Bond Motorhomes: Differentiation Strategy - Essay Example

Executive summary Bond Motorhomes is a family owned business founded in the UK and throughout its operations; it has exhibited tremendous growth prospective. This is despite the fact that it is small in size that has made the management resort to crude ways of management to run the company. The company is divided into three sections; repairs, conversion and the administration departments with only the first two sections as the revenue centers. The company has continued with the repairs department even after knowing that this department is not lucrative. For the performance of the company to be enhanced the market has to be assessed which would involve trying to find out its customer preferences; this is done with the aim of trying to stabilize the sales, which has been fluctuating since the year 2008 to date. The growth in total assets may also be because of poor circulation of inventory, which is not healthy for the operations of the business. This report will further asses the ways that the company needs to employ its differentiation strategy apart from simply having large stocks for the sake of increasing prices, timely delivery and long lead times (Bates, Greenwald & Morrissey 2009). The company needs its inventory to move hence the main strategy is to expand its operations in terms of employing qualified personnel, look for incentives to control employee turnover and modernize its operations. As it stands, the company operates its operations in a very crude way, which has to stop by way of formulating organizational procedures and clear management structures. Table of contents Introduction Main Body Conclusion and recommendations Introduction Bond Motorhomes a company that was formed in 1973 to repair and motor homes and caravans decided to expand its business in the year 2000 and into conversion of vans into motor homes as another way of doing their business. In terms of capacity and operations, the company did not change significantly, as it is reported that it maintained the repairs department, which was the pioneer to act as an attraction to customers. As a result, of this plus other factors the company performance in terms of sales turnover has been fluctuating a lot. The company has a major issue concerning maintaining its employees due to unclear employee management structures. It is true and understandable that the company still has small operations and it is a fact that the company has prospects of growth (Baxter & MacLeod 2008). This calls for the management to streamline all the operations of the company, formulate a plan of action, enact ways of recruiting employees and devise a way of recruiting the right employees for the right jobs. In addition, they ought to create clear roles in the policy of each position and attach an equal incentive package for each position created. There should be a fixed minimum or retainer pay for each of the employees and exemplary performance should be rewarded in equal measure (Burke 2006). This has the impact of ensuring that laxity as has been exhibited by the employees is drastically minimized. After the operational procedures are clearly defined, the management will therefore be tasked with looking into the operational variables like the escalating operational costs and see into ways of controlling the same (Rummler & Brache 2010). Terminating contracts with main suppliers may not be sufficient; at the same time, investing in larger premises may not be a brilliant idea most so before the capacity of the company is developed. The company can instead employ the tactic of sales maximization and cost minimization. Using this approach, the company should widen its client base and at the same time fetch for their raw materials at the lowest costs possible. Customer handling is also an issue since the company must have adequate ways of handling their customers to create customer loyalty (Baxter & MacLeod 2008). From the extracts of the profit and loss as well as the balance sheet statements of Bond Motorhomes plc from the year 2008 to 2013, it is true that the cost of raw materials has escalated. This may have been largely due to the increase in the prices from the producers of such raw materials. The sales revenues of the company have also fluctuated with a turnover of 200,000 pounds in year 2008; an increase was registered in the year 2009 with a drastic fall between the 2010 and 2011. As a result, profitability has also been fluctuating in the same trend. The total assets for the repair department have also shown a constant decline from 750,000 pounds in the year 2008 all the way to 700,000 pounds in the year 2013. The company has also been affected by the shift of its customers to other well-established companies who provide the same services at much lower prices (Burke 2006). This has prompted a management action which has since acted to unstable pricing hence a fluctuation in the profitability variables. The direct labour as provided by the human capital of the organization represented a huge part of the direct costs incurred by the company. From the company policy of providing uniform or constant costs to each employee irrespective of their roles has made have costs remain so high throughout the six years of observation. The trend in costs in the company as is observable is directly proportional to the trend in the costs of direct material and the factory overhead costs as it should always be the case. It is also important to note that the profitability of the company has also taken the path of the costs as involved in production (Joia 2007). This is expected to change as the company is on its growth path and with well-implemented policies, this is likely to subside. As the company becomes bigger, it is expected that it will employ measures that will enable it to control its costs effectively. The lowered profits can as well be attributed to production proliferation which is a major issue in this industry. The minimum profitability in a way has stagnated the increase in production capacity in form of special purpose and highly efficient machinery. The increase in capacity is what the company needs most at this time to aid it in its expansion path (Joplin & Pattillo 2009). All the three sections of the company must be fully fledged in terms of operational capacity without sparing other departments as mere customer provision units. The repairs is the original and the main business of the company; it is what most of its clients have known it for and hence the management must see of a way to strengthening the unit (Lewis 2007). The spare parts must also not be kept in quite a large quantity, as they would be lying idle, a reorder level must therefore be in place so that the company does not make many losses due to overstayed spare parts. The conversion unit as well requires reorganization and restructuring; this is because it is the unit that has experienced the most; in form of total assets. From the stock take, it is evident that most of the assets are made up of inventory. Poor customer procedures has been attributed to this given the strenuous procedure involved since the customer gives specifications to the time that the customer gets the final product. This period is unnecessarily long and is against the needs of the modern customer who values time so much (Joplin & Pattillo 2009). The time from when the customer makes his or her specifications to the time they get the product must be reduced through modernization of operations, stocking of the raw materials required. In addition, the company should always have ready-made designs, as most of the designs required are repeatedly available (Roussel & Epplin 2009). The company also uses historical pricing to determine the prices of their commodities a practice that is regressive in nature. The historical prices are known not to take care of the uncertainties in the future hence are not effective predictors of prices. Pricing should be based on diverse aspects such as the expected inflations and tax prospects as opposed to historical information, which is inaccurate in most of the times. It is prudent to note that all these recommendations can only work when the administration wing of the company is operational and effective (Baginski & Hassell 2006). The administration personnel must therefore posses all the qualifications both academic and professional to enable them discharge their mandates with decorum. The management should also employ the services of auditors both internal and external who will provide the necessary advice on the areas of weakness that needs improvement. They will also be in the position of effecting standards of operations. Conclusion and recommendations Bond Motorhomes plc is a company with many prospects in form of its future growth perspectives. It therefore needs to place its resources in order right from its raw materials and labour for efficiency in operations. The strategies it uses to explore the market must as well be in order and these include being a market leader in terms of pricing and as well in terms of customer handling procedures. The company must also strengthen all its sections to realize productivity (Baginski & Hassell 2008). The management must employ clear management policy framework and the company will achieve the desired growth in form of turnover and profitability. References Baginski, SP, & Hassell, JM, 2006, Intermediate accounting: management decisions and financial accounting reports, South-Western College Pub: Cincinnati, Ohio. Baginski, SP., & Hassell, JM, 2008, Management decisions and financial accounting reports (2nd ed.), Thomson/South-Western: Mason, Ohio. Bates, C, Greenwald, DJ, & Morrissey, RC, 2009, Eighth annual Institute on Securities Regulation in Europe: a contrast in EU & U.S. provisions, Practising Law Institute: New York, NY. Baxter, LF, & MacLeod, AM, 2008, Managing performance improvement, Routledge: New York. Burke, L, 2006, Mangement Accounting Decision Management, Elsevier: Burlington. Joia, LA, 2007, Strategies for information technology and intellectual capital challenges and opportunities, IGI Global (701 E. Chocolate Avenue, Hershey, Pennsylvania, 17033, USA): Hershey, Pa. Joplin, B, & Pattillo, JW, 2009, Effective accounting reports, Prentice-Hall: Englewood Cliffs, N.J. Lewis, RB, 2007, Accounting reports for management, Prentice-Hall: Englewood Clffs, N.J. Roussel, FJ, & Epplin, R, 2009, Thinking about going into business?, Small Business Adiministration: Washington. Rummler, GA, & Brache, AP, 2010, Improving performance: how to manage the white space on the organization chart, Jossey-Bass Publishers: San Francisco. Read More