Margin Analysis: Aluminum Bahrain - Case Study Example

Aluminum Bahrain (ALBA) Table of contents page Analytical objectives 2) Value driver analysis 3) Strategic pre-evaluation 4)Analytical issues/questions 5) Margin/differences/ratio analysis 6)Inferences 7)Conclusions Aluminum Bahrain (ALBA) Introduction. Aluminum Bahrain is a large corporation that is a manufacturing company therefore it relies on exploitation of real and tangible assets, transforming raw materials into final goods, in this case Aluminum exploration will be capital intensive to provide higher profits. Alba produces six different types of products: Extrusion Billets, Foundry Alloy Ingots (Propertzi and Standard Ingot Form), Rolling Slabs, Tee and Standard Ingots and Liquid Metal hence making it more valuable to us as stakeholders of the company. client user group identification As the Current shareholders and principal client users who are interested in knowing all the information necessssary to make a critical decision to whether buy ,sell or hold investments in the Aluminum Bahrain B.S.C(Alba).Our focus will be on the following in line with our needs: The company, Alba, performance compared to the Aluminum sector in the MENA region. Potential growth areas and Alba’s ability to capitalize on these growth opportunities. Expectations of Alba’s main revenue/profitability streams The robustness of the financial position of Alba. By 2000 the business had transformed with the purchase of new assets and businesses. The purpose of the acquisition of the new businesses was to establish a Pacific Rim beachhead for the American parent company, rolling labs Industries. At that same time, the rationalized business would bring forth cash flow, infrastructure and economies of scale for the expansion of the business into the rapidly growing markets of China, Indonesia, The Philippines, and later on India. However, in 2014, this company faced a worse situation than it was in earlier . Dollar fluctuations and increase in costs led to lose of a large client base. There was also an increase in costs of production due to the rise in labor costs in Bahrain. analysis OF ffffTHE FIRM TYPE AND THE VALUATION Firm type valuation In order to determine the firm type of the aluminium company its supply and demand are key factors in addition its produced in metric tons. When establishing its demand by market the following factors are considered: The packaging of the aluminium, it should be properly packaged to prevent pillfirage,motor vehicle capacity needed in terms of transport, power in terms of electricity needed when allot of electricity is needed means the firm type are big. Firms involved in Aluminium industry and handle there own supplies and customers and has its own national and international organisations PERL analysis PERL analysis shows that there are many problems that might face company. The price of aluminum is decreasing as the quality keeps increasing. This caused many companies to seek external markets that have cheaper labor so that they cut down on their production costs as much as possible. The cost of labor in America has greatly increased almost by double. They are completely non-concurrent to other countries. Aluminum Company is placed in a competitive market with companies that have good business networks both within and without the American market. Some of Its employees are members of unions that fight for the rights of employees. Aluminum subsidiary companies is well situated for extensive growth into the Asian markets. Opportunities and threats for the business. Aluminum has strong relationship with some large companies in the mining industry globally . This could aid them in the shifting into international markets and production to other countries (BUHLER 2010). It has the opportunity of going global and venturing into new markets. However, the production cost is the biggest problem facing Aluminum. This is greatly contributed by the high costs of labor in America. It is this labor costs that forced other companies out of America. This causes American-based companies to compete unfavorably with other global companies based in places with cheaper labor costs. Another challenge of Aluminum is strengthening of the dollar in Bahrain(COOK 2009). This makes exportation from Bahrain a is cumbersome. Aluminum should therefore sort solutions for these problems to safeguard its position and existence. It therefore considered outsourcing labor and taking production to developing economies where labor is cheaper like in India. Aluminum has a few goals which revolve around production of cheap but quality accessory parts. The company seeks to cut down on its production costs so that the final products are not so expensive (CRAIG 2008). As a sustainability strategy, the company ought to produce the most popular and best accessories all around the world. Some strategies have been proposed to aid in reducing the labor costs and the overall production costs. Rationale for business strategy. The main rationale for the business strategy is reduction of production costs. the business strategy is meant to put the company in a good competitive position with other global companies in the industry. The strategy will result in the lowering of prices of its goods too. This business strategy will be the key to its production costs going lower. The strategies are meant to help the company develop by going global. Strategic pre-evaluation The strategy states that Aluminum should shift its production to countries that offer cheaper labor. This move is meant to reduce the cost of production and consequently reducing the price of final products. Going global will allow us attain cheap labor and economies of scale that will make our production cheaper. The existing partnership with Toyota should be used as a chance to access the global market. It should also take to advantage the German manufacturing conglomerate, Groathe industries. This is because the costs of labor are relatively smaller in German. Re-engineering of the entire business process is also a good strategy. This will lead to the betterment of quality of goods and the reduction of costs (DELCAMPO 2011). This can be realized by making clear ownership of the processes in the production to look in to the quality and eliminate reluctant work activities and the individuals responsible for them in the current factory state. This will help in the elimination of non-productive labor that still is a cost to the company. This will significantly reduce production costs. Aluminum company needs a redesign of its working organizations into cross-functional groups in order to bring down organizational layers in the company. This move is set to greatly assist in the lowering growing concern of cost incurred due to labor in production. The main strategy here should be the change of our labor plan and the organizational structure (HECKER, & HALLOCK 2001). Change of our labor plan means change in how we used to manage our human resource in terms of staffing, management of the staff and the training of staff. Going global will be done through a couple of ways. One of the ways is starting the export of our locally produced goods to other countries. The subcontracting of some production processes to foreign countries in which we intend to venture in for example India. We will also get into various ventures with this countries we intend to go into. we will also set up operations in the countries we are intending to venture in. this will help us achieve our strategy of globalization. Analytical issues/questions The main rationale of the new strategy is reducing production cost in America. As the business strategy is set to go off, the company has strengths and weaknesses that may end up affecting the entire strategy (GATELY 2013). The achievement of this strategy needs very skilled workforce. The high wages that are offered to labor in Australia mean that the company has the ability to acquire skilled manpower from anywhere in the world. In addition, our strength is the non-unionization of majority workers in the company. This will allow the company to engineer its own rules that are flexible and relevant to the company’s operations. MetalEx has for a long time embraced the promotion of employees to higher posts (HENEMAN, & TANSKY 2006). Those employees that portray a lot of enthusiasm in their work get promoted to higher posts if they have atleast the minimum qualification. This greatly motivates the employees to be more productive so that they can enjoy promotions. The Australian workforce is also highly diversified. Diversification of workforce is always a great advantage to a company. Alluminium greatly benefits from this diversification of workforce. These strengths are meant to make this strategy successful. However, Aluminum has some weaknesses that may act as hindrances to the strategy. aluminum has very poor staffing methods (INFORMATION RESOURCES ON FINANCIAL MANAGEMENT AND ACCOUNTING 2013). The criteria used in employing new workers are very poor. Aluminum ends up employing unskilled manpower so that it saves on money spent in wages. This makes the internal promotion a bad idea. Aluminum does not also invest in the training of employees. The company rarely organizes training forums. These forums are mostly for the personal development of individual workers. Lack of such forums is driving away some of its skilled workers who are not only after a good pay. They go to companys that will help the growth of their abilities. Aluminum company has another weakness of lack of evaluation plans (JACKSON, S. E., DENISI & HITT 2006). This company lacks mechanisms to monitor its employee’s performance. This greatly affects the quality of production which is key in the competitive global market. Aluminum also lacks appropriate methods to champion for teamwork. Teamwork greatly aids the success of a company since work is better done when people work as a team. Teamwork makes work easier. Lack of an efficient staff retention strategy is also a weakness of Alluminium.Alluminium lacks the strategies to and retention. Most of its employees resign after a short while of service. There is no employee loyalty. Recently, aluminum company experienced loss of many employees that had been working in production. They were offered better deals by another company (LEE & WARNER 2006). This is dangerous for competition because the workers go with production secrets to the other company. Conclusively, the lack of skilled manpower at alluminium may play a major role in hindering success of the new strategy. Proposed H.R strategy. The human resource at allumium company has some major roles in the new strategy. Nevertheless, the human resource department at allumiuum company currently does the capability to support the plans. The business plan requires a human resource team that has experience in the global market. The human resource currently also lacks teamwork. The strategy needs a human resource to embrace teamwork. There should also be clear mechanisms for monitor and management of the human resource. Without good management the quality of production will take a nose dive. The H.R strategy is going to ensure that all employees give the best and the costs of paying them is lower than earlier. Potential role in assisting achieve the business strategy. The human resource strategy has been developed and is expected to ensure that the human resource is ready for the support of the new strategy. The H.R strategy should help cut down in expenses of employment and paying of wages. The human strategy set is to ensure that the methods of management of employees are sufficient. It is also set to ensure that the methods of recruitment of new employees are sufficient (LEES 2003). The strategy will bring some major changes in the activities of recruitment, monitoring, training and rewarding of employees in aluminum company. The strategy is also set to control the procedures of production so as to realize production of quality goods that will strongly compete with goods from the other companies globally. Human resource is a key sector in the road towards changing fate of aluminum company Inferences The first step of the strategy will be personal preparedness of the changes that are expected to occur. The new business strategy is expected to bring forth tremendous changes in the workplace that might result in changes in the entire workforce. All employees need to be psychologically prepared for the changes (MCGANNON, & MCGANNON 2009). The recruitment department of Aluminum Bahrain (ALBA)must be restructured. This will happen so that the new individuals that have clear understanding of metrics of diverse workplace get introduced to the recruitment team. Aluminum Bahrain (ALBA) will require new and able workforce to achieve the changes they need. The strategy also states that there should be implementation of employee training and retention programs to ensure that employees are well trained to deal with the needs of the new emerging markets, especially in the Asian markets. This is to ensure that they have the ability to deal with global diversity. Training will also be used to ensure development of individual employees. Strategies to check the performance of employees are being developed. This is to ensure quality production is created and motivated. A downsize of the current workforce is advised to create room for the incoming experienced staff and also creation of more funds for the expansion . The unskilled manpower has to create space for the skilled manpower expected to change the company and pilot it to greater heights (MCGANNON, & MCGANNON 2009). The strategy will be carried out by doing a number of activities. Some of this activities set to be done by the human resource department include; stressing on the increase in funding for training programs. This move is meant to help improve individual performance. It is also a strategy to attract skilled manpower and to retain the existing ones. Employees that do not add value to the company are also going to be laid off. This will bring new energy, skills and experience in the company (PODMOROFF 2005). MetalEx is also going to bring workers appraisal in the human resource department (NOE, & NOE 2012). This action will look into the working of employees and ensure that monitoring is done effectively. Shifting production processes should also be done in order incorporate collaboration and teamwork. The human resource needs to be engaged with work in order to achieve this strategy. Employee engagement greatly enhances production and motivation. For the human resource strategy to work, some other things are set to be implemented. The recruitment strategies have to be looked into and changed. They have to change their human resource strategies to ensure they incorporate international standards (ROTHWELL et al 2012 Conclusion. Aluminum Bahrain (ALBA) has to reduce its labor costs so as to reduce the entire production costs. The new strategies are set to reduce the costs they incure in labor. The HR strategy is set to help the new strategy be successful. The new strategy needs all employees to be cooperative and work together so as to achieve the goals. The company is also going global in order to find markets that are more lucrative. References 1. MEIGS, W. B., & MEIGS, R. F. (2007). Financial accounting. New York, McGraw Hill 2. HARRISON, W. T., & HORNGREN, C. T. (2001). Financial accounting. Upper Saddle River, NJ, Prentice Hall Read More