Labor and Compensation Strategy, Finance Strategy - Research Paper Example

Strategic Management Capstone Labor and Compensation Strategy The labor and compensation tactics selected have to be in synchronywith, and support, the broad differentiation strategy adopted for Advanced Camera. The company’s human resources will, therefore, have to be organized and compensated using strategies seeking to ensure that the company meets its goal of offering distinctive cameras that a broad array of buyers will find alluring and worthy of their money. Adoption of the broad differentiation strategy will require maintenance of company presence in each segment (Slack, Chambers, & Johnston, R.2010). It will also involve ensuring that cameras at all levels of production showcase exceptional design and are easily accessible, while the level of awareness about these attributes will need to equally high. These attributes call for balance between developing employees’ R&D competency, increment of unit sales hence expansion capacity, as the company generates higher demand with time, and according employees compensation that is above average. The first step in the labor strategy will involve training individuals that are better equipped in production and sale of digital cameras than potent competitors in the industry. This will play a significant role in ensuring that Advanced Camera has significant competitive advantage over other camera providers. Such human resource-dependent competitive advantage should not be overlooked, since unlike other company advantages that can be replicated elsewhere, unique skills and characteristics of employees are difficult to imitate. Further, a properly trained production workforce will generate higher quality cameras than one that is untrained hence unskilled. In the first year, the company will primarily focus on training extant portable appliance testing (PAT) members. This will happen for two years in a row, thus keeping the money used for quarterly productivity improvement and PAT training constant at $1,000. In the third year, the company will hire 20 new PATs, with the intention of raising the number of units assembled during overtime (OT) to 80 per member. In the subsequent quarter, that is, during year four, Advanced Camera will strive to maintain about 30 PATs, while increasing units assembled at OT by 20 cameras per PAT member. The company intends to maintain this number of PATs even in the fifth year, in order to sustain first shift and overtime PATs, without having to outsource labor (Dess, Lumpkin, & Eisner, 2006). Through this strategy, the company will be able to raise basic wage per PAT member by about 2% from the current 1%, while providing incentive pay at 2.5$ for every camera assembled, which is $1.5 more than the current rate. In addition, the company projects a 70 dollar quarterly attendance bonus, which is $20 more, and provision of a fringe benefit package at $900, as opposed to the current $800, for every PAT member. Overall, by year five, an estimated $500 per PAT will be spent for training and improvement of productivity, an amount half of what Advanced Camera is using presently to train its PATs. This will aid in enhanced employee expertise, hence production of extra and higher quality cameras per PAT trained. The latter labor strategy caters for production of distinctive digital cameras by Advanced Camera, as well as, predicted rise in demand for the same. In addition to increasing productivity, the approach is also expected to significantly reduce costs associated with warranty claims from disgruntled customers, due to elevated product quality (Bansal, 2005). Finance Strategy Financial Objectives The primary financial goal of the broad differentiation strategy opted for by Advanced Camera is to increase unit sales, thus increasing revenues and countering relatively high production costs (Hitt, Hoskisson, & Ireland, 2007). For higher specificity, the company intends to increase its revenue by 35% over the following five years. Advanced Camera also projects an improvement of earnings per share (EPS) TO 50%, and a subsequent increase in returns on equity (ROE) to show 25% improvement. Other financial objectives of the camera company over the next five years include maintenance of image rating at 85% or more, raising bond and credit rating from B+ to A+, and raising value of stock prices by approximately 51% (Thompson, 2014). Capital Structure The company is currently financed by shareholders’ equity and business borrowing. The current debt equity ratio, which is given by the proportion of total liabilities to owners’ equity, is about 0.7 with liabilities at $66,902 and equity at $100,000 (Thompson, Strickland, & Gamble, 2008). The company will, therefore, strive to continue to reducing its debt to avoid interest expenses, while financing its investments and operations mainly through retained earnings, stock issues, and supplemental bond offerings when necessary. The company also intends to maintain assets to equity ratio between 1.5 and 2, in order to sustain liquidity. Advanced Camera has a working capital (current assets-current liabilities) of $23, 030. In the upcoming year, the company will make concerted efforts to increase its balance at 5% more than the current assets, that is, about $8310 in cash and inventory, increasing in subsequent years by 10, 15, 20 and 25% respectively (Thompson, 2014). This will aid in avoiding debt, keeping reserves for potential variations in camera stock, and allowing for dividend payment. Operation and Communication Strategy Given the fact that Advanced Camera intends to maintain its market share, while expanding its control by targeting unexploited markets, the company requires a comprehensive communication and implementation strategy. The first step towards achieving the projected goals will involve conveying strategy objectives and measures to involved stakeholders, particularly middle level managers and ordinary employees. Addressing partisans’ concerns and involving them in the decision making process will ensure that they wholly embrace the strategy and that they are adequately motivated and equipped to spearhead implementation (Hambrick & Fredrickson, 2005). Communication, decision making, and duties or responsibilities assignment will be consensual, preferably adopting a horizontal rather than vertical structure. This will ensure that individuals in lower ranks of the organizational structure do not feel like they are simply carrying out potentially unpractical decisions formulated by executive level staff. Such partisanship of various stakeholders calls for transparency in all areas of communication and operation (Wang, Chiang & Tung, 2012). This implies that there will be open information sharing in an accurate and timely manner, as well as, working constructively in unison to resolve identified issues. Advanced Camera staff members will also commit consistently to high standards of operation and monitoring of implemented strategic measures. This will be achieved through maintaining an open information sharing conduit not just within the organization, but also with external partisans including present and prospective customers, material suppliers, and even creditors, among others (Cohen, 2004). For instance, the company will make use of various marketing research approaches like questionnaires, focus groups, and market surveys, in order to continually redefine parameters of the broad differentiation strategy and keep up with changing market conditions. Internally, this will be achieved by minimizing bureaucracy hence fostering flexibility in adoption of potentially beneficial emergent operation techniques and technologies. References Cohen, A. (2004). The Art of the Strategist: 10 Essential Principles for Leading Your Company to Victory. New York, NY: AMACOM. Hitt, M., Hoskisson, R., & Ireland, D. (2007). Management of Strategy: Concepts and Cases.7th ed. Mason, United States: Thomson South-Western. Bansal, P. (2005). Evolving sustainability: A longitudinal study of corporate sustainable development. Strategic Management Journal, 26, 197-218. Thompson, A. (2014). Strategy: Core Concepts and Analytical Approaches. New York, NY: McGraw-Hill/Irwin. Thompson, A., Strickland, A., & Gamble, J. (2008). Crafting and executing strategy: The Quest for Competitive Advantage: Concepts and Cases. New York, NY: McGraw Hill. Slack, N., Chambers, S. & Johnston, R. (2010). Operations management.  Harlow: Prentice Hall/Financial Times. Dess, G., Lumpkin, G., & Eisner, A. (2006). Strategic Management: Text and Cases. Boston: McGraw-Hill Irwin. Hambrick, D. & Fredrickson, J. (2005). Are you sure you have a strategy? Academy of Management Executive, 19(4), 51-62. Wang, K., Chiang, C., & Tung, C. (2012). Integrating Human Resource Management and Knowledge Management: From the Viewpoint of Core Employees and Organizational Performance. The International Journal of Organizational Innovation 5 (1): 109-137. Read More