Case 7-4 Aloha Products (Summary)

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ALOHA PRODUCTS

Aloha products is an over a century existing coffee seller that deals with a wide range of customers. Top management is regulated by the members of the founding family. Company uses centralized control system where all main decisions regarding purchases, production, sales, marketing and promotion are made on corporate level while plant managers are only responsible for their profit and loss. Also there is centralized preparation of overall financial statement at home offices. This organization has led plant managers to a lack of adequate control over the activities of the managed plant; however, they are still assessed on the performance. This is unfair in view of managers’ position as even though they have better knowledge what inputs are required for generating highest outputs for the specific plant, they do not acquire any voice in decision process. Also very important to take into consideration what exact strategies company wants to pursuit. As now it is not very clear if they want to be low-cost producer for the broad consumption needs or be high-quality producer targeting specialized customers.

If the strategy of the company is to be a low-cost coffee producer, plant managers should be given more freedom and control over the purchase and production activities in their plants. They would be set as profit centers since they would have the responsibility of purchasing and producing. As they are more closely to the whole process, they have more insight what would be the best for the plant. Moreover, in the case of low-quality coffee beans requirements, the plants could have their own purchasing units that would look for opportunistic sales on the current market. Thus, the purchasing departments would not be required to have a deep insight in the complex market of coffee beans.

On the other hand, the coffee industry is very sensitive to environmental effects and depends on seasonal harvest. In addition, the complexity of the coffee...
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