The objective of this paper is to discuss the case of Midas Shop, a company that offers repair services to clients, majority of whom are owners of cars and other automotive vehicles. Focusing on the positive and negative impacts of the company’s operations, the author would make recommendations as to how the company’s operations can be maintained and improved.
A typical Midas shop and the service center at a dealership such as Genoa Ford provide the same service, but are they really competitors? Each has adopted different strategies and tailored their operations to fit those strategies.
Midas is in the automotive repair business. Its strategy is to provide a narrow range of services at low cost. National advertising is used to develop wide geographical coverage. The company is not a full service repair shop, but concentrates on muffler repair, brakes, and shock absorbers. It is successful because it quickly delivers quality services at low cost. How are operations important to Midas?
Limited service requires a limited inventory that allows convenient storage close to where materials are needed to perform operations.
Multiple shops and limited service permit careful engineering of the necessary hand tools and work procedures. These special tools and work procedures make shop employees more efficient. Midas can apply the same tools and methods to a large number of shops, ensuring that initial engineering costs are easily covered.
Because employees have few variations in service, they learn how to perform these jobs more quickly.
Workers' skill levels and knowledge requirements focus on a limited area of service so they quickly become experts in a particular area.
As part of a Ford dealership, Genoa Ford's Service Center provides a full line of automotive repairs. In contrast to Midas, this service operation competes without advertising or national appeal. It also has a different operating strategy. In order to maintain the dealership, Genoa Ford must be able to satisfy a wide variety of customer needs. It offers transmission work, body work, engine repairs, and other tasks in addition to working on brakes, shocks, and mufflers as Midas does. Genoa Ford designs its operations to match its objectives.
The facility is adaptable to changing needs. For example, on one day, a single repair stall may be used to wash a new car, repair a door lock, fix an air conditioning leak, or tune an engine.
Genoa Ford has more tools than a specialist like Midas does because Genoa Ford offers a greater variety of jobs.
There is some job specialization among workers. All employees will not be able to do everything, but employees still need a wide range of skills because Genoa Ford does not have enough of one particular job to allow personnel to specialize. Cross-training is necessary.
The workers' skill levels and pay rates are higher than workers at Midas.
A significant inventory of many different parts is maintained. These parts are physically separated from the repair stalls and controlled by specialists in parts.
As a result of its strategy, Genoa Ford has higher costs and charges higher prices than Midas does for comparable work. When a car needs routine exhaust system work, it can be taken to a national chain such as Midas. Generalists, such as Genoa Ford, can complete more difficult jobs and repair work that is paid for by Ford as part of its new car warrantee program.
Discussions
When it comes to managing a set of business operations, it would be important to cover both the positive and negative side. If the focus is on the business’ survivability and growth, a strategy that emphasizes the minimization of the impact, if not the complete removal, of the weaknesses should be implemented. Based on how the case of Midas has been presented, it would be safe to say that the business’ position in its respective niche and industry is relatively stable so the focus should be more on growth than survivability.
For the positive impact of the company’s operations, one of the business’ edges is that it commands a high level of efficiency across its branches. Midas is in the automotive repair business and one of the highlights of its business model is its offering of a limited range of services to its customers. To specify, the services that it provide is only limited to the repair of brakes, shock absorbers, and mufflers. The advantage of this approach is that the company gets to be more efficient when it comes to the storage of tools; its employees also become efficient in doing their work as they do not have to deal with complex machineries just to get a single job done.
The effect of this kind of operation is a higher than usual customer turnover rate. Turnover rate pertains to how fast a business addresses the concerns of a customer, which in this case may be either one of the limited services mentioned earlier. Because Midas is essentially a service repair shop, it only generates revenues every time it successfully addresses a customer’s concern—i.e. repairs. The counterpart of this for companies operating in the manufacturing sector is inventory turnover—which measures “how quickly the inventory of a business is sold and moved” .
A higher customer turnover rate would therefore equate to a higher revenue generation rate. However, if one is going to look at the bottom line, the turnover rate would only be one of the factors that need to be checked. The revenue generated per turnover should also be assessed as these two combined would determine how profitable the company’s operations would be.
Another positive quality of Midas would be its low operating costs. Although no actual figures were given, the author of this paper has good reasons to believe that the operating costs of Midas would be lower compared to full-pledged repair shops. This is because there are only a limited number of tools and equipment that the company keeps; plus the fact that the storage needed to maintain those tools do not have to be expensively large.
Going on to the negative side of the company’s operations, it would be safe to say that the biggest downside to them would be the fact that the company’s earnings potential is extremely bottlenecked. If the presumption that suggests that the company has already managed to establish a sizeable and loyal customer base in the areas where its branches are located, then this means that now is the best time for the company to expand. Unfortunately, the company is not doing so because it has been focused too much on the minimization of operating expenses and maximization of efficiency—to the point that the management has already forgotten that maximization of earnings is all the more important.
Another negative impact of the company’s operations would be its employees have become detrained. They have only been proficient in doing minor automobile service repairs so far. When it is finally time to level up, the company may face some hiccups as the staff is currently not trained to conduct more complicated repair services.
So far, there are two main positive and negative impacts that were identified. Focusing on addressing the identified negative impacts, what the company could do is to save a portion of its earnings and use it as capital to finance an expansion program. The purpose of the expansion program is to address its bottlenecked earnings potential.
The goal for the expansion program is to enable the company to offer higher value products and services to its customers aside from the low value and limited services that it offers. While this may incur large upfront costs for the company, the investments should be worth it especially if the company’s existing customers patronize the new lineup of products and services being offered. Included in this proposed expansion program would be a comprehensive training program for employees, aimed at updating their knowledge on how to do more complex repair tasks.
The accommodation of tune-up services should have long been part of the company’s operations because it is still considered as a limited service low value offering. Tuning up services for both diesel and gasoline-fed engines do not require complex machineries, technical knowledge, and equipment . The main reason why the company should have started to adopt this service in their existing lineup is the fact that it offers an opportunity for the company to cater to a larger range of services. For starters, not all cars require repairs but all cars require tune-ups, even if they are running in good condition. Tune-up services is a part of a process called preventive maintenance service.
Input should be gathered from shop owners simply because the company has no other reliable source of feedback than their shop owners. Midas should treat its company as its partners. They should work together to know and of course report what parts of the operations are going smoothly and which ones need adjustment. A company’s ability to send and receive operational feedback may well be the most important skill .
The type of input that should be gathered should be organic feedback—one that is there all the time; measures a company’s communications strategy (especially the members’ ability to listen effectively and actively); that contributes to the development of the company’s performance, and one that can be used for learning . Learning is an important part for employees working in the automotive services industry. With continuous feedback, Midas should be able to expand continuously and successfully.
The processes and steps needed to launch this new program are in fact simple. It should follow the original expansion plan that was recommended earlier. First, the company should prepare for the expansion financially. It should save away a portion of its net income so that it would have something to use as capital to finance the training of the employees and the procurement of new tools and equipment. Knowing how tune-up services are performed, this should not cost a lot. A month’s worth of saving for capital would be enough to kick start this new program. The only real problem that the company has would be on the employees’ training.
Sure, there are training programs available out there but being able to perform a flawless tune-up procedure requires an adequate amount of experience. For example, there are cars that show signs that it needs to be tuned up but in reality, there are already parts inside the engine, transmission, or any mechanical component that needs repair and replacement—at the company’s current state, it is not equipped to handle automotive problems that have that level of complexity.
Opening Midas’ shops for tune-up services basically opens its doors for a whole lot of repair-related services as well. This is, in fact, why it is being recommended that if the company is going to embark on an expansion program (for its services); it should do it all at once so that the change management process would be more comprehensive and organization-wide.
A one by one approach would only be beneficial if the company has not solid customer base to speak of. However, because the company already has a customer base, it would be logical to go a little bit more aggressive. Either way, the only problem here for Midas would be how it is going to transition from being a limited service provider for automobile repairs to a full-pledged one.
References
Arthur, L. (2016). Difference between Turnover and Revenue. Chron.
Auto Tap. (2016). What's a Tune-Up Today. http://www.autotap.com/techlibrary/whats_a_tune-up_today.asp.
Dignen, B. (2014). Five reasons why feedback may be the most important skill. Cambridge University Press, http://www.cambridge.org/elt/blog/2014/03/five-reasons-feedback-may-important-skill/.
