Eliminating redundancy at Lion using Business Intelligence Platform - Essay Example

?Introduction Kirini is a Japanese based brewery company which has been brewing beer since its inception in 1888. Lion Nathan Ltd in Australia is wholly owned by subsidiary of Kirin after the merger. According to information obtained from its official website, Lion is a leading beverage and food company with a portfolio that includes many of Australia and New Zealand’s favourite brands. It was formed in 2009 under the name ‘Lion Nathan National Foods,’ but the name later changed to Lion when Kirin Holdings Company Limited completed its purchase of Lion Nathan and merged the business with National Foods in 2009 and it has owned this business since 2007. These companies before and after the merger belonged to the national economies of their host countries. Information obtained from http://www.lionco.com/company/ (2012) posits to the effect that Lion employs close to 8,000 people across Australia and New Zealand and it boasts of a portfolio of market-leading, household-name brands in beer, spirits, wine, milk, fresh dairy foods, juice, cheese and soy beverages. The company has significantly contributed to the Australian and New Zealand economies. However, the problem emanates from the view that the merger acquisition by Kirin of Lion which is Australian based company may cause redundancy and problems in operation support services. As a result, the redundancy can lead to an increase in the operation costs if the problem is not fixed and this is likely to affect the company. If the problem not fix, explain why it will affect the company. Of notable concern is the factor that there are also competitors in the food and beverage industry where Lion operates and Heineken is the greatest competitor. In order to address the problem raised above, the initiative change is primarily concerned with reviewing the computer system used by the organisations before and after the merger to establish the changes required to turn around the fortunes of the organisation. In this case, it is proposed that when solving this problem, a business intelligence Platform (real time) can be used to reduce the operational costs after the merger so as to improve the organisation’s productivity in order to gain a competitive advantage over the other rival competitors in the same industry. BIP is a computer based support system used in the decision making process and is based on factual data. According to Gartner (2007), BIP is comprised of mainly three categories namely information delivery (workflow and collaboration) as well as analysis. All information about the operations of the organisation is gathered and computed in detail where it is established if there is any area that may need change to ensure effective operation of the organisation. However, these two organisations have been using different systems where the BIP model was alien to Lion Nathan before the merger. The issues raised above are very important and they are likely to affect the company if change is not done given that before the major, these two companies used different BI platforms which can pose a challenge to the merged company. In order to analyse the current performance of Lion, it will be imperative to carry out a financial analysis of the company in order to draw a comparison with its previous performance levels. Analysis of the current situation Lion is a company which operates in the food and beverages sector in Australia and it is a public company with various shareholders. The company is listed on the Australian stock exchange and all the data in the financial statements from 2009 to 2010 is quoted in Australian dollars. All the data used in the financial analysis for the company below has been retrieved from the company’s official website (http://www.lionco.com/2011/02/10/lion-nathan-national-foods-fy10-result/, 2010/11). The analysis of the organisation is mainly based on the following three important aspects namely expenses, revenue, net profit as well as return on investment for the three year period under survey. The financial analysis will also focus on the financial performance of one competitor Heineken in order to establish the differences between the operations of these two organisations. This comparative analysis will also help in suggesting the measures that can be implemented in order to improve the operations of the company in question. Below is a table showing financial results for lion for the period 2009 to 2010. Table 1 Financial Analysis of Lion Nathan 2009 2010 2011 Expenses $914,6m $1,234.8m $1.334.3m Revenue $1,217m $$1,584m $1,383 Net Profit $176 (6.9%) $597.7 (22.12%) $588 (4.7%) ROI 6.9% 7.3% 7.7% A critical analysis of Lion’s financial results from 2009 to 2011 shows that there have been some fluctuations in the company’s performance which can be attributed to different factors such as persistent global economic conditions which resulted in low consumer conditions as well as the company’s drive to merge its operations with Kirin. Due to factors such as hard economic conditions obtaining on the ground since 2007 shows that there has been a steady increase in the amount of expenses incurred by the company. There has been a steady increase in the value of expenses from $914,6 m in 2009 to $1,334.3m in 2011 which translates into meaning that an average of 5% increase in the amount of expenses was witnessed every year. This partly involved money used for marketing initiatives as well as operations in a bid to counter the negative aspects of economic hardships obtaining in the economy. Though there has been a steady increase in revenue generated in 2010 compared to 2009, it has been observed that in 2011, the company witnessed a slight decline of revenue. In 2011, the revenue declined by about 6.2 %. This is partly owed to changes witnessed as a result of the merger that took place in 2009. It can be noted that the operations of the company changed as a result of the changes that took place as a result of the restructuring exercise that took place in the organisation. As noted, some departments were not operating at their maximum potential which also amounted to redundancy. For instance, the marketing and operations departments were operating below capacity. The major problem was particularly the result of job cuts especially in these departments which are very crucial in the operations of the organisation. Another close look at the company’s performance in terms of its net profit shows that in 2010 there was a net profit increase of about 22.2% from about 6 % recorded during the previous year in 2009. However, there was a negative development in the company’s net profit in 2010. It dropped from $597.7 to $588 in 2010 which accounted for about a 4.7 % decline. This was partly due to a result of financial hardship as a result of the global economic crisis that affected most sectors of the economy. On the other hand, the organisation was not operating at full capacity as a result of the changes recently implemented in its structure. The beverages and food industry was somewhat unstable especially between 2009 and 2011. However, the situation in the organisation also compounded the predicament of Lion which faced challenges with regards to viability problems. In terms of returns on investment, it can be noted that Lion witnessed a steady increase of 6,9% and 7,3 %in 2009 and 2010 respectively. However, there was a negative development witnessed in 2011 when the statistics of returns on investment recorded a decline of about 7,7 %. This trend can be attributed to the aspect of the crisis characterizing the industry such as economic hardships as the consumers are tightening their budgets in face of other pressing needs. The beverages industry is also characterized by competition and this can be partly attributed to Lion’s negative performance during the period in question. However, there is need to compare the operations of Lion with another competitor in the same sector and the following section is going to focus on the financial analysis of Heineken. The table below shows an outline of the financial statements for Heineken from 2009 to 2011. All the figure are quoted in Euro. Financial Analysis of Heineken 2009 2010 2011 Expenses Eur14 521 EUR15,846 EUR16,233 Revenue EUR15,021 EUR16,101 EUR16,510 Net Profit EUR1,452 EUR1,447 EUR1,430 ROI 6.9% 4.6% 4.7% Though Heineken was also affected by the global economic crisis, its annual report shows that it has continued to operate steadily. As can be seen on the chart above, the pattern of expenses gradually increased as a result of the investment initiatives embarked by the company. However, it can be seen that there has also been a steady increase of revenue generated from 2009 to 2011. This can be attributed to carefully planned investment drive by the company. According to its annual report, the company anticipates to cut expenses through an organic reduction of the number of employees. On the other hand, HEINEKEN “expects to benefit from continued positive growth momentum in higher growth economies and from revenue enhancing initiatives in developed markets,” (Annual Report, 2012). The company expects to continue its strong performance and a six percent increase in costs which will be cushioned through the implementation of planned revenue growth initiatives. The company expects marketing and selling as a percentage of revenue to remain in line with the 2011’s 12,7 %. In 2011, Heineken introduced a EUR500 million cost saving program and it continues to focus on capital expenditure to approximately EUR1,2 billion which is expected to bring a good percentage of investment returns. Compared to Lion, Heineken’s financial statement shows that it has managed to operate steadily despite the financial crisis that characterised the market especially in 2009 and part of 2010. Heineken’s financial performance is stronger than Lion’s position in the marke. Besides the financial trends observed above, there are also other quantitative trends which are worth mentioning. Out of about 8 000 employees, it can be noted that these are have been satisfied with their work despite the organisation’s shortcomings during the recent past years. However, some quotas of the workforce are not content with their work. The customers are also satisfied with the products offered though there has been a negative trend which needs the attention of responsible authorities in the organisation. Compared to its competitors, it can be noted that more needs to be done with regards to improvement of its operations. The general conclusion is that the negative trend recorded in the financial performance of the organisation needs to be rectified before it goes out of hand. It reflects that something is not in order and this negative trend can be attributed to the forces of acquisition of the company as well as the external factors such as the global economic crisis. In order to improve productivity as well as competitiveness of the organisation, redundancy must be eliminated. Porter’s five forces analysis According to an article entitled ‘Five competitive forces -Porter,’ which was obtained online, this model is used as a strategy to establish the extent to which an industry is attractive in the face of different forces. As such, the chart below depicts the external forces that impacts on the organisation. Entry of competitors Though the beverages industry in Australia is comprised of established players, other competitors can still penetrate it. Treat- Lion should put measures that are meant to bring a competitive advantage to its operations. Threat of substitute The products offered by Lion Nathan can easily be substituted which makes the condition less favorable for the company. There are various wine and beer brands in Australia which make it a probable threat to products offered by lion Nathan. Treat- Continual product development must be implemented by Lion. Bargaining Powers Of Buyers The spending capacities of the consumers have been partially affected by the financial crisis obtaining on the ground given that they are now spending little on alcohol beverages. Treat- The pricing regime must be reviewed constantly to meet the needs of the customers. Bargaining powers of suppliers Due to the changes in the economic sector, the suppliers are likely to increase the prices of their products which is likely to affect the operations of Lions. Treat- the needs of the suppliers should be taken into consideration. Rivalry among the existing players - competition exists in this particular field where it can be noted that the existence of established brands such as Heineken cannot be ignored. Treat- it is important to adopt a cost advantage strategy or to opt for uniqueness as a way of gaining a competitive advantage. Source http://www.12manage.com/methods_porter_five_forces.html A close analysis of the beverages industry using Porter’s analysis shows that there are certainly many factors which cannot be ignored as they are likely to pose a threat to the operations of Lion Nathan. For instance, it has been observed that the market is free and open to new entrants and this can be a challenge to Lion given that competition for the same customers will increase. Another threat to the company is the existence of substitutes where it can be observed that there are plenty of wine and beer beverages that exist in the market. The issue of substitutes if proper planning is not taken into consideration can be a major threat the viability of the organisation which is already facing other viability problems. The bargaining powers of buyers also have role to play in the operations of the organisation. Consumer spending has been shrinking as a result of the economic crisis obtaining on the ground during the period under review. The trend shown by the level of spending by the consumers is not favorable to Lion. On the other hand, it can also be noted that the bargaining powers of the suppliers is also likely to pose a threat to Lion as they are likely to increase the price of the raw materials supplied as a result of the changing economic factors existing in the industry. This will increase the operating costs which also entails that the organisation is likely to face pressing operational costs. Finally, rivalry among existing players is a reality in this particular case. Competition is always a threat in the operation of any industry and a holistic approach has to be taken when dealing with this particular issue. Change initiative overview Following the initiative to merge the company in 2009, it has been observed that its financial performance has slightly decreased given that some sectors of the organisation have been made redundant. Cording to the company’s official website, the organisation now boasts of a workforce of about 8000 after factoring reduction caused by employment cuts as a result of the merger exercise that was undertaken. During the period of the financial crisis, the organisation also suffered a decline in revenue as well as profits which went down by about 7.2% and 4.4 % respectively. These can be attributed to the fact that due to redundancy as a result of the merger exercise, the other departments which were affected by the exercise ended up being less productive which contributed to the predicament currently faced by Lion. As such, in order to mitigate the negative impacts of this predicament, it is imperative for the organisation to adopt a new computer based system, a business intelligence platform (real time) which can be used to reduce the operating costs after the merger in a bid to improve productivity in the organisation so as to be in a better position to gain a competitive advantage. Change initiative analysis The financial analysis of Lion which primarily focused on aspects such as expenses, revenue, net profit as well as return on investment showed that the organisation is slightly lagging behind some of the main competitors in the industry. For instance, Lion witnessed a 7.7 % decline in return on investment as a result of a combination of factors highlighted above. However, it can be noted that the situation can still be controlled since it has not completely gone out of hand. Compare to its rival competitor, it can be seen that Lion fared poorly and there is need for it to improve its operations. Indeed, there is need for improvement in the operations of the organisation but its profit margins still show that it is still a profitable organisation which only needs some form of attention before the situation goes out of hand. There is need for Lion to strategically position itself so that it is able to race against the competitive forces existing in the market. In order to rectify the situation likely caused by redundancy in the form of job cuts as a result of the merger exercise, there are certain measures that can be taken so as to be in a position to turn around the fortunes of the company. The human resources in the form of the employees are the major resources which are required to turn around the situation in this given company. The average net profit ratio for Lion is around $590 million compared to more than $700m for other competitors like Heineken. There is need for effective management of the human resources so that their efforts are pulled towards the same direction in order to enhance the productivity of the company. As noted, this change initiative in the company which was meant to reduce the expenses of the company resulted in the reduction of productivity as a result of redundancy that ensued after the exercise. Therefore, the best strategy that has been proposed in order to improve productivity is related to business intelligence platform. Basically, this change initiative can only be made possible by the availability of a dedicated and committed workforce under leadership of an effective management team. Apart from the human resources required to improve the operations of the company, there is also nee for the correct soft ware known as business intelligence platform. As discussed above, BIP (real time) can reduce the costs after the merger and productivity is likely to be improved which can be a source of competitive advantage over the other competitors. The other resources required are related to computer based technology which requires the expertise of people with the knowledge of using the technology. Apart from the software required for this program, the other resources required include some capital to finance the project. An estimated value of about $500 000 can be set aside for this project given that this initiative is not something totally new but an exercise to improve the operations of an already functional organisation. However, there are likely to be uncertainties that can be encountered such as resistance to change as well as lack of knowledge among the people who are supposed to implement the initiative. People in an organisation always fear new change as it is likely to bring about changes to their usual operations. In some cases the employees may not be comfortable with these changes. Upgrading the system is often seen as a time consuming initiative which can be seen as a barrier with regards to implementation of the new change initiative. However, measures such as employee involvement can be implemented in order to mitigate these barriers to change. There are certain benefits likely to be derived from implementing this new initiative in the organisation. Productivity is likely to improve given that efficiency in the daily operations of the organisation will have improved which can certainly appeal to the interests of customers as well as investors. Below is a chart showing barriers to success as well as measures that can be taken. Barriers to success Measures that can be taken Lack of technical expertise Promote learning in the organisation Resistance to change Promote knowledge creation and sharing among all members of the organisation Limited financial resources The process has to be spread over a period of time. Ethical analysis The chart below shows the ethical concerns of the organisation. Ethical theory Implication to the stakeholders Consequence Improved performance of the organisation Duties Employees are aware of their duties Virtue Harmony in the organisation Basically, business ethics refers to the values, principles and standards that operate within business and these attempt to make a distinction between something that is morally good from bad (Rossouw 2004). In this case, focus is on the application of ethics to business as well as the implications on the people likely to be affected. There is need therefore to ensure that business does not negatively impact on the interests of the stakeholders. The change initiative in this case does not bring any serious ethical issue to the organisation since it is primarily concerned with improving productivity which can benefit all stakeholders involved. The consequences theory of ethics is closely related to the stakeholder approach to business ethics and this is an analytical way of observing and explaining how different constituencies are affected and affect business (Bowie & Duska, 1991, as cited in Weiss, 1994). Thus, this theory is mainly concerned with the ethical consideration that businesses are expected to act in the best interests of the stakeholders involved while at the same time upholding the principle of their moral rights. In this case, the stakeholders are likely to benefit as a result of improved performance of the organisation in the event of successful implementation of the change initiative which is a positive consequence. Mutual understanding among the stakeholders is likely to be promoted which can help the organisation to gain a competitive advantage in its operations. In theory, truthfulness and being honest are basic tenets that shape the operations of business. According to the duty theory, every member of the organisation is obliged to play a critical role in improving the overall performance of the organisation which is good for all the stakeholders. On the other hand, the virtue ethics can be seen as good as they are meant to improve the operations of the organisation as a whole. Virtually, the whole organisation will benefit upon successful implementation of the change initiative which will be an added advantage to all stakeholders. Building support For any change initiative to be a success, it has to gain the support of various stakeholders likely to be affected by it (Werner, 2003). There are internal as well as external forces that are likely to impact on any change initiative hence concerted efforts have to be taken in order to counter these influences. In order to build or gain support of the people in a bid to successfully implement a change initiative, it is imperative to involve the ideas of all the stakeholders likely to be affected by the change initiative. The views of the employees have to be taken into consideration so that they will share the same vision and goals for the proposed change which will be beneficial to the organisation in the long run. As sense of belonging to the organisation is likely to be created if they are involved in the decision making process. A change initiative without the support of the stakeholders is likely to face resistance from them particularly the employees. There are also external factors that can impact on any effort to implement a change initiative. The customers as well as suppliers and other stakeholders ought to be consulted if an organisation is intending to implement new changes in its operations as a way of attempting to gain their support. If all the stakeholders are consulted, there are less chances for them to resist change since they will share the same vision of the change initiative with the organisation. Open communication channels ought to be established so as to get feedback from the suppliers with regards to their needs as well as their expectations. Information regarding the customers can be obtained from point of sales where the representatives will interact directly with the customers in a bid to get information pertaining to their views and interests. Compliance with rules and regulations obtaining in the country is another form of building support for the change initiative. Below is a PEST diagram showing the external factors that can affect the change initiative at Lion. Political -Compliance with political forces in the country is likely to attract support for the change initiative Economic -Reasonable prices for the products offered are likely to attract more buyers. Social -norms and values of the stakeholders ought to be given due consideration so as to be able to build support with the customers. Technological -use of communication technology such as the internet is likely to attract the support of stakeholders. Implementation Once the change initiative has been approved and gained the moral support of all the stakeholders, there will be need for implementing it. The manager will take a leading role in implementing the change initiative with the support of the line managers as well as other line managers who are directly responsible for the operations of various departments. There is need for the senior management to delegate responsibilities so that each person is aware of the role he or she is supposed to play. Approximately 20 people are required to implement the change initiative. However, the project needs to be sponsored hence there are also some financial resources required in order to successfully implement the change initiative. At Least $500 000 is required in order to carry out the initiative. This money will be required to train the staff to use the new system as well as to purchase the require software. The timeline for the initiative is expected to be twelve months. However, challenges that may be encountered are related to lack of technical expertise by the people directly responsible for implementing the change initiative. In order to deal with resistance to change, training and development of staff are crucial (Wener, 2007). The problem may be forced to discontinue as a result of limited financial resources. The contingency plans for this are related to implementing fundraising initiatives so that there is no shortage of money to sponsor the initiative. Key success factor The key success factor is related to increased productivity of the company. The problem highlighted is related to redundancy as a result of the merger initiative which resulted in the organisation being less productive. Due to redundancy, other departments are performing below capacity hence increased productivity is the major key success factor. Productivity can only be achieved if effective and efficient means of production are implemented hence this is the key measure of establishing the extent to which the change initiative is a success. Another success factor may be related to improved product design which is likely to appeal to the interests of many customers. Metrics The metrics to be monitored to ensure that implementation is on track and that the desired outcomes are being achieved include improved business performance which can be measured through improved productivity which is the desired outcome. Improved access to data is another measurable metric which is a desired outcome of the project. Information to measure if the metrics are successful can be obtained from the customers as well as the employees and other stakeholders. Getting feedback from stakeholders is one good way of measuring success of the initiative. In actual fact, success of the change initiative can be measured through direct observation of organisational performance. This can be done through observing if there has been a positive change in performance for the same period compared to the previous year. To ensure that the project is on track, it is important to get feedback from the stakeholders as well as analyzing periodic reports of the organisation and financial audits. Surveys of customers are also important as they are likely to provide good feedback to the management to establish if the change initiative is on track. Financial audits can be done every three months while performance of the employees has to be monitored on a daily basis to ensure that the change initiative is on track. The technical staff should conduct a quality check to see if the BIP system is operating efficiently after every six months. The key decision points can only be implemented by the management if there have been some shortcomings of the initiative witnessed. Bibliography An introduction to biomedical ethics (N.D). Retrieved from http://www.medindia.net/education/familymedicine/biomedical-ethics-theories.htm Annual Report (2011). Report of the executive board. Retrieved from http://www.annualreport.heineken.com/report-of-the-executive-board/outlook-2012.html Business dictionary (N.D). Retrieved from http://www.businessdictionary.com/definition/redundancy.html Gartner (23 April, 2007), Business Platform capability matrix. 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Descriptions of Ethical Theories and Principles[online] Retrieved from http://www.bio.davidson.edu/people/kabernd/Indep/carainbow/Theories.htm Robbins, S. P. (2009). Organizational Behavior (13th ed.). Saddle River, NJ: Person Prentice Hall. Rossouw D. (2004). Business Ethics: 3rd Edition. Oxford. Cape Town. Oxford University Press. UK Essays (2012), Heineken beer market. Retrieved from http://www.ukessays.com/essays/business/heineken-beer-market.php Weiss J. W. ( 1994). Business ethics: A managerial, stakeholder approach. California. International Thompson Publishing. Werner et al (2003). Organisational behaviour. Pretoria. Van Shaik Publishers. Appendix 1- Time line (2012) Jan 1 – Jan 15 the conversations that need to happen prior to designing the systems. Jan 15 –Jan 30 HR meeting Jan 30 –Feb 15 Corporate approval Feb 15 –Feb 29 Discussion with stakeholders Feb 29 –March 30 Preliminary design of the system March 30 –May 30 Implementation May 30 –July 30 Testing July 30 –December 31 Monitoring NB Training and development of IT personnel is a constant process which runs concurrently with other stages mentioned above. Task 1 Task 2 Task 3 Task 4 Task 5 Task 6 Task 7 Task 8 Task 9 Read More