured into. The Rich Man Group brand and goods will be exposed to new markets; this move will bring merits of increased sales as well as brand recognition. Products aside, efforts will be put in place to enhance employee morale as well their retention. Most of the measures already discussed such as acquisitions, mergers and innovation incentives have their benefits trickling down to the employees. However, individualized attention will be extended to the employees. Rich Man Group will start giving maternity leaves with pay for a period of three months for all its female employees. The choice to spread out those 90 days will be at the discretion of the worker. As far as general health is concerned, benefits will be available for all employees at all levels of the company. The organization will also set milestones for each department, the achievement of those milestones will result in rewarding of the involved employees. Rich Man Group cares for its employees, to prove this, there will be a series of activities that are more employee centered. These activities include recognition of birthdays with small celebrations at the office, having name tags on all desks to personally identify people, converging with employee families for support in case of tragedies such as funerals or fund raisings, and also celebrating with them during happy moments such as graduations of their siblings (Vasantham 2014). Social fun activities such as company retreats end of year parties and retirement parties will be introduced to break the monopoly of office work and ultimately enhance morale and employee interactions. In conclusion, Rich Man Group business stagnation will be turned around by implementing these measures. An acquisition will bring in new talent and new products. A merger will complement the weaknesses of the group; it will lead to higher bargaining power, shared risks, easier entrance to new markets as well as consolidation of talents. These two activities will lead to more employee responsibilities thereby improving their morale. Innovation would realize fresh products to replace the outdated ones. On the other hand, outsourcing will improve the quality of or products while decreasing the production cost due to cheaper labor overseas than in the home country. Moreover, franchising will take Rich Man Group products to new markets using the help of third parties. Finally, introducing perks for the employees such as incentives, showing genuine care and incorporating fun activities to break the monotony of office work will improve employee retention, increase their morale and enhance productivity. References Vasantham, S. Tephillah, 2014. Employee morale and employee retention. IPASJ International Journal of Management, 2(11): pp 1-2. Read More