Introduction
Continuous development and expansion are essential for the sake of an organization. The efficient the level of improvement, the higher will be the probability to sustain the position in this competitive world. Most of the companies throughout the world are now focusing on the same factor of improvement, because they are well-aware with the fact that continuous improvement is the only thing that can add four moons within their productivity and efficiency level (Hsiao et al. 2010).
Proper management of direct and indirect cost are some of the main line of things that associated with the long run productivity of an organization. It means that the higher and efficient the cost management criteria, the efficient will be the productivity of the company that can help the companies to manage their operations with complete effectiveness and efficiency. Due to increasing globalization and competitiveness, most of the companies throughout the world are now become resilient over the market conditions and the challenges pertaining to the same factor (Joong et al. 2008).
The main perspective of this assignment is also related to analyze the position of a company with the name of Ledd Computer Company (LCC). There are certain recommendations which have been proposed by Kyle Jackson, the CFO of the company to overcome on the major problems of the company, which needs to be re-analyzed accordingly. The assignment is divided into three main sections which are introduction, Analysis & Discussion and Conclusion. All of the relevant analysis and discussion will be done under the second heading that uses for the complete decision making factor.
Analysis & Discussion
According to the recommendation posted by Kyle Jackson, the CFO of the company. The company has recently change their design of PC Allowed to overcome on the overall manufacturing cost and loopholes of the company that may endanger their position in the market. According to the CFO, it is becoming more and more imperative for LCC to decrease its cost, and it is possible with their new designing and system. However, in the real term, it was not achieved as desired or required by the company (Knemeyer & Murphy 2004).
From the Exhibit-1 of the case study, it is clearly found that LCC is able to generate net revenue amounted to $ 1,500 Million in the year 2012, which was extremely high. It is also showing that the capability of the company in terms of increasing its sales is very positive and efficient, however there are certain loopholes that specifically associated with the positioning of the company that may endanger their position in the market. The direct cost to sales ratio of the company is 40% only, which is showing a perfect point from the viewpoint of the management as well as the shareholders. This particular analysis is showing that the company is highly efficient in terms of managing its direct cost. Most of the companies throughout the world are now having the problem to not to manage their direct cost efficiently. But, in the context of LCC, it is quite obvious and efficient from which they can easily manage their well-being in the market. Due to low cost to sales ratio of the company, the Gross Profit of the company is $ 900 Million, which is showing a 60% Gross Profit Margin (GPM), which is quite high and very efficient. Up till now, the recommendation of Kyle Jackson related to the designing of new system and management of cost is looking very suitable for the sake of the company through which they can take timely actions for their betterment. However, in the future analysis, this particular thing didn’t retain like the same.
After the Gross Profit, the next important thing found very efficient and suitable for the companies as well as the shareholders is the analysis of the Operating Profit and Operating Profit Margin (OPM). Theoretically, OPM is a ratio that uses to get an idea about the company, and its tendency to generate operating profit from their net sales (Lenny et al. 2007). This particular ratio is an important one from the viewpoint of the investor as far as taking their decisions, hence it is equally beneficial to find the relevant health of LCC. From the income statement analysis of the company, it is clearly found that the total operating expenses of the company has increased heavily in the same financial year, and it reaches higher than the gross profit of the entity. According to the income statement, it is found that the generated cost of Selling and General Expenses was amounted to $ 950 Million, which was too higher from the gross profit amounted to $ 900 Million. Considering the same factor, it is found that the operating profit moved to a level of operating loss due to its higher pertaining cost. The operating profit of the company was become – $ 50 Million, and showing that the operating profit margin (OPM) of the company reached on the level of -3.3%, which is very efficient from the viewpoint of the company. This particular analysis is clearly showing that the company is not doing a sensational job as far as managing their operating expenses that translated adversely over their end productivity. In short, it can be said that the recommendation of Kyle in this particular aspect of managing cost is not found suitable as far as managing the operational cost of the company. The company has to decrease its operational expense in order to have positive operating income and thus OPM.
After the Operating Profit, the next important thing found very efficient and suitable for the companies as well as the shareholders is the analysis of the Net Profit and Net Profit Margin (NPM). Theoretically, NPM is a ratio that uses to get an idea about the company, and its tendency to generate net profit from their net sales (Lai, Zhao & Wang 2007). This particular ratio is an important one from the viewpoint of the investor as far as taking their decisions, hence it is equally beneficial to find the relevant health of LCC. From the income statement analysis of the company, it is clearly found that the total operating expenses and financial charges of the company has increased heavily in the same financial year, and it reaches higher than the operating profit of the entity. According to the income statement, it is found that the generated cost of finance was amounted to $ 10 Million, which was too higher from the operating loss amounted to $ 50 Million. Considering the same factor, it is found that the operating loss moved to a level of net loss due to its higher pertaining cost. The net profit of the company was become – $ 60 Million, and showing that the operating profit margin (OPM) of the company reached on the level of -4.5%, which is very inefficient from the viewpoint of the company. This particular analysis is clearly showing that the company is not doing a sensational job as far as managing their operating expenses and financial cost that translated adversely over their end productivity. In short, it can be said that the recommendation of Kyle in this particular aspect of managing cost is not found suitable as far as managing the operational cost of the company. The company has to decrease its operational expense and finance cost in order to have positive operating income and thus NPM.
The next major problem or drawback of the company is related to their operational assets and their usability factor. The generated gross and net income of the company is located in a negative node, which is not an efficient sign from the viewpoint of the company through their current operational assets. The operational assets of the company is amounted to $ 1081.2 Million, which is extremely high, but still the amount of the generated net income of the company is located on a negative node, which is not at all efficient from the viewpoint of the company. The company is having high amount of assets, but still they are facing economic issues and problems as highlighted with their case study. There is a need to have some change in their business strategies and become more efficient and focused especially in the long run. This is the only way through which the company can increased their attentiveness and tamed their behavior as well. There is also recommendation required to change their strategies. It is recommended to the company to use 4Ps of marketing strategy that can help them to improve each of the process accordingly
Product Strategy
Inevitably, product is known as one of the most important things that have by an organization. It is one of the things that assist a company to compete with other organizations operating in the same line of business (Power, Sharafali & Bhakoo 2007). The efficient the product strategy, the higher will be the chance through which an organization can sustain their position in the market. It is imperative for the companies to have an efficient and highly organized product strategy through which they can sustain their competitive position in the market. The same is applied with LCC as well. It is recommended to the company to use ANALYZER Product Strategy in order to satisfy the needs of their customers. This particular strategy enables the company to have a strong look over the products and the underlying strategies used by their peers for their productivity, as this particular action will help them to secure a suitable place in this fast growing market.
Pricing Strategy
Inevitably, pricing is known as one of the most important things that have by an organization. It is one of the things that assist a company to compete with other organizations operating in the same line of business. The efficient the pricing strategy, the higher will be the chance through which an organization can sustain their position in the market. It is imperative for the companies to have an efficient and highly organized pricing strategy through which they can sustain their competitive position in the market. The same is applied with LCC as well. It is recommended to the company to use COMPETITIVE Pricing Strategy in order to satisfy the needs of their customers. This particular strategy enables the company to have a strong look over the pricing factor of the products and the underlying strategies used by their peers for their productivity, as this particular action will help them to secure a suitable place in this fast growing market(Power, Sharafali & Bhakoo 2007).
Place Strategy
Apart from product and pricing strategy, place strategy is also known as one of the most important things that have by an organization(Power, Sharafali&Bhakoo 2007). It is one of the things that assist a company to compete with other organizations operating in the same line of business. The efficient the place strategy, the higher will be the chance through which an organization can sustain their position in the market. It is imperative for the companies to have an efficient and highly organized place strategy through which they can sustain their competitive position in the market. The same is applied with LCC as well. It is recommended to the company to use OFFLINE Place Strategy in order to satisfy the needs of their customers. This particular strategy enables the company to have a strong look over the availability factor of the products and the underlying strategies used by their peers for their productivity, as this particular action will help them to secure a suitable place in this fast growing market.
Promotional Strategy
Promotional is known as one of the most important things that have by an organization. It is one of the things that assist a company to compete with other organizations operating in the same line of business. The efficient the promotional strategy, the higher will be the chance through which an organization can sustain their position in the market. It is imperative for the companies to have an efficient and highly organized promotional strategy through which they can sustain their competitive position in the market. The same is applied with LCC as well. It is recommended to the company to use PULL Promotional Strategy in order to satisfy the needs of their customers. This particular strategy enables the company to have a strong look over the products and the underlying strategies used by their peers for their productivity, as this particular action will help them to secure a suitable place in this fast growing market. It enables the company to increase the marketing factor of the company in a professional manner.
Conclusion
The main perspective of this assignment is also related to analyze the position of a company with the name of Ledd Computer Company (LCC). From this entire discussion and analysis, it is clearly found that the company has a great chance of gaining advantage in the given market. However, there are certain loopholes associated with the company that needs to be change completely. The same is applied on the scenario of LCC through which they can maximize their core potential in the market with proper effectiveness and zeal.
References
Hsiao, H., Kemp, R. G. M., Van der Vorst, J. G. A. J., & Omta, S. O. (2010). A classification of logistic outsourcing levels and their impact on service performance: Evidence from the food processing industry. International Journal of Production Economics, 124(1), 75-86.
Joong-Kun Cho, J., Ozment, J., & Sink, H. (2008). Logistics capability, logistics outsourcing and firm performance in an e-commerce market. International journal of physical distribution & logistics management, 38(5), 336-359.
Knemeyer, A. M., & Murphy, P. R. (2004). Evaluating the performance of third‐party logistics arrangements: a relationship marketing perspective. Journal of Supply Chain Management, 40(4), 35-51.
Lenny Koh, S. C., Demirbag, M., Bayraktar, E., Tatoglu, E., &Zaim, S. (2007). The impact of supply chain management practices on performance of SMEs. Industrial Management & Data Systems, 107(1), 103-124.
Lai, F., Zhao, X., & Wang, Q. (2007). Taxonomy of information technology strategy and its impact on the performance of third-party logistics (3PL) in China. International Journal of Production Research, 45(10), 2195-2218.
Power, D., Sharafali, M., &Bhakoo, V. (2007). Adding value through outsourcing: Contribution of 3PL services to customer performance. Management Research News, 30(3), 228-235.
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