From what perspective perspective are you analyzing the case? A. Strategic Management / Business Policy Whereas, the process of analyzing, decision making, and implementing strategic actions raises good questions including but not limited to the following: 1. Why do some entity succeed and others fail? 2. Why some firms are higher performers than others? 3. What information is needed in the strategic planning process?
B. Top Management Committee Committee Whereas, the top management is responsible for identifying deeprooted problems and giving solutions for them. Also, they make decisions for the whole company and raises good questions including but not limited to the following: 1. How do competing values and beliefs by the top management affect strategic decision making? 2. What skills and capabilities are needed by the top management to implement a strategy effectively?
What is/are the: A. Major Problem There is no strategic plan. They don’t know where they want to go and where they should be.
B. Secondary Problems A. Production / Manufacturing 30% waste factor in production To reprocess or not the waste? Low finished goods and raw materials inventory
B. Marketing / Distribution They don’t have any forecast West Coast distributors act like customers instead of employees Not competitive when it comes to market shares in the industry Few salesmen and distributors
C. Financial Low turnover of accounts receivables Not very liquid in terms of cash and accounts receivables Very liberal credit terms Poor financial ratios (e.g. return on equity, return on assets, debt/equity ratio, etc.)
What is/are the objectives of the top management committee?
To develop a strategic plan for the company. To characterize the Ajax Company as highly customer oriented. To maintain current sales volume To achieve growth through acquisition.
What are: A. Facts of the case Ajax is professionally managed, i.e. active operational management is provided by other than shareholders. The company is a single-plant manufacturer of special wiring serving many markets. Ajax still has a good credit position but 75% of their accounts receivables are now on 90 days and that’s hurting their cash. Matching Empire’s 20% trade discount is probably necessary, but it does hurt especially when the company is giving such liberal credit terms. The company’s before tax profit on sales is 4%, while the industry average is over 8%. Ajax’s before tax return on equity is 7.7%; before tax return on assets is 3%; debt/equity ratio is presently 1.5 12% of the sales volume is coming from the West Coast distributors. The company’s top fifty customers account for 80% of their sales. Ajax Company have the best delivery time in the industry; a quality producers; have a bunch of really very good people working for them; good community neighbors; got some equipment suited for their production. Ajax has a market share of 2.9% of the total sales.
The Company fields a sales force of 14 direct salesmen as well as sell to four distributors on the West Coast. Of the Company’s 700 active customers, the top 35 direct customers account for 50% of their sales. Company profits have grown from 1% before taxes five years ago to about 4% currently. The Company is operating at capacity with present mix. Bill Smith, Joe Thompson and Tom Rogers make up the executive committee. There are 30 companies in the industry. The top four companies (Empire, Second Best, Inc., WTH & Co., and P & F, Inc.) account for 70% of the total sales. Sales are made by both direct factory salesmen and by distributor salesmen,
B. Your assumptions The top management committee were not on the same track regarding where they should be heading and so they collide with each other. The top management is just contented with the reports submitted to them and they thought that they don’t need a strategic plan for them to express the ownership dreams and visualize successful results. The top management just focus on their department or division and not on the overall company which is very vital in an organization. Overproduction causes consumption of raw materials that otherwise could be used on actually demanded products. It also causes inadequate use of personnel, plus product and material accumulation in the production floor that difficult the manufacturing process and inventory. Since there is no production schedule, lack of synchronization among all these production elements (Materials, Tools, Persons), during process or sourcing causes delays on production and idle personnel and machinery. Employing just few salesmen and distributors would not increase the sales volume in a way the top management is expecting it to be. The manager could not determine pricing strategies because he doesn’t have any forecast which led to a low gross/net profit margin ratio.
Poor management performance as well as poor budgeting can be indicated by the poor financial ratios of Ajax Company. Strategic planning is very vital for an organization. It has a domino effect in all aspects of the firm. Since Ajax Company, doesn’t have a plan, the production may open bigger problems which has a greater impact in the finance, distribution, marketing, etc. and vice versa.
Alternative Solutions to the Major Problem ALTERNATIVE Making a Tactical and Operational Planning
Formalizing a Strategic Learning Agenda
ADVANTAGE/S help management find inefficiencies in its operations allow companies to benefit from the input of its employees management can take the necessary steps to make corrections in a shorter period of time able to analyze the effect of its operations on profit dissects a company's financial position, identifies weaknesses and develops ways to increase profits
can get top management and senior staffs to plunge into new situations can stimulate the perspective and creativity in decision-making
DISADVANTAGE/S - time consuming with regards to developmental process - can cause a slowdown in a firm's operations if the plan is extensive - possibly lead to a decrease in profits
can overly constrains managerial discretion in a dynamic environment greater chance of conflict between individual 4|Page
Improvising a Strategic Plan
structures exploration to involve more people at multiplelevels and in smaller groups involves and engages the management with the "industry" and its trends
learners - decision-making takes more time
focus is placed on the important things Identifies strategic goals and strategic intent provides a road map to show where the company is going and how to get there poor performing areas can be identified and eliminated able to set more realistic objectives that are demanding, yet attainable.
costly to perform the process is very complex low rate of successful implementation.
Best Alternative; Why?
IMPROVISING A STRATEGIC PLAN is the best alternative because:
Strategic planning is critical to business success. It moves a business forward to the intended destination. It evolves over time in response to changing circumstances. It is the company’s road map to achieving competitive advantage.
It is the company’s game plan for how to please customers and how to improve financial performance. It helps the various work units within an organization to align themselves with common goals.
Proposals for Ajax Company
1. SWOT Analysis for Ajax STRENGTHS -
The top management are risk-taker The plant manager run the plant effectively Good equipment that are ideally suited in their operation Good community neighbours Good relationship with employees Quality producers Best delivery time in the industry Professionally managed Offers complete product mix within the market segment and competes nationally Good credit position
Characterize Ajax as highly customer-oriented Develop a strategic plan to succeed Employees training Use of marketing or promotional techniques to boost the business
Thirty percent waste factor in production Don’t have any forecast Low finished goods and raw materials inventory Very liberal credit terms 75 % of the accounts receivable are on 90 days Poor financial ratios
West Coast distributors act like customers instead of employees Competitors operating within the market segment Fortuitous events (e.g. natural calamities) Price increase of raw materials
2. Strategy Formulation a. Vision, Mission and Philosophy of Ajax VISION
The Ajax Company will kindle its employees to be the best they can be. We will engross in sustainable practices and anticipate the needs of our customers. We will maximize return to the investment while still maintaining quality in our products. MISSION
The Ajax Company strive to be a high performance company that attracts customers and exceeds their expectations, provides an enriching, fulfilling and rewarding environment for employees, values long-term relationships with clients and distributors, serves and supports the community and achieves solid financial performance. PHILOSOPHY
We at Ajax Company believe that we must put our customers first and strive to secure their loyalty through top quality service and we shall value our employees and seek to help them achieve their full potential. b. Goals / Objectives of Ajax
To increase revenue as well as the profit and to reduce cost To satisfy, delight and nourish the customers To grow the business operation To increase efficiency as a way to increase productivity To support and foster the community To improve people skills and discipline To increase the quality of the products c. Action Plan Activity / Program
Analyze the Company’s internal and external environment. - SWOT Analysis - Industry Analysis - PEST Analysis - Competitor analysis
Timetable (After Top Management’s Meeting) Start Completi on January December 2014 2014
Identify Ajax Company’s vision mission and philosophy.
Develop specific strategies and allocate resources to close the gap and achieve its desired state.
Top manageme nt
January 2015 January 2016 January 2016 January 2018
December 2015 December 2016 December 2017 December 2018
All departments Marketing
Review of Strategic Plan Implementation of Strategy Evaluate the strategies implemented and adjust as necessary.
VIII. Contingency Plan A. If the company could not still compete with the top firms, having a huge impact on the organization’s success, Ajax’s company should prioritize this contingency plan with the following systematic process: 1. Assess its competitors and market. It involves performing a situation analysis, self-evaluation, and competitor analysis—both internal and external, and both micro-environmental and macroenvironmental. When assessing competitors, consider determining what makes a competitor attractive to its customers and what your company can learn from that competitor's success. Also, consider what your potential customer needs. 2. Set goals and strategies based on the company's competitive position. The short- and long-term objectives are set. The objectives can cover a variety of different areas, from production targets to how to reach out to potential new customers. These objectives should include completion dates. 3. Implementation Implementation plans then detail how the objectives are to be achieved. Implementing a strategy involves organizing, resourcing, and employing change management procedures. This may require organizational changes, such as creating new units, merging existing ones or even switching from a geographical structure to a functional one or vice versa. Additionally, implementation may
require significant budget shifts, impacting human resources and capital expenditure. B. If the cost of the product increases dramatically, the company should make an incremental analysis and make decisions based from it whether it should manufacture a product in-house or purchasing it from an external supplier. C. In case of economic threats in the company, top management should decide which capabilities are vital to the business and protect them.