Executive Summary
This report aims at analyzing the options available to ASX with the view to come up with a plan of action that could not only maintain the profitability of the company but could also help the company to preserve its core values owing to which ASX is considered to be the best in the industry for what it does.ASX, in the present situation is experiencing multiple problems in relation to profitability, strategic management and cultural aspects. The purpose of this report is not to merely chalk out a cost cutting strategic plan but to also streamline the management process on a whole in a broader prospective. ASX that was brought into existence by Gavin Andrews is now being run by his son Stephen Andrews. No marketing strategies seem to work in the favor of the company thus leading to a consistently falling performance of the company in the market while losing the most of its business to its competitors. Moreover the strategic planning and management of the company also needs a revamp in its structure and execution criteria based on which new implications shall be accomplished in order to generate a win-win situation for the company. The understanding of the present situation of the company leads to the critical assessment of the areas such as:
Effective and innovative profit maximization strategies
Increasing profitability through mergers & acquisition
Also, it has been made note of that the founder of the business of ASX, Gavin Andrews, always believed in having huge cash reserves to serve any unplanned financial need of the company such as mergers or acquisitions. Like father, like son, so did Stephen Andrews believed in. During the attempt of enhancing the profitability of the company, practicing a mass layoff was being considered as the most effective and easily practicable option while overlooking the cost of straying away from the core values of the company. Therefore, innovative business decision making needs to be resorted to in order to enhance the profitability of the company and also protect the employees from being laid off which not only can adversely affect the reputation of the company but also hurt the loyalties of the employees in association with the company.
Introduction
The present report wishes to explore the various options that are available to ASX in order to find a solution for its drastically falling profits and market position. Various new marketing strategies including aggressive promotions and drastic price reductions adopted by the company have been of no avail to the company while leaving it in the lurch. In such scenario most of the concerned officials of the company except few could not think of anything better than opting for a mass lay off plan to be implemented by the company to immediately avail the outcome of reduced costs to the company. The numerous brainstorming sessions between the officials of various cadres in the company could not lead them to a better solution apart from resorting to mass layoffs. However, there are many other options available to the company when it comes to cutting sots without reducing the staff of the organization. As has been noticed among various other organizations who have executed a mass layoff, it is proven that the benefits that are expected to arise subsequent to the execution of a layoff might not be reaped immediately. Rather it might take a good time of around 12 to 18 months to be able to see the actual cost reduction. Consequently, the following sections provide an insight into the options which can be considered for the purpose of cost reduction and profit maximization while not executing a mass layoff plan.
Effective and innovative profit maximization and cost cutting strategies
Companies tend to require hard facts but creativity and innovation are often based on intuition. American manager’s over-dependence on analytic thought and quantitative analysis was a principal cause for the loss of its worldwide pre-eminence (Stamm, 2003). Every organization during its period of existence arrives at one such point of time where, external factors start affecting the business considerably. In such times decisions considering only the internal factors of the organization do not suffice in order to enable the business to remain in the competitive place that it previously used to be. This is when innovative decision making comes into picture. McKaskill (2010, p. 55) echoes with this statement while saying “Innovation, whether it is in product, process or business concept, enables the firm to step away from the pack and secure a greater level of control over the business outcomes”. The development of a global knowledge economy has broadened the scope of options available at the disposal of the companies during the times of difficulties (reduced market share, decreased profitability, increased costs of operations etc.).
Innovative decision making necessitates a certain change in the thought process of the organization and also motivates the organization to follow new approaches towards solving the strategic problems concerning the organization. Change creates opportunity, but only for those who recognize and seize it. Growth through innovation reinvigorates a company (Christopher, 1998).
Contrary to the traditional approach of reducing costs that involved mass layoffs, the contemporary approaches to reduce costs include steps such as a temporary pay cut for the entire staff right from top to bottom level. This was what exactly Ryan, Vice President of Marketing and Strategy at ASX suggested instead of going for a layoff. As, in his opinion, it was hard to justify the huge bank reserves while putting forth the decision of a mass layoff. This decision shall not only reduce the cost to the company with immediate effect but also restore the faith of its employees in the company for not leaving them in sway during the period of recession. This shall also reap some long term qualitative benefits for the company in addition to meeting the immediate needs of the company.
Increasing profitability through mergers and acquisitions
The founder of the business of ASX believed firmly in the strength of acquisitions and mergers owing which the company always had huge cash reserves to support any of its decision with regards to mergers of acquisitions. McKaskill (2010, p. 6) is of the opinion that “Often acquisitions are used to underpin the growth. Acquisitions can bring new products, new customers, experienced staff and new competitive advantages”.
However, it is also noted in the previous times that not all the acquisition strategies went successful owing to the lack of integration in the acquisition strategies while being executed. The acquisition strategies when resorted to, need to be carefully planned while keeping in mind, all the relevant details of the immediate needs of the company. Reaffirming this thought is the opinion of McKaskill (2010, p. 111) “However, most acquisitions prove to be highly disruptive due to problems of integration. Without a detailed plan for integration and experienced personnel to handle the risks associated with it, the benefits sought through an acquisition are unlikely to be achieved”. Therefore it is very essential that ASX while executing an acquisition strategy shall provide sufficient training and development to all the relevant staff that play an instrumental role in the successful execution of the acquisition strategy.
A considerable risk factor arising out of acquisition activities is the senior executives who pose widespread difficulty while seeking the right kind of acquisition that exactly fits the needs of the company. Since, ASX already has huge cash reserves to support any merger or acquisition decision taken by the management of the company, it would be wise on the part of the management to make the best use of the resources by reaching at the most desirable acquisition deal for the company which not only broadens the company’s scope of activities but also ensures as less cost as possible during the process of executing the acquisition strategy.
Conclusion
Leaders who exploit the new environment by seizing opportunities for growth will redefine the industrial landscape for both their personal and our world's betterment (Christopher, 1998). Hence it is very much advisable to Stephen Andrews, that he adopts the contemporary decision making models which involve extensive use of innovative methods to find solutions to the problems relating to the cost and profitability issues of the company. While there is generally agreement on the components of innovation (i.e. creativity and implementation), there is often disagreement on what deserves the title ‘innovation (Stamm, 2003). Therefore a careful assessment of what falls within the purview of meaningful innovation in the best interest of the company is inevitable. The sources such as financial and the parties such as employees, suppliers, customers and dealers that need immediate attention during the process of innovation shall be kept a track of well in advance so as to avoid any miscalculations at the time of execution of strategic decisions.
Stephen, while doing so shall not only protect his company from straying away from its core values but also shall build a long term relationship with its employees and customers as a company that does not leave its associates in the stagger. There are many new employees who have recently joined the company while considering ASX over its competitors due to its projection of the core values followed at the company as an essential part of its work culture. Such employees wish to see themselves prosper along with the growth of the company. A mass layoff not only shall ruin the expectations of such employees but also creates mistrust in the market about the company among its customers, dealers and suppliers.
Moreover, considering a mass layoff also shall not be able to make the expected cost cuttings available to the company within a short span of time. Whereas, the innovative decision making strategies such as partial sale of non profitable operations or parts of the company, temporary pay cuts and slash in the benefits to the employees shall not only retain the strength of the company in tact but also reduce the cost structures and increase the profit volumes with the immediate effect of the decisions taken in this regard.
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