QC: An Analysis Of The Operating Performance
Introduction
Through the information presented, the performance of Quick connections was very impressive during its first fifty years where it was a pioneer in the development, design, as well as manufacturing of screws and connectors for highly technical devices. We can hence say that with a market share of 75%, Quick Connections which we shall in this analysis refer to as simply QC was effectively the market leader in its field. The scenario is however overturned by a change in the competitive environment in the late 1990s and this leads to the market share of QC nosediving to an all time low of 25%. There is hence a real need for the management to react to the deteriorating fortunes of QC. This calls for a turn around. In this text, I will discuss the sales, cost as well as price of each specific product as well as each products contribution to sales in terms of profit. Lastly, I will analyze the relationship between sales and supportive employment.
QC: an analysis of the operating performance
A look at the financial information presented for QC shows an improvement in the sales value of screws from 2008 all the way to 2010. For 2008, we have a total sales value of screws standing at 25500 and then 26300 and 30100 for 2009 and 2010 respectively. This figures are for the aggregate performance of the screws. Individual products also paint a similar picture will all the screw divisions including television, computers medical units reporting an increment in the sales value. However, the automotive unit increases by 6% from 15000 to stand at 16000 for the years 2008 and 2009 respectively. However, for 2010, the sales for screws in the automotive unit fall by 3.75% to stand at 15400 from 26300 in 2009.
A look at the sales of connectors paint a similar picture. For the television unit sales is largely stagnant for the year 2008 and 2009. they then decline top stand at 12000 in 2010. Just like the television unit, the computers unit sales decreases in 2010 after registering an increase in the years 2008
and 2009. the other units including medical and automotive divisions for connectors display increases in profitability for the year 2009 and 2010.
With regard to costs, there is a sustained increase in the same from the year 2008 all the way to 2009 standing at 69500, 79550 and 85725 respectively. This is with regard however to the total costs. For individual products we have the costs of screws falling in the year 2009 to stand at 16800 from 18200 in 2008. They however increase to a new high of 23155 in the forecast for the year 2010. For connectors the costs are decreasing thought the years i.e 51300, 60500 and 62570 for the years 2008,2009 and 2010 respectively. The total costs for the two products seem to follow the costs for connectors. They show a decreasing trend from 2008 all the way to 2010 to stand at 85725 in 2010. For 2008 and 2009, they stand at 69500 and 795550 respectively.
With regard to the pricing for each specific product, the margin shows the aggregate prices of the screws falling through the three years. In 2008, we have the margin standing at 29% followed by 26 % in 2009 and lastly 23% in the year 2010. hence the trend can be said to show decreasing aggregate prices for screws. With regard to the connectors, the prices also follow the same trend i.e they decrease over time as shown by the forecast margins to stand at 23% in the year 2010 down from 30% and 25% in the year 2008 and 2009 respectively. The total pricing shown by the total margin also indicate an identical trend where prices are falling with margins standing at 30%, 25% and 23% for the years 2008, 2009 and 2010 respectively.
We can also effectively use the margins to help us understand each products contribution to sales in terms of profit. Connectors have the highest contribution to sales with margins of 30%, 25% and 23% for the years 2008, 2009 and 2010 respectively. However, for 2010, we have the connectors and screws having identical margins. For 2009, it is good to note that the margin forecast is higher for screws as compared to connectors. The total sales for connectors are highest standing at 22200,19750 and 18930 for the years 2008, 2009 and 2010 respectively. This are relatively high as compared to those of screws which stand at 7300, 6800 and 6945 for the years 2008, 2009 and 2010 respectively.
A look at the head count reveals that for direct labor, we have 2080, 2400 and 2500 for the year 2008.2009 and 2010 respectively. The figure for indirect labor stands at 320, 350 and 400 for the years 2008, 2009 and 2010 respectively. Lastly we have a total head count of 2400, 2750 and 2900 for the three years starting from 2008. In my opinion, I would say that the sales level of QC cannot justify the high number of employees. According to Panneerselvam (2006), most firms end up accruing huge expenses supporting an unsustainable workforce and in the long run, this poses cash flow problems. McCain (2000) seems to support this view by saying that though there are many ways to turn around failing companies, the trend in the last few decades point out the problem to be high a high level of expenses that cannot be justified by the sales. With this he proposes that the best way to deal with such a scenario is to effect massive layoffs to reduce costs. Hence with that in mind, it might be beneficial to layoff a few employees as one way to redeem QC. Grant (2006) also notes that this has been one of the techniques used by many turn around gurus including Jack Belch who effected massive layoffs at general electric and eventually saw the company regain its profitability.
Conclusion
it is important to note that QC was basically a first mover in its first 50 years of existence and hence it enjoyed all the advantages of a first mover and hence the turn around efforts have a high probability of paying off. Mark Fortune could use an array of strategies to ensure that QC regains its market share in the light of the prevailing competition.
References
Grant, R.M. (2006). Contemporary strategy analysis. Wiley-Blackwell
McCain, P. (2000). Strategy & Business Planning of Privately Held Companies. Trafford Publishing
Panneerselvam, R. (2006). Production and Operations Management. PHI Learning Pvt. Ltd
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