Thompson Telescopes Ltd is a division of Murray Engineering. It was formed following the acquisition of a US company by Murray’s parent group, the large conglomerate, PH Holdings plc. Initially, Thompson acted as the UK sales arm, and marketed a range of standard telescopes for amateur astronomers and clubs. Telescopes were manufactured in the USA and sold via the UK company to markets in Europe, the Middle East and Africa (EMEA). However, customers increasingly demanded specific designs to meet their own tastes. Some, for example, would want their own specification of motion drives to be fitted, others wanted CCD camera attachments and accompanying software. It was found that, while the US company could supply special orders, Thompson’s sales were suffering because of the costs and the relatively lengthy delivery times involved.
It was therefore decided some six years ago to establish manufacturing facilities in the UK. A factory was built on an industrial estate at Ebbw Vale in Gwent, South Wales, and the machines and equipment purchased to enable Thompson Ltd to carry out manufacturing and development of many of the components and systems themselves. This helped considerably to reduce costs and improve capability of meeting specific customer orders, and sales surged ahead. By 2000, Thompson Ltd was buying only 50 per cent by value of the parts and systems that it used from the USA.
● The company
Although Thompson had grown rapidly after it had established UK manufacturing facilities, sales turnover had flattened in recent years. Table 29.1 shows the profit/loss statement, and Table 29.2 the balance sheet for this period. Thompson is currently regarded as a poor performer within Murray, and finds it difficult to attract investment for the further growth in sales the company believes is possible. The organisation chart for Thompson is shown in Figure 29.1, and the main functions can briefly be explained as follows:
John Tulk has been with Thompson from the start. He has been successful in establishing the company as a force in the marketplace, and has led the sales initiatives ‘from the front’. In common with Murray Group policy, he is required to prepare and have approved an annual budget and to submit monthly reports of current and forecast financial performance. He is under increasing pressure to improve return on capital employed (ROCE) to the Group target of 15 per cent. ‘After our initial sales successes in the European and Middle Eastern markets, competition has become much more intense in recent years. Further progress depends on improvements in the level of service we provide to our customers while at the same time making substantial inroads into our cost base. It is apparent that our manufacturing operations have a major role to play in achieving these twin objectives.’
Reg Fox joined Thompson four years ago, and his responsibilities now range from the sales force to sales support. Sales support handles telephone and e-mail orders and enquiries, and processes contracts and orders from the sales force. Sales have led the development of Thompson, and take full ownership of processing customer orders from pricing, quoting delivery dates through manufacturing to delivery. In the last year, Reg has become increasingly concerned about Thompson performance. ‘We are getting a lot of complaints about late deliveries. My salespeople are wasting a lot of their time chasing orders through manufacturing, and are increasingly delivering urgent orders themselves. I know that opportunities are being missed; we are simply finding it difficult to keep our promises.’ Thompson holds about 18 per cent of the EMEA market for its range of products; the major player holds about 35 per cent and a number of smaller players each hold less than 10 per cent.
Peter Nuttall is responsible overall for Thompson’s budgets and period financial...