Introduction:
This reports purpose is to give a clear indication of the external factors that have an effect on the sustainability and profitability of AB Electronics Scotland Ltd, while also making recommendations on measures to take inside the business to help increase the profitability and income of the company.
Key External Factors of AB Electronics Scotland Ltd:
Labor Market Skills Shortages:
According to managers of the company it can take “up to a year to recruit a qualified technician or maintenance engineer”, now this could be due to lack of advertisements due to their lack of presence on the internet, a shortage of engineers suitable in the trade or any number of reasons, a way around this problem would maybe be to advertise the company more or train internally. Because of the cutbacks on funding for AB Electronics Scotland the managers have also put a freeze on recruitment as they cannot afford to pay for any new personals wages and this cannot be fixed until the company makes profits again.
Internet and E-Commerce:
Having the company expand itself to the internet opens up limitless possibilities for not only the selling of products but for buying parts and hiring new staff as it allows for the capability to buy parts at cheaper prices and to sell its products to a greater amount of people as 40% of its output is already to the European market. An issue that the company has had, was that they were unable to get the sales figures due to IT problems, but with additional funding into their presence on the internet these would be easier to obtain.
Economic Factors:
The company has suffered quite severe cut backs on funding as the training budget has been halved from 100,000 to 50,000 and now the company is not bringing on any new staff due to a lack of money to pay the wages with. Another way that funding decreasing is apparent is by the fact that 35 production jobs have been lost and a production line being closed, showing that they no longer have the funds capable of sustaining the full company. With the need of new equipment and staff to improve and generate any income the company is incapable at this point to change its outcome.
Technological Changes:
AB Electronics Scotland claim to sell a “state of the art mini hifi system” that was commissioned two and a half years ago, but with technology ever changing these will be now out dated and with no mention of any new products being built the company is threatened to be left behind by other companies selling similar items. And with the decreasing number of production staff a new product might not arrive any time soon to help produce a profit. The fault finding equipment has also foregone its accurate life producing errors and misreading’s.
Environmental Factors:
The way that some of the chemicals used in the production process are not disposed of correctly it appears as “local press” question the way that it is treated after use causing management to worry about a meeting with a health and safety worker. This is bad as not only does it damage the environment and possibly destroy life, animals habitats etc. but it could also steer buyers away from the company due to a bad reputation which would hurt sales. Obviously to sort this problem waste should be dealt with correctly following laws even if it does cost more money.
Recommendations:
Efficiency Measures:
To improve the efficiency of the company possible measures that could be taken are:
Improving fault finding equipment to reduce possible faults with products so less money has to be spent to repair or replace them.
If the IT presence of the company improves this allows for the chance to save money buying items but is also capable of increasing selling as it opens up to a wider range of customers.
Outsourcing services to other companies can help reduce costs as they would then not have to pay for that persons complete salary and just have to pay a fraction of what it would be if it were a full employee.
Improved Customer Focus:
Complaints have increased 32% over the last two years. To improve the customer focus and possibly help increase sales, first the source of the complaints would need to be discovered within the company and address the problem fixing it. This could be anything from outdated equipment (work machinery or fault finding equipment) to employee mistake to even things out of their control ex. delivery, etc. Once the complaints have been discovered and sorted a better relationship with the customer can be built finding out what they want from the products and ways they think they can improve the service which could help.
Internal and External Training:
If training was done inside the company it would remove the need to waste the money and time searching for a replacement, so instead of it taking a year to fill a position it could take a matter of months which would help to improve profitability and also avoid the freeze on new recruitment making it a viable option.
While external training at the moment appears to be poorly advertised so will cost more time and money to find a suitable replacement. Ways around this is to possibly increase the wage to attract more people, advertise the position greater or train internally.
Changes to Organizational Structure:
The total work force of AB Electronics Scotland branch is 387, 22 of which are managers, now with only 8 different departments they seem to be in excess and with the (probable) largest salary this is a waste of funding and could be reduced while still keeping a working structure.
With the loss of 35 production jobs and closing of a production line it would be expected that some of the 22 production supervisors would be lost as well as there is less need for them, so this is also an area for waste.
As the number of complaints has risen 32% in two years the quality assurance and customer care departments could be inspected and if needed staff could/should be retrained or if totally required new staff hired.
Better Application of Information and Communication Technology:
If AB Electronics expand into the internet area of business it allows them to sell their products to a greater number of people greatly increasing the chance of increasing income and profitability as 40% of their exports already go to a European market.
It also allows them to advertise positions and other products a lot easier which would attract a lot more attention compared to their current methods making it easier to find replacement operators, technicians or managers.
The buying of parts for products will also decline in cost as they would be able to find the cheapest areas to buy from other than just buying parts locally which has the possibility of being more expensive also increasing profitability.
Conclusion:
In conclusion AB Electronics Scotland Ltd is a company that is in disrepair, it needs to start making a profit to improve, but the only way it can improve is if it starts to make a profit. So much is wrong with this company and it looks like it will make heavy losses soon so possibly the best course of action is to shut down this branch and to move elsewhere where it would be cheaper and easier to expand and sell.