Superior Living Inc Cost Management - Essay Example

According to the Head of the luxury division, the reason behind the increment in the cost is the increase in the overheads. He had especially blamed the excess recruitment in the HR and IT department.

In his opinion, it is quite evident that the cost of the products of the luxury department includes the cost of other functional departments. From this fact, it can be assumed that the organization follows the traditional method of costing. It implies that the overall cost incurred by the entire organization needs to bear by all the product lines. A particular department may have a minimum contribution to the cost incurred by the IT department. Instead of that the department may have to bear the entire cost of the IT department. A similar thing has happened with the luxury department and hence its cost has been raised.

From the above-exhibited diagram, it is apparent that every product lines are self-sufficient with its personal sales, marketing, and manufacturing team. However, each division does not possess separate HR, IT, and finance departments. These functional departments work for the entire organization as a whole and there lies the main issue. Through increasing expenses of these functional departments, the cost of the product divisions also increases. Unlike the others, the luxury division targets a different set of customers and caters to a different market. It has been found by the other players in the industry that luxury products are customized. Therefore, human resources required for the luxury division will need certain expertise and it may require a high level of information technology to locate its potential customers for customized products, financial obligations will also be dissimilar. Hence, it can be recommended to Superior Living Inc frame different segments for the luxury product line. It will also be justifiable for the organization as luxury is the largest division of the organization. Since the organization is planning to go for acquisition and expansion, and the directors and the CEO of the organization have suggested merging with a particular product line, it will be better to make the luxury division, a separate segment with all necessary supports.

Generally, it has been observed that frequent conflicts have taken place among the marketing and operation department. However, in this organization, these two departments are considered under the same division. In such cases, conflicts arise among the functional departments and the product departments. The product departments are mainly dealing with the manufacturing of the products and sales of those. They do not have sufficient time to involve with other matters like cost control, conflict resolution, and customer relationship. Therefore, the production departments must associate with the other functional departments to achieve the ultimate objectives. Apart from that, the functional departments should maintain good relationships among themselves to render all other support to the product lines except manufacturing and sales. Caudron (1996) has established multifarious reasons to build up good relationships between the finance and HR personnel. It is essential to have HR, IT, and finance departments in a manufacturing unit, but according to Porter’s Value Chain analysis, these functions are the supportive departments. Therefore, it is not essential to recruit redundant employees for these functions. In this regard, the ultimate motto of the functional heads should be to ensure the optimum utilization of the resources. The scope of disguise unemployment cannot be put up with. Moreover, it can be suggested that the department heads together should develop a work plan and must interlink their activities so that wastage of time and cost can be reduced. It can be better understood with an example. When the IT department will come up with an innovative design or technique, the IT personnel should first sit with the HR executives and finance department. As the HR personnel is accountable for the training, therefore, IT personnel should have a brainstorming session with them before the training session. Simultaneously, the finance department can also determine the projected cost of implementing new techniques and develop an expansion strategy accordingly. Thus, a compiled implementation strategy can be developed with minimum time and cost involvement. Eventually, it can be concluded that the association of the three functional heads will not only reduce cost but can also enhance the quality and effectiveness of the products and processes.