Advantages and Disadvantages of the Following Strategy of Cutting All Expenditure on Training - Case Study Example

Your CEO’s Response Is To Say, “We Must Cut All Expenditure on Training”. Write a Report for Her Outlining the Advantages and Disadvantages of Following This Strategy Table of Contents Part 1: Statement of Okamoto 3 1.1. Introduction 3 Part 2: Assumptions 4 2.1. History and Current Situation 4 Part 3: Analysing Implication of Training 6 3.1. Advantages of Training 6 3.2. Disadvantages 7 3.2.1. Technology Leadership 8 3.2.2. Market Performance 9 3.2.3. Organisational Culture 9 3.2.4. Relationship Management 10 4. Conclusion 11 References 13 Part 1: Statement of Okamoto 1.1. Introduction Founded in the year 1934, Okamoto Industries Inc. (Okamoto) is a Japanese manufacturer of quality condoms and heating pads. Currently, the organisation operates across numbers of emerging markets across Asia, Europe and the US, with the aim of providing comfort and convenience to individualist targeted group of customers through its range of quality assured products. In relation to the present day context, Okamoto has been observed to achieve continuous improvement with a capital of ¥13,047,630,000 due to its robust development of technological aspects and marketing communication functions across its different global markets (Okamoto, 2013). However, according to the recent financial highlights, the organisation has been observed to face a significant decline in its annual sales due to the increasing variable costs of production and selling activities. In this regard, the Chief Executive Officer (CEO) of the company is emphasising the reduction of costs associated with training and development activities with the aim of transforming its financial performance. Emphasising the recent strategic measures of the CEO in Okamoto, the study tends to evaluate the implications of reducing costs associated with training and development of the staff members in the organisation. In order to evaluate the possible implications, the study includes an in-depth analysis regarding the advantages and disadvantages of training that can enable the organisation to achieve its desired financial goals. Part 2: Assumptions 2.1. History and Current Situation With regard to the current financial highlights, it can be observed that Okamoto has been recently facing a decline in its sales revenue as compared to the last few financial years. In relation to the recent company report, the financial highlights of the fiscal year 2010 to 2013 demonstrate a continuous instability as revealed through the income statements of Okamoto. The following pictorial representation depicts the financial highlights of Okamoto from the fiscal year 3010 to 2013. Source: (Okamoto, 2013) With reference to the financial highlights capturing data since the last four years, the ordinary income, current net income and current net income per share can be observed representing an increasing instability for the company. Therefore, it can be ascertained that the scenario of declining income level might have been driven by various types of costs associated with manufacturing and marketing activities. In the context of current net income, organisations are often observed to face declining scenario due to the higher investment of activities associated with the production facilities. The rising variable costs associated with manufacturing functions often lead to major impacts on the organisational potentials to gain a considerable rate of return. In this regard, the strategy of eliminating costs linked with employee training and development by the CEO of Okamoto can be stated as a major decision. Okamoto has numbers of manufacturing firms across the Asian region and is often involved to deploy advanced technological features to improve efficiency in the process of maintaining quality and convenience throughout its production process and suffice expectations of the end customers. Therefore, a higher level of investment is often faced by the organisation when conducting training and development programmes for the staff members. The scenario might further lead the organisation to face major decline of the company’s current net income (Werner & DeSimone, 2008). Additionally, the strategy of continuous development of marketing and promotional activities might also have a strong impact on Okamoto, resulting in continuous fluctuation in its annual net income during the last few financial years. In order to reduce challenges in marketing products along with building better relationship with the customers might also increase the variable cost of the company. The marketing and promotional activities for improving customer relation may also lead to an increase in the costs that can considerably influence the organisation to achieve their desired financial goals. In this context, the marketing and promotional activities can also be considered to obstruct growth of the annual net income of Okamoto prohibiting the demanded stimulation of its financial performance in the short run (Werner & DeSimone, 2008). The financial report also provides evidence to the fact that the fixed cost of Okamoto is characterised into various departments with the aim of transforming its manufacturing activities. The continuous deployment of leading technological features has also been observed to increase the variable cost for the company to a substantial extent. The newly deployment of technological equipments and features may further increase the need for conducting training and development programmes for the company, in the absence of which, it may further cause significant decline of profit as well as competitive stance weakening the organisational capabilities required to suffice the desires and expectations of its target customers. According to the observation, it has been identified that 70% of the total training cost in technological functions and 20 in different types of marketing training related activities is current invested by the company. In this context, it is evident that the increasing investment on technological skill related training activities have significantly reduced the annual net income of Okamoto, but in turn has helped in upholding the competitive strengths of the company. Part 3: Analysing Implication of Training 3.1. Advantages of Training Conducting a well-built set of training programmes has long been observed to play a crucial role not only to improve productivity skills and competencies of the staff members, but also to stabilise profitability levels as an assurance to the successful achievement of the long-term business goals (Odumeru & Ilesanmi, 2013). In the competitive scenario of current business environment, training has become an integrated strategic decision for contemporary organisations to improve the innate capability of the workforce with the aim of increasing operational efficiency. Hence, the strategy often helps to reduce operational costs and ensure organisations to achieve their long-term financial goals (Tomer, n.d.). According to the present day context, organisations with manufacturing segments are often observed to increase their investment to provide adequate training facilities to their existing workforce to equip them with technology advancements. The training programmes fundamentally involve an effective set of practices that empower the skills and knowledge of the staff members, which further boosts their level of productivity from a long run perspective (Nick, 2008). Moreover, the training programmes associated with the technological advancements of the organisation also helps to reduce a large sum of wealth by educating workforce about the efficient use of each component within a manufacturing plant. It helps to increase production capability of the firms by developing an easy manufacturing process without engaging additional staff members. Hence, training can also reduce costs of the organisations, which might have risen to engage additional employment for different processes within the manufacturing plant (Gong & et. al, 2009). 3.2. Disadvantages Although training plays a crucial role to improve productivity skill of the employees and strengthen the internal capabilities of any organisation, it also has certain limitations that can negatively influence the organisation’s sustenance in the desired marketing position. In this regard, the training programs relating to the technological segments of a manufacturing firm often include few major drawbacks that further impose adverse effects on the organisations, especially when aiming at a larger volume of the market share or earning considerable rate of return (Bauernschuster, 2008). Few of the major factors that impose considerable influences on the organisations have been critically analysed in the following sections. 3.2.1. Technology Leadership The term ‘technology leadership’, generally defines a set of approaches and practices that emphasise continuous innovation and development related functions in order to increase efficiency throughout the organisational processes. Technology leadership is often considered as a responsibility of both leaders and followers with the aim of developing cutting-edge solutions for different functions of the organisation (Massachusetts Department of Elementary and Secondary Education, 2010). In the context of a manufacturing plant, although technology leadership improves the production units, it also imposes a considerable degree of negatively impact on the organisations to attain their financial goals. In general, the practice of technology leadership in the manufacturing firms involve a set of developmental activities, including IT infrastructure, equipment along with various types of digital tools in order to produce innovative products (Sebastian, 2007). In relation to the business function of Okamoto, the leadership style has been highly observed to emphasise a continuous practice of technology leadership. Although the leadership style has major influence on increasing operational efficiency, the organisation has also experienced major complexities with the rising cost being involved in frequent training programmes for the workforce. 3.2.2. Market Performance Developing a set of effective practices has long been witnessed to strengthen the current position of an organisation within the industrial segment. In relation to the continuous improvement of marketing strategies, there are various types of promotional strategies applied by the organisations to grasp the attention of a large group of target customers (Archibugi & Pietrobelli, 2003). In this regard, the marketing and promotional activities, such as building brand awareness, campaigning public relations or direct and indirect selling techniques, are often deemed as subjected to an effective set of training programmes practiced within the organisation. However, the training programmes associated with different marketing activities can also be considered to impose major risks for the organisation to achieve their predetermined financial objectives. Although the integration of marketing and promotional activities helps organisations to establish a strong brand positioning, it further involves a large amount of wealth to conduct a wide range of marketing communication activities (Nikandrou & et. al, 2008). In the context of Okamoto, the organisation has also been recognised to practice an effective and wide range of marketing and promotional activities to promote its products in different domestic and overseas markets. In order to develop a strong position, the marketing and promotional activities of the organisation have often included a large amount of wealth, which had also increased the cost and lowered the profitability level of the company. 3.2.3. Organisational Culture Training associated with maintaining robust organisational culture has major influence on the firms to build long-term sustainability in a particular market. It helps organisations to formulate a productive and relatively familiar working environment that further ensures major advantages for the organisations in terms of competitive benefits (Shahzad & et. al, 2012). However, in various cases, training program associated with building organisational culture can be identified to affect the financial performance of a particular firm negatively, as witnessed in the case of Okamoto. Owing to the fact that the process of building robust organisational culture generally involve a number of activities including communication development or improving behavioural and individual attitude related activities that fundamentally require an effective set of training programmes. According to the current business practices, it can be identified that Okamoto often conducts different types of training programmes relating to the development of communication behavioural characteristics of each individual staff members. However, the cultural developmental training activities of the organisation often require an additional investment, consuming valuable time that lowers the production performance of the manufacturing plants (Blanchard, 2012). Moreover, adapting change is also a major and common practice in the business operations of Okamoto, which further involves frequent training programmes for the employees. In this regard, the process of providing training associated with change management has also been identified to include a significant amount of wealth, which further hinders the organisation to achieve its financial goals. 3.2.4. Relationship Management Relationship management can also be regarded as a major attribute to form strong collaboration among the employees from different job roles within an organisation. It helps organisations to tailor strong interpersonal relationship and form a robust culture within the working environment. The process of managing relationship among the employees may involve a set of elements that can enable leaders or managers to build strong collaboration amid each individual member within the organisation (Eby & Allen, 2012). However, building relationship among the employees through robust training programmes may also cause negative impacts on the financial performance of the organisation. For instance, organisations in the present business world are highly observed to increase their investment on conducting a number of events or cultural programmes to strengthen relationship among the employees. In this regard, the leaders and/or the managers are required to have effective training and development programmes to increase their capability of building relationship among the staff members (OECD, 2005). In the context of Okamoto, the leaders and managers are frequently observed as engaged in different types of training programmes to improve their leadership skills and competencies. Hence, the training activities consumes significant amount of time and wealth that further increases the risk of financial loss subjected to the success potentials of the training programmes. Therefore, leadership training to manage relationship among the employees can also be considered as a major factor, which might have a negative influence on the organisations to achieve the desired financial goals. 4. Conclusion With respect to the modern era of technological advancement, it is being observed that transforming changes are taking place within the daily routine practices of contemporary organisations. Organisations have thus become tender in investing higher amount of wealth and interest for its technological development. In relation to an in-depth understanding, it has been critically observed that the training programmes associated with different technological practices play an essential role for Okamoto to build its strong brand image in different Asian, US and European markets. The frequent practices of training programmes, regarding different advanced technological features and equipments, the strategy has been observed to empower the organisational capability to emphasise continuous innovation in producing a number of effective and quality based products. Although the strategy of providing adequate numbers of training programmes for the staff members influences continuous innovation, the strategy has also been observed to bring a significant challenge for Okamoto in its financial performance. According to a critical assessment concerning various training programmes, it has been observed that the frequent practice of deploying advanced technologies in different manufacturing and processing functions has radically increased the annual expenditure in Okamoto, imposing major financial decline risks, especially since the year 2011 and 2012. The assessment has been critically detailed about the major implications of training programmes that significantly lowers the financial capability of Okamoto. However, it has further been observed to lead the company to sustain its dominant position in the respective business industry. Although training of staff members enables to regain productivity and operational efficiency, the frequent practice of training relating to the technological aspects of the business can negatively impact on the overall functions and reduce the competitive position of Okamoto. Hence, it is suggestible that rather than completely divesting in this particular operational sector, the company can retrench its budgetary costs in its training programmes, lessening the frequency and magnitude of the same. References Archibugi, D. & Pietrobelli, C., 2003. The Globalisation of Technology and its Implications for Developing Countries Windows of Opportunity or Further Burden? Technological Forecasting & Social Change, Vol. 70, pp. 861-883. Bauernschuster, S. 2008. The Impact of Continuous Training on a Firms Innovations. Entrepreneurship and Innovation - Organizations, Institutions, Systems and Regions, pp. 1-30. Blanchard, P. N., 2012. Effective Training, Systems, Strategies, and Practices, 4/e. Pearson Education India. Eby, L. T. T. & Allen, T. D., 2012. Personal Relationships: The Effect on Employee Attitudes, Behavior, and Well-being. Routledge. Gong, Y. & et. al, 2009. Employee Learning Orientation, Transformational Leadership, and Employee Creativity: The Mediating Role of Employee Creative Self-Efficacy. Academy of Management Journal, Vol. 52, No. 4, pp. 765-778. Massachusetts Department of Elementary and Secondary Education, 2010. Technology Leadership. ETAC Technology Leadership Whitepaper 2010, pp. 1-15. Nikandrou, I. & et. al, 2008. Training and Firm Performance in Europe: The Impact of National and Organizational Characteristics. The International Journal of Human Resource Management, Vol. 9, No. 11, pp. 2057-2078. Nick, B. P., 2008. Effective Training: Systems, Strategies and Practices. Pearson Education India. Odumeru, J. A. & Ilesanmi, O. A. 2013. The Effects of Human Resources Development on Financial Performance of Organisations. Asian Business Review, Vol. 2, No. 1, pp. 19-23. OECD, 2005. OECD Employment Outlook 2005. OECD Publishing. Okamoto Industries Inc, 2013. About Okamoto. Corporate Information. [Online] Available at: http://www.okamoto-inc.jp/en/corporate/index.html [Accessed April 30, 2013]. Sebastian, M. W., 2007. Information Technology Leadership Perceptions and Employee-centric Organizational Culture. ProQuest. Shahzad, F. & et. al, 2012. Impact of Organizational Culture on Organizational Performance: An Overview. Interdisciplinary Journal of Contemporary Research in Business, Vol. 3, No. 9, pp. 975-985. Tomer, J., No Date. Understanding High Performance Work Systems: The Joint Contribution of Economics and Human Resource Management. High Performance Work Systems. [Online] Available at: http://gemba.sdsu.edu/~frantz/docs/Tomer.pdf [Accessed April 30, 2013]. Werner, J. M. & DeSimone, R. L., 2008. Human Resource Development. Cengage Learning. Read More