Analysis of Superior Manufacturing
Table of Contents
Introduction The objective of this report is to provide Mr. Paul Harvey, president with the detailed reasoning for the decisions recommended and also to figure out which products are losing money. As the company is operating in an oligopoly and has somewhat medium market share, setting our own prices is not an option. The giant Samra announces the prices for the products annually, and the other eight companies in the industry follow the price.
Problem
The organization underwent management change in early 2004. The company lost $690,000 (Refer to appendix 1) in that year, which resulted in a low morale of the employees. They have lost faith in the management and have low motivation level. So, a decision has to be made regarding the production of three products i.e. 101, 102 and 103. Recently the giant in the industry Samra decided to lower the selling price for the product 101 and a final decision has to be made, if the organization should lower the selling price or not?
Key Success Factors Looking at the share of industry sales rate, for product 101 its 12%, for 102 its 8% and for 103 its 10%. The company has to increase its market share to be able to generate positive income. The second most important aspect is costs. As all the products are manufactured in separate factories and they operate below capacity, it’s hard to control the costs especially the fixed costs. Even though all the factories are horizontally integrated with shared production process facilities, it doesn’t help keeping the costs in check. The employees seem to be disappointed with the new management and have a low morale. They are not exactly motivated to try harder to make a positive impact. Operating in an oligopoly, where prices are controlled by another firm, Superior has no control over the selling prices so, the company should focus on keeping costs minimum and increasing their industry sales rate. There is no compensation and reward system to judge
Introduction The objective of this report is to provide Mr. Paul Harvey, president with the detailed reasoning for the decisions recommended and also to figure out which products are losing money. As the company is operating in an oligopoly and has somewhat medium market share, setting our own prices is not an option. The giant Samra announces the prices for the products annually, and the other eight companies in the industry follow the price.
Problem
The organization underwent management change in early 2004. The company lost $690,000 (Refer to appendix 1) in that year, which resulted in a low morale of the employees. They have lost faith in the management and have low motivation level. So, a decision has to be made regarding the production of three products i.e. 101, 102 and 103. Recently the giant in the industry Samra decided to lower the selling price for the product 101 and a final decision has to be made, if the organization should lower the selling price or not?
Key Success Factors Looking at the share of industry sales rate, for product 101 its 12%, for 102 its 8% and for 103 its 10%. The company has to increase its market share to be able to generate positive income. The second most important aspect is costs. As all the products are manufactured in separate factories and they operate below capacity, it’s hard to control the costs especially the fixed costs. Even though all the factories are horizontally integrated with shared production process facilities, it doesn’t help keeping the costs in check. The employees seem to be disappointed with the new management and have a low morale. They are not exactly motivated to try harder to make a positive impact. Operating in an oligopoly, where prices are controlled by another firm, Superior has no control over the selling prices so, the company should focus on keeping costs minimum and increasing their industry sales rate. There is no compensation and reward system to judge