Corporation Collapse: Krispy Kream Hong Kong - Case Study Example

Name: xxxxxxxxxxx Tutor: xxxxxxxxxxx Title: Corporation Collapse: Krispy Kream Hong Kong Institution: xxxxxxxxxxx Date: xxxxxxxxxxx Corporation Collapse: Krispy Kream Hong Kong Introduction When corporations fail, the corporation’s ability to honor agreements, uphold promises as well as act on the higher ideals of their mission statements is normally compromised. The corporation’s practical responsibilities have to be understood against the background of the relative scarcity or profusion of the business as well as social environment. Bankruptcy protection in addition to reorganization could result into the corporations cutting some of their responsibilities. But even though this concession is practically employed, the future possibilities of the business failure should be understood and this means that the present actual obligations of the owners and administrators to the personnel should also be understood. Whereas, the responsibilities of the bankrupt can delegate to negligible contractual responsibilities, an investigation of the managers’ responsibilities for the failure of the business can demonstrate significant things regarding the nature of both employment as well as managerial ethics (University Microfilms International 2007).1 Krispy Kreme Hong Kong Collapse The attempt of Krispy Kreme to launch the company within Hong Kong failed and this is what led to liquidation of the company after just two years. The financial crisis indicated that Krispy Kreme stores in Hong Kong, 27, five ceased operation, the other two stores were to be closed after use of raw materials, it also means operating within Hong Kong just two years the chain enterprises into liquidation, which is following the U-RIGHT, Tai Lin, Hong Kong and a winding-up of the chain. The Hong Kong federation of trade unions leader earlier had ascertained that the financial crisis that the Hong Kong retail industry was experiencing was likely to affect the catering industry (Irwin 2008)2. Additionally, Krispy Kreme also implies that the collapse of the financial crisis, Hong Kong, the outburst of the intricacies of catering industry. The rent costs were too high in operating difficulties chain. According to the company’s financial advisor, the operating costs within Hong Kong were too high. The financial magazine showed that retail rent within Hong Kong was the world’s second highest average monthly rent of 788 yuan per square foot. The face of financial crisis, bear the brunt of retail, high retail rents as a significant reason as to why the chain was being closed. It is understood that, for the retail industry, rent taking up to around 70% of the expenses, during economic crisis, companies within trouble. A research indicated that the turnover of shops within Hong Kong lowered noticeably, in such a tough financial atmosphere, if the rents rising, the expenses are hard to pass, finally just the completion of the issue (University Microfilms International 2007).3 Krispy Kreme announced that chain had been closed because the management was not willing to continue working with underperforming employees. He also added that the depressed stock price had been changed from a high flyer to an undervalued stock. This could imply that the management did not clearly know the employees and also maybe the employees were not motivated enough and this is what led to the underperformance for the employees. The management should know the competitors. Leadership involves offering value to people. In case the key competitors provide a better quality and less costly products as compared to one’s business, it is not possible to create any value (George 2008).4 Possible causes of the collapse This chain could also have failed because of poor marketing. This is because the business owners could have minimized the significance of properly promoting their business followed by ignoring the competition. This means that as a business leader, one should be in a position to efficiently communicate their idea to the right individuals and also to everyone who can understand their special needs and wants. Leadership involves taking an initiative, taking action, enduring that things are done and making decisions. Krispy Kreme probably did not do anything significant to market and promotion of the business and this is what probably led to the business collapse. The competitors such as McDonald's could have used a better strategy in promoting their products and this could have led to McDonald's outdoing Krispy Kreme Hong Kong. Krispy Kreme Hong Kong was supposed harness their strengths to offer diverse benefits, for example speed, convenience, better service; as a result, Krispy Kreme could have lowered their price and improved the quality of their products, created a different product for an unmet demand, or purely close the business and this what the business chose to; the Krispy Kreme was closed (Irwin 2008).5 Krispy Kream Hong Kong collapse also resulted from rises and falls on leadership. Leadership is among the most important factors in determining the success or failure in leadership especially in the fast moving economy. More importantly, the main reason why Is Krispy Kream Hong Kong failed was because there was the planning was initially poor; there was poor financial planning, poor marketing as well as poor management. Again, Krispy Kreme Hong Kong collapsed because of poor management. A research indicated that in the management classification, 70% of businesses collapse because the owners fail to acknowledge what they don’t do well and hence they do not seek more help and this is followed by inadequate appropriate business experience. Not delegating appropriately and recruiting the wrong employees were key contributing features to Krispy Kreme Hong Kong failure in regard to management (Guan 2007).6 Operations management scope of functions Operations managers within the companies do not have the power to make strategic decisions but they have an important role in the shaping of the strategies within the organization and they also participate in the strategic thinking. Operations managers are supposed to translate strategic goals as well as objectives into clear operational aims and actions in order to be able to implement, design and improve the company’s products and processes of their delivery. The operational managers should be aware of how changes integrated to external aspects influence the operation and how changes in one feature of the operating system affect other features. Moreover, operations managers should be aware of the effect the technological changes have on the ability of the organization to deliver, and to integrate their conclusions into strategic procedures. Consequently, operation management entails the ability to think animatedly and systematically (Irwin 2008).7 Total quality management is one of the most vital advances of the operations management. The pursuit to get high quality products and services results from the market globalization partly, and rising litigation regarding service or product failure. Definitely, there is close connection between quality market and share performance. The companies that do not understand the quality issue have a higher likelihood of failing. A major share of the responsibility for quality standards lies on the operations manager. Furthermore, global supply chain management is a very significant element of operations management. Trying to find lower production costs, more flexibility and local risk reduction, organizations are looking for outsource and produce services in addition to products on global scale. It is the responsibility of the operational managers to fulfill the task. Again, project management is also another responsibility belonging to the operations management department. Operations managers are responsible for several projects which vary from substantial capital projects to specific projects. Effective management of the project entails fulfilling and delivering them on time and also within the planned budget. In a nutshell, operation management is extremely important within the organization because it accomplished several vital functions of the organization. Operations manager tackles daily operations and functioning of the company (Howell 2003).8 The implication of poor managerial performance for the collapse Krispy Kreme Hong Kong Krispy Kreme Hong Kong had operations management department which was responsible for numerous functions. However, the functions of this department were very limited. There are other administrative departments which carry out the functions of operations department; and they include, operations facility management, commodity management, financial operations, as well as capital management. Even if most functions carried out by these departments are simply executive and do not have any integration, systematic vision, responsibility, control and also creative element (Harris 2010).9 Apart from limited range of functions allotted to operations management within Krispy Kreme Hong Kong, another vital aspect is related to the quality of their performance and general corporate culture and environment developed in corporation. Practically, the key functions of operations management consist of developing ethic values, integrity, proficiency along with clear accountability in the organization. The management of Krispy Kreme Hong Kong failed in complying with these tasks (Howell 2003).10 On the outward level, the attitudes and motives that led to the occurrences and decisions that causes the eventual collapse of the company; collective and individual self-indulgence developed within the environment of corporate arrogance. As the reputation of the company within Hong Kong grew, the internal organizational culture started worsening considerably. The employees were not treated appropriately and the company’s expectations from the employees led to stiff competition which caused the prevailing instant short term results above long-term potential. Therefore, the mistrust in the company increased and numerous limiting confidentiality clauses rose. As a result, deals, specifically within the finance division, were performed too fast and no attention was paid to if the company’s objectives were conformed or if the employees complied with the organization’s risk management rules (George 2008).11 Apparently, it is clear that the problem which resulted into the collapse of the company did not lie primarily in the outline of accounting practices. After the analysis of all internal practices in the organization, it is evident that the accounting subject alone never devastated Krispy Kreme Hong Kong, its shareholders and workers. What is supposed to be considered as a grave reason for the collapse of the company are poor corporate performance management as well as operations management. There was no understanding as to if the business model was capable of supporting itself. And this is where performance management comes along. Corporate performance management includes a much wider scope that keeping track of performance levels of the employees. Performance management is the activity in the organization that offers C-level executives the capability to get a sole picture regarding the truth across the organization and the exact picture of the financial status of the company. This offers the organization with the possibility of knowing business initiatives and then act basing on what works and what does not work for the company (University Microfilms International 2007).12 Therefore, the collapse of Krispy Kreme Hong Kong was due to interrelated reasons, and most of these reasons can be allied to poor functions of operations and also performance management. Being ostensibly s stable company with strong management and clear hierarchy, the internal organization of Krispy Kreme Hong Kong had numerous shortcomings. Accordingly, operations management within Krispy Kreme Hong Kong evidently never provided or advanced positive control environment and also did not take part in shaping the organization’s ethical value, veracity, management philosophy and stringent accountability within the company (Hanrahan, Ramsey & Stapledon 2010).13 Stringent and inconsiderate hierarchy and also performance assessment system perverted the primary values and ethical base of the organization; respect, integrity, communication and quality, and replaced them with the priority of gaining profit regardless of methods that the company used. There was motivation for the workers to take diverse debatable practices. The whole managerial department took part within this procedure, and subordinated the functions it had to accomplish (Guan 2007).14 Conclusion The collapse of Krispy Kreme Hong Kong shocked the financial world and the company’s reverberations were felt on global level. Krispy Kreme is one of the leading franchises within United States and often considered to be an admirable corporation. Additionally, Krispy Kreme Hong Kong was considered as the most desired places to work, the revenues were good. The customers really loved Krispy Kreme Hong Kong and the outside observers praised the company while internally the company had a considerably decentralized financial control as well as decision-making system, which made it extremely difficult to get consistent and clear opinion on the activities and operations of the company. Obviously, the problem that led to the collapse of the company was not merely poor managerial performance; all the organizational department participated in destroying the corporate ethical values and principles, but the key responsibility lay on the managers and the executives because as the leaders they should have instilled a culture and a clear accountability of the company. If the management of the company worked appropriately, and if it was given possibility to work is such a manner, there could be an opportunity to escape such a tragedy (Guan 2007).15 Bibliography Hanrahan, Ramsey & Stapledon, 2010, Commercial Applications of Company Law, CCH Australia. Howell, M., 2003, Predators and profits: 100+ ways for investors to protect their nest eggs, Prentice Hall Professional, Sydney. Irwin, D., 2008, Managerial attitudes and performance, Sage, Austria. Harris, 2010, Corporations Law, Butterworths, Sydney. George, C, 2008, Assessment centers and managerial performance, Academic Press, Sydney. University Microfilms International, 2007, Dissertation abstracts international: The humanities and social sciences, University Microfilms International, Melbourne. Guan, L., 2007, Cost management: accounting & control, Cengage Learning, Newcastle. Read More