Vershire Company was a diversified packaging industry organized with several divisions focused on different product lines. One of these is the Aluminum Can Division, which by far is one of the largest manufacturers of aluminum beverage cans in the United States. The company has a decentralized culture, with the division general managers exercising considerable autonomy in decision-making. Under a general manager were two line managers responsible for production and marketing functions. Over the years, the Aluminum Can Division had built plants scattered throughout the country. Each plant is responsible to serve a geographical area, both for large and small-scale customers. The industry is very competitive, as each manufacturer employs the same technology and everyone was viewed by customers to have the same product quality as anyone in the industry. Thus, customers can readily shift from one supplier to another in cases that delivery schedules and product qualities were not met. Vershire employs a long-term budgetary control system. Corporate sales budgets are prepared both in a top-down and bottom-up approach. These sales budgets are then translated to sales target per production plants and became the basis of target profits for each plant. Upon the end of the period, managers are then evaluated based on these target profits, even when budgeted sales are not met. Also, other performance measures are at place that is inconsistent and do not derived meaningful results. Although Vershire has been successful especially in the Aluminum Can division, the changing environment and industry conditions may result to necessary changes to company policies and procedures.
How can Vershire maintain its profitability and current position in the industry? How can the company delegate responsibilities to appropriate personnel to best serve the interest of both the company and the welfare of its people?
In examining a company, one should know first what the company intends to achieve. In this way, it can be evaluated if the company’s actions and decisions were in line to achieving its objectives. Thus, the group’s analysis begins with what Vershire is currently doing, assess its relevance in attaining the long-term goals of Vershire and consider their appropriateness to existing industry conditions. Focus will be given in reviewing the present budgetary system and performance evaluation methods employed by the company for its managers. In performing this, a BCG matrix will be utilized to determine the current industry position of Vershire, identify the suitable strategy and decide on actions that will support such strategy. In addition, advantages and disadvantages of the budget control and performance evaluation schemes on hand will be recognized. To aid in reinforcing the suitable strategy identified, a Porter’s Five Forces Model will also be used.
Just like any other profit-oriented organization, Vershire’s objectives were to boost its profitability and increase the returns derived by its shareholders. Particularly for the Aluminum Can Division, growth in sales has been increasing beyond the general industry growth rate. This signifies that Vershire is reaching the end of the Star Quadrant in the BCG matrix and will enter the Cash Cow pace in the years to come. It will be expected that sales growth of the company will start to stabilize within the industry average, as growth beyond what the industry experiences is not sustainable given that major competitors are present and existing technology do not give any competitive advantage to anyone. Vershire will be experiencing slower growth with considerable market share in the beverage container production.
Porter’s Five Forces Model
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