Decision Making for Success of Acme Corporation - Case Study Example

Decision Making for Success Businesses are products of decision making, i.e. whenever management makes the right decision companies perform better and attain market leadership; conversely, any wrong, misinformed, untimely and ineffective management decision is often very costly. Hammond, Keeney & Raiffa (1998) stressed that when evaluating and making decisions, the mind often has a tendency to have a significant bias to the information it receives first. Further, Mele (2010) stressed the need to have practical skills and wisdom among the management team involved in decision-making. Mele further observed that every decision has in itself an ethical dimension that managers have to rely on to make the right decisions. Therefore, decision-making when overcoming competition requires a delicate balance and application of practical knowledge, which when applied effectively would anticipate and meet its market needs much better than competitors. Case Summary Acme Corporation is an Australian firm with specialties in quality products, superior customer services and their ‘made in Australian policy. Shesright Pty, one of the Acme competitors in the market, has a strong market control with its major strength being superior customer services coupled with the provision of financial arrangements to their clients. Besides, Hammer & Tong (H&T) a Sydney based company offers Do It Yourself (DIY) program and superior-priced products. H&T outsources very aesthetical materials from France, which are easy to use, having outstanding warranties and avail them at H&T shops and online through their online platform. Despite the above three competing firms, the entry of Arrow Inc., a leading Asian giant in the building sector promises to unsettle the Australian market. Maxim, the Acmes CEO has strong feelings that Arrow Inc. could disrupt the status quo by delivering products based on their principle of low cost, excellent performance, and customer value proposition. Shesright ‘s CEO perceives Arrow Inc. to be a low cost and poor quality player with no threat to the existing market structures, because the companys ‘made in Australia policy has led to increased customer loyalty. However, H&T CEO intends to counter the Arrows market entry by restructuring its products from the ‘made in France policy to the production of affordable products sourced locally from low-cost suppliers. Criteria for evaluating the case While evaluating this case study, one of the criteria to be used would involve assessing the risks such as financial, operational risks that each company involved would face as a consequence of the decision these firms implement. For instance, cost cutting could also include upgrading IT systems to ensure efficiency and reduction of human labour costs within an organisation; nevertheless, there would be a financial risk on this occasion. Installation of IT stock without proper planning and process audit, a procedure that could incur costs in itself, could make the installed IT stock ineffective (Ukai, 2003). Such installation would be a significant financial risk that could erode the gains the company has made and the goals it is currently seeking to achieve. As Hammond, Keeney & Raiffa (1998) explains, management decision can either undermine everything within an organisation or could lead to better results. The other criteria for analysing the case would involve employee engagement analysis. An organisation is made up of individuals who contribute their skills and strengths towards the success of the institution. As such, any decision that affects the employees’ performance would have a formidable effect on the overall business’s performance. Maxims initial thoughts of cost cutting could significantly affect employee engagement. Cutting costs entails a reduction of non-productive expenses, which could involve cutting down on the employees benefits and employee layoffs where skills are found inappropriate. The third criteria to be employed will involve examining the cost and profitability resulting from any decision made by the CEOs. In most cases aligning the organisational structure with its management’s decisions would result in better performance, thereby improving the company’s performance (Blenko, Mankins & Rogers, 2010). Evaluating the cost and profitability of decisions would be significant in determining the appropriateness, and feasibility of the decision taken. For instance, though the ‘made in Australia branding strategy could have been advantageous to the company, since customer loyalty demands that the firm offers a value proposition better than what is available in the market (Palmatier, Scheer & Steenkamp, 2007). Case Evaluation In the case study, Maxim, Acmes CEO, considers cutting costs as the most appropriate tactic to ensuring the firm’s continued competitiveness in the market by adopting zero-based budgeting. This method requires every employee to get management’s authorization before making any cost incurring operation such as colour printing (Kesmodel & Gasparro, 2015). However, there would be a danger of increasing bureaucracy and job bottlenecks considering that these functions are carried out at a departmental level, which could significantly reduce production effectiveness. Furthermore, working on constrained budgets could result in an operational risk, since it could lead to conflicts and disagreements between different departments with respect to cost cutting matters (Sumner, 2000). On the other hand, H&T CEO faces several risks in his plan entailing a complete change of its operations by abandoning their "made in France" policy. The company will face both operational and financial risks in its re-branding process. Change of business from ‘made in France products to sourcing from local suppliers could entail a change in the final product, which amounts to rebranding. H&T could face massive financial risks if the re-branding program is poorly implemented, which would lead to loss of customers. Moreover, any hitches in the changeover especially involving new raw materials and products could negatively affect production and hence lead to a possible operation risk (Perrey & Spillecke, 2013). Besides, the company by adopting this strategy risks losing a significant proportion of its clientele. Customers perception is critical in consumption; therefore, those clients who preferred the ‘made in France policy might not change this preference as the company changes to using local materials. On the other hand, Shesright, one of Acmes competitors, does face a possible market risk resulting from overconfidence in customers’ loyalty to the company. If Arrows value proposition to its customers is superior to that of Shesright, customers could prefer the new company and break their loyalty to Shesright. In this case, switching costs could be low considering the targeted benefits. This client loss could be an operation risk as the company could significantly lose its market share and scale down its production. Employee Engagement In most cases, engaged employees develop loyalty to a company, work hard and utilise their skills and strengths towards the company’s set goals and objectives (Lockwood, 2007). However, management decisions in most cases could affect employee engagement leading to the demoralisation of workers. As Lockwood (2007) further asserts, cognitive engagement entails workers’ beliefs about the company, organisation culture and the management in place. As such, any attempt to reduce costs by reducing the workforce or their benefits could injure the long term relationship with unionised employees, besides to scaring investors (Ewing, 2011). Therefore, such a decision would be a value losing strategy. H&T re-branding strategy could also affect employee engagement within the firm. In most cases, limited or lack of knowledge about the users’ experience could amount to a project risk (Sumner, 2000). Any attempt to interfere with the employment structure could lead to conflict with unionised employees and strained relations. Moreover, Shesrights CEOs decision could have a significant impact on employee engagement in the long term. By ignoring the new entrant in the market and choosing the status quo as the best response, the CEO risks possible loss of business to the new entrant. Arrow Inc. could provide better products at lower costs and other superior terms to its customers, which could lower the cost of switching from the company to the new entrant. Loss of customers would entail loss of business, which would then require layoffs as a cost-cutting method considering the company would have lost a significant market segment. Often, layoffs and benefits reduction often strains employee engagement policies in the company significantly. Cost and profitability of decisions Porter (1985) in his generic competitive strategies identified two main competitive advantages that a firm could achieve in attaining market leadership, which were the low cost and differentiation advantages. These competitive advantages usually lead to three main strategies that a company has to apply to realize success in the market, which are focus, differentiation and cost leadership (Porter 1985). Acme in its cost reduction strategies seeks to attain cost leadership by reducing operational costs coupled with low-cost local materials; this would significantly hurt their final product in its quest to achieve market leadership. The company does not deal directly with the final users, which denies it a golden opportunity to interact with the end user and hence offer quality and differentiated services. On the other hand, H&T’s value proposition to its customers by providing quality and differentiated products could be their first step towards achieving focus in the industry. Moreover, the company through its differentiated approach has designed a unique approach that meets the final user needs besides to interacting with the end user. However, customers do not incur high prices or remain loyal to a company based on minute differences in products despite their quality (Bolton et al., 2014). Moreover, Shesrights approach maintaining the status quo puts it at a high risk of reduced sales and profitability. Therefore, as earlier stated customers would not be willing to pay premium prices for near similar products in the market, but often require differentiated products, a concept that Shesrights CEO ignores. The company focuses on identifying and exploiting a narrow competitive scope in the market such as offering financing to customers. As Such, each CEO in the firms above has to employ practical wisdom in evaluating their respective cases and all factors involved when coming up with the right cause of action. Recommendations For Acme to attain market leadership, it is important for the firm to restructure its operations with the aim of dealing directly with the final consumer. Valuable feedback about the companys products could only be obtained from the end users, upon which the company would design means to address the concerns of the end user. As competition in the market intensifies, it is vital to meet the end user needs by offering a unique value proposition; this approach could increase the companys competitiveness and customer loyalty (Rintamäki, Kuusela & Mitronen, 2007). On the other hand, the Shesrights status quo approach in a competitive market would not go a long way in maintaining customer loyalty. The company should seek to employ elaborate cost cutting procedures besides improving their differentiated products to gain market leadership above other competitors. H&T offers a superior value proposition besides differentiated products that have led to its market dominance. The companys re-branding process would also improve its market standing besides enhancing its cost cutting initiatives. For the company to maintain its market dominance, it should seek to differentiate its products from what is in the market to retain their customers’ loyalty. The creation of additional affordable lines of products would not necessarily lead to increased business (Braakmann & Wagner, 2009), but differentiated products do certainly have a potential of increasing its profitability. Shesright’s CEO needs to concentrate more on its differentiation strategies and finding means to lower production costs to attain cost leadership in the market. However, as Pretorius (2008) observed, Porters matrix could prove inadequate as it assumes normal operations by all entrants in the market. As such, the prospected partnership with Arrow Inc. could prove valuable to the firm due to increased market coverage and the improved range of products that it projects to launch in the market. On the other hand, Acme fails in its differentiation strategy. According to a study on organisations and their differentiation strategy, leading firms prioritize in "customer experience followed by a focus on employees and company Culture" (Bolton et al. 2014, p. 2). As such, the company needs to maintain its strong employee engagement policies which have managed to reduce conflicts between the employees and the management. Conclusion In summary, any data, estimates, impressions, thoughts and judgments that come first to the management executives mind would have an enormous impact on their final decision. Consequently, practical skills within the management team are not the only aspect necessary for good decision-making, but a manager should also possess a good degree of moral-based virtues and practical wisdom. The final outcome of decisions would be as good as the initial decision itself, making it necessary for critical evaluation of any thoughts before a final decision is made. Considering that the performance of a company is dependent on the CEOs decisions, there are no predetermined sets of rules that a manager could use to make decisions, but any decision has to be made to correspond to the vision of the company and its mission towards service delivery. The competitiveness of the three firms and their success in maintaining their market segments would depend on the decisions taken by each CEO towards improving the firm’s performance and its products in the market. For instance, For Acme to remain competitive there has to be strategies aimed at interacting directly with the final consumers to offer them benchmarking value proposition. On the other hand, H&T re-branding from the ‘made in France concept to lower cost local materials could make the skills of some employees redundant and instead necessitate employing locally trained staff with core competencies. Therefore, each management decision helps the firm improve its performance while at the same time making it more competitive in the market through ingenious methods that other competing firms would find hard to replicate. List of References Blenko, W. M., Mankins, C. M., & Rogers, P. 2010. The Decision-Driven Organisation. The Harvard Business review. [online] Available from https://hbr.org/2010/06/the-decision-driven-organisation [Accessed 27th May 2015] Bolton R. et al. 2014. Small Details that Make Big Differences: a radical approach to consumption experience as a firms differentiating strategy. The university of Cambridge: Cambridge Service Alliance. Braakmann, N. & Wagenr, J. 2009. Product Differentiation and Profitability in German Manufacturing Firms. University of Lüneburg. Working Paper Series in Economics No. 115. Ewing, M. 2011. Cutting Costs Without Cutting People. Harvard Business Review. [online] Available from https://hbr.org/2011/04/cutting-costs-without-cutting [Accessed 27th May 2015] Hammond, J. S.,Keeney, L. R. & Raiffa, H. 1998. The Hidden traps in decision making. Harvard Business Review, 76(5), 47-58, Kesmodel, D & Gasparro, A. 2015. Kraft-Heinz Deal Shows Brazilian Buyout Firms Cost-Cutting Recipe. The wall Street Journal. [online] Available from http://www.wsj.com/articles/from-heinz-to-kraft-zero-based-budgeting-sweeps-across-america-1427308494 . [Accessed 27th May 2015] Lockwood, N. R. 2007. 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