This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
Honeywell Flour Mills Plc. was initially registered as Gateway Honeywell Flour Mills Limited. A subsequent conversion to a Public Liability Company in March 2008 led to its current name - Honeywell Flour Mills Plc.
Over the years HFM Plc has positioned itself as a market leader in flour milling, processing & packaging of flour and livestock feeds from wheat. The entry of the Company into the flour milling industry in Nigeria redefined the industry standards; as its high quality compelled an improvement in the quality of flour products by other players in the industry.
The Industry (see appendix 1.1)
BELOW IS TRANFOR MATION MODEL FOR COMPANY "A" HONEYWELL FLOUR MILLS PLC.
COMPANY "B" BEMIL NIGERIA LIMITED
BACKGROUND "see appendix 1.2"
TRANFORMATION MODEL FOR COMPANY "B" BEMIL SECURITIES,
COMPANY 'A' AND COMPANY 'B'
Low cost operation
On time delivery
Differences, derived consist of the following:
For Honeywell flour mills plc. There's Consistent quality as it's a very high volume process, on time delivery, low cost operation, less customization as the process varies as well as the volume. Delivery speed and, developmental speed is very significant considering the fast paced of the consumer markets, in taste and perception and when delivery is slow it's bad for business.
The difference for Bemil is evident in its top quality as they deliver highly valuable items, there is quick delivery speed, the process is always on time and is highly customized.
Similarities in process for both firms include the following:
There is volume flexibility and for Honeywell and this is obvious as the flour production can be decreased and constantly increased as well as they have the capacity and the same applies to Bemil and this is seen in the amount of cash they can convey at any given point in time, they are not low cost operation, hence that's stand as a barrier for market entry. They both have on time delivery, which significant for their various market segments or clients, there is variety in the process, Bemil provides other security services other than Cash in transit, and Honeywell does have diverse product portfolio.
Fig 1.4 CORPORATE STRATEGIES
From the above no similarities are observed in comparing both firms, differences observed are in all areas. For example:
A Bemil security focuses on customer intimacy and they achieved this by cultivating a lasting relationship with customers and striving to satisfy their unique needs in security. Other Organizations known for this strategy are (e.g. bespoke holiday agent Powder Byrne, Airborne Express, BUPA, etc.)
Honeywell plc. utilizes the product leadership strategy as they tend to dominate the market by continually offer the best/high quality as well as most innovative products in the flour milling industry.
According the above model (Porters generic strategy) to be successful, a company must focus relentlessly on one of the value disciplines in order to be the best in that area, whilst being at least industry average in the other two disciplines.
However, it would be a big mistake to base corporate strategy solely on this decision. New technologies and distribution concepts can change the bases of any cost leadership within a short time. Similarly, firms can lose distinction advantages quickly when competitors imitate product or service features. Never trust a model blindly, only because it proved worthwhile in the past or even in recent times.
CAPACITY PLANNING FOR HONEYWEL FLOUR MILLS PLC
Honeywell Flour Mills utilizes the expansionist strategy as they plans to embark on an aggressive strategy that will increase its capacity utilization to 100%, up from 80%, to achieve this, the firm is launching a new brand of pasta products as well as expanding existing pasta and noodles snacks plant, manufacture seasoning for noodles, install plant and silo tower at factory complex and exploring opportunities outside its domestic market.
However it should be noted that over supply can put downward pressure on price and as such the high demand for or the need for increase in capacity should be proportional to the market demand as an increase in capacity on the part of the organization would lead and increase on price of grains from the supplier for HFM.
For most organization the need for capacity expansion in inevitable not forgetting the implication of higher financial risk if market doesn't appreciate and more the risk of losing market share when there's boom or increase in demand.
A manager might decide that by expanding, the firm would gain preemptive marketing. Yes and no, yes because the expansionists strategy allows for the positive advantage of preemptive marketing for by making a large capacity expansion or announcing that one is imminent and in so doing the firm has preempt the expansion of other firms , as these firms must sacrifice some of their market share or risk burdening the industry with over capacity, however the preemptive firm must have the credibility to convince the competition that it will carry out its plans and must signal it plans before the competition can act.
However, in considering an expansion, a firm should consider how fast its industry is growing? Are you keeping up with it? Before expansion a firm should be cautious of its short-term liabilities outpacing the short- term assets as well as been cautious of mortgaging the firm's future. In good times expansion is excellent even for Honeywell, Yes.
As Suggested Strategy firm has to follow a plan that can enable them to sidestep the potential "traps" that can bring an entity into chaos, a new business to a tragic ending. But staying out of "traps" is not enough; you also need a strategy for success - not just a business plan, but a set of guidelines similar to a set of principles, could be off the books principle's that will help keep a business on its path to success. (Dr. E. Adams. 2001). Avoid the Perils of Expansion
BUFFER INVENTORY (HONEYWELL FLOUR MILLS PLC)
HFM Plc utilizes the buffer/safety stock inventory method as they use this to protect against the uncertainties of supply and demand, as well as unpredictable events such as poor delivery reliability or poor quality of a supplier's products. Safety stock or buffer inventory is any volume of inventory held on hand that is over and above that which is presently needed to meet demand, in reality it can be seen that the buffer safety stock inventory is best suited for Honeywell Flour Mill Plc having taken into account that it's a high volume process industry.
However, Safety stock is, in reality is a huge expense of doing business. To increase revenues and earnings, managers must carefully control all expenses, including safety stock. Hence, we strive to achieve our customer service goals with the least possible amount of buffer stock.
Managers must have in mind that a good forecast is what underpins an effective inventory management program. The better the projection of future demand of a product, the easier it will be to provide a high level of customer service while reducing your overall inventory investment. Correcting actual usage for lost sales opportunities is a significant part of the forecasting process. But to be potentially effective, these corrections must envisage, as accurately as possible, what would have been sold or used had the item continuously been in stock.
Having too many products stack in a warehouse can make a firm look less interesting to investors and possible customers. Very often a firm will offer significant discounts to customers if the inventory digits are high and sales are low. Furniture firms may offer inventory reduction sales in order to clear out their showrooms for newer merchandise and all this come at a premium price for every industry having excess inventory.
The problems associated with the buffer inventory cannot be overlooked as this plagues the firm on the long run, keeping high levels of finished products will increase the costs of the warehouse management Secondly, if the prices of the finished goods are expected to fall then the firm can get the capital loss. The buffer inventory can as well make some inventory obsolete when they're not quickly utilize or when there's decrease in demand, too much waste might come out of it in the production process, on a whole the buffer safety stock method of inventory in my opinion encourage waste which on the long and short run impacts on profitability hence the firm suffers.
How much safety stock does a firm require? How much do we need in stock? In doing this determining this, managers should take into account the below factors:
Plan markdowns, managers should learn to plan markdowns and this goes hand in hand with planning inventories. If you plan the date of the first seasonal markdown before the season even begins, you can plan the inventory you want to have at hand at that point in time
Plan dynamically. Managers should learn to make solid preseason planning, don't put it in a drawer never to be seen again. Use that plan as a dynamic tool to track the progress of the season. As each week goes by, and sales trends begin to develop, adjust future sales plans accordingly, and adjust inventory plans for those updated sales plans. If sales are exceeding plan, you want to be sure you have the inventory to keep the momentum going. Conversely, if sales are coming up short of plan, the sooner you modify and fine tune your inventory the less likely you are to end up with excess inventory that needs to be marked down at season's end. Ted Hurlbut (2008) avoiding Inventory problems.
PORTERS VALUE CHAIN
The value chain, although it's a powerful management tool in identify the source of competitive advantage by performing a chain of activities in a cost effective way, there has also been some potential weaknesses and limitations in using this porters this managerial tool
However useful it might be, potential weakness and limitations entails the fact that; constructing the value chain is not an easy process. Complex summation difficulties between a series of value-adding activities would be a potential problem to apply this framework, especially for small-sized organizations. There are various thorny problems involved in calculating a value for intermediate products, isolating key cost drivers, identifying linkages across activities, and computing supplier and customer margins (Hwang and Richard, 1999).
Significant limitation of the value chain is that it ignores the power of digitalization and information to maximize value for organizations. In recent years, with the advent of information technology, and the recognition that IT can add benefit for the customer while concurrently reducing the costs of producing the end product or service has revolutionized the role of technology and information in organizations, (Porter & Millar, 1985).
This stretches as far the five forces as power of information technology grows, all players in a market will have access to far more information. Thus, totally new business models will emerge in which even players from outside the industry are able to vastly change the basis of competition in a market. For example, the rise of electronic shopping malls, operated for instance by telecom operators or credit card organizations. Those who use the Five Forces Model and who base their thinking on today's industry structure would never see these changes coming in time. (Downes 2007) beyond porter. Apparently, the emergence of digital technologies has thrown nearly every industry into a new era of competition in which none of the old rules are valid.
The application of the physical value chain model to most organizations seems relatively slow and inefficient in such a rapidly changing environment. While more and more use of information component of any process advance faster than the physical counterpart. Especially in creating added value for customers. The main reason is the power of information and it's such that it provides opportunities for organizations to establish a virtual value chain in addition to any pre-existing physical value chains. Virtual value chain creates significance not only through a physical value chain involving the making of physical goods, but also with analyzing and utilizing information. Therefore, traditional value chain in recent information systems field may as well take information technology into consideration to meet the requirement of new economics.
Porter's style of planning is based on assumption and predictability or at least identifiable competitors and business partners, including customers. He also assumes business environments will tend to stay in place while you experiment on them. But these assumptions are no longer viable. The problem is that new forces in likes of information and digitalization, globalization, and deregulation are overwhelming in today's rapidly changing economy.
Summarily, Michael Porters models do not have the influence they used to have any more. New economic laws came up and other drivers stare to transform markets. Nevertheless, that does not mean that Porters theories became invalid. However, what we have to do, is to apply them with the awareness of their limitations in mind and to use them as a part of a larger framework of management tools, techniques and theories. However, this method is advisable for the application of every business model brand new or old, from Mr. Porter or from somebody else, and in every economy. (Dagmar, 2008) A Critique of the Critique of Porter
TOTAL QUALITY MANAGEMENT
The concept of TQM is fantastic: involve the people, examine their work flow and develop ways to improve the output, thus eliminating waste. By including staff and gathering input from everyone involved in a procedure, we are able to collectively examine the function (purpose) and flowchart the process (action taken). We are on the way to improve our quality. So what could possibly get in the way of our success? Brilliant!
However, TQM has its limitations, constraint to the organization as well as some shortfalls hence does organizations really need to go through the overall process of implanting TQM?
Time Consuming and Laborious
Designing a systematize TQM program necessitate the development of "teams" and the calamitous need of many meetings and this is where the problem begins. The idea of the flowcharting and streamlining process was to takeout steps and reduce time. Now time is spent meeting with other team captains, documenting progress and nursing performance. Team captains/members may have been assigned who may not be as committed to the TQM concept (and the investment made) as top management. Also, the team may change. People leave the firm after they've been involved in the process with the organization investing time etc. in their training.
Without Measurement, There Is No TQM
In implementing TQM it should be noted that it cannot be measure. Apparently, the most important, yet least understood, component of TQM is measurement. After all, TQM's chief innovators including Deming, Juran, Ishikawa, and Shewhart were all statisticians and apparently, the basic premise behind TQM is that all processes are not perfect and there is always a degree of variation.
A significant question is can manager and firms really measure the gains achieved with TQM program? Has the benefit exceeded the investment of time and money? Will the gains received be long-lasting, or is TQM simply the latest management rage and crave?
TQM Is Not Supported By Upper Management.
Apparently; executives confuse the means with the ends. It's meaningless to say "We've trained 1,200 employees in TQM." What give's should be the obvious effect this training has on a firm's performance
A Costly Investment
No question about it, TQM can be a high maintenance, costly program and at the end might lead to gross and unhealthy financial picture.
Too Much Leadership "see app 1.4"
Wise approach should be for firms to watch, they should pay attention and be observant. Managers as well in so doing can learn a lot about staffs and a great deal about the organization. Too often, managers are likely to get hooked in the responsibility and the objectives they must accomplish. Stop it! Get in touch with staffs and employees and be less optimistic to the new rage. Be more inspirational and supportive. Firms should endeavor to believe in their employees, their people and they will be able to inspire them to grow, produce and accomplish much more for your organization than you might have imagined
The balance score card
The balanced scorecard is a performance measurement tool developed in the year 1992 by Harvard Business School professor Robert S. Kaplan and management professional David P. Norton. it's a tool that enables managers Rather than compelling managers to choose between "hard" financial measures and "soft" operational measures-such as customer retention, product development cycle times, or employee satisfaction-they developed a method that would allow managers to consider both types of measures in a balanced way.
Using the balance score card is time consuming, top management spends a great amount of time and energy in gathering as wells as analyzing the respective data rather than on making decisions. Now and then, the costs of such a procedure may well outweigh developments in the firms performance. Hence, it is quite significant to plan to substantially cut down the number of measures existing in firms that are outside the scope of the Balanced Scorecard (Kaplan and Norton, 1992).
The Kaplan and Norton's Balanced Scorecard notion does not give enough guidelines regarding structure. However, the structure of the Balanced Scorecard can be mauled, in that the four perspectives have to be translated into the specific needs of individual companies (Johnson, 1998). Potential shortcomings for Honeywell might include, for example, that its wheat suppliers are not adequately taken into account or that the financial goals lose too much importance when competing with three or even more other perspectives, i.e. the customer and employees on a whole it doesn't entire gives a consistent picture. Taking a lot of time recording and observing data for the measures, overlooking the employee's acceptance, not considering supplier's contribution. Etc.
IN EVALUATING THE MIX OF CONCEPTS AND FRAMEWORKS SO FAR; on a whole, all these models; the value chain, capacity planning, balance score card, the buffers safety stock inventory method, and TQM, might all seem significant for firms to implement in their business process but the truth of it is, are they all relevant to a firm?
The expansionists strategy for capacity planning enable firm's to preempt the market which is a good pursuit as it does creates a platform for the firms to gain competitive edge and remain sustainable and alongside stand innovative by introducing new product line and firms must act on this before the completion can act.
TQM, is a not significant as most firm does not even understand the concept behind TQM, TQM does not happen in a day nor in a year in an organization, for an organization to identify with TQM, the concept must be instutionalised with the firm, TQM is too big an idea for most firms, TQM is a culture, hence firm's misunderstood what it's all about turning out to be a waste of time and money. In pursuing this, organization could lose it vision as it empathizes on too much leadership, its way too expansive and can turn out to be demotivating for employees. Executives do not entirely go well with it, not forgetting it's all based on perception and cannot be appropriately measured which in my concrete opinion does not makes a firm competitive or sustainable.
The Hidden Agenda behind TQM. "See app 1.3"
The Buffer Safety Stock is very significant for Honeywell should continually be put to good use because, if prices of raw material are definitely going Honeywell would stack up the warehouse, also is the risk of currency fluctuation, fluctuation in raw material (suppliers) as Honeywell do import its raw materials, e.g. wheat constitute 80% of the production of flour, for Honeywell price has been high over the last 3year as its determined in accordance with international pricing mechanism however, honey well will continue to monitor price trends on a daily basis in order to take advantage of favorable price movement for forward commitment. However, seeing its positive advantage firms should first carry out a concrete forecast.
Haven gone over the limitations of the value chain on whole, managers should be conscious of the fact that the value chain highlights internal analysis of a chain of business activities only and does ignore the influence and power of digitalization which firm s in today's business environment can effectively use to maximize value for the organizations. An application of the physical value chain model to most of organizations would be relatively slow and inefficient in today s fast paced business environment that's in a rapid state of flux. Hence organizations in, in utilizing the value chain should as well strive to gain far value beyond the physical value chain as the actual application on a whole is not entirely effect. Hence less emphasis should be placed on it and
also is the balance scorecard and it's a complete no no as it doesn't digest adequately the various measures that affects a business, The model's disregard for external competition and/or technological advance, which may introduce uncertainty in terms of risk, and which may threaten or invalidate the present strategy of an organization.
Conclusively, firms does not entirely needs to utilize the balance score and management should picture the firms beyond the physical value chain, expansionist strategy is fully supported by the needs and success of industry and the actual market, TQM is a waste of time and the buffer safety stock ever remain a positive strategy for firms producing in very high volumes and this must be corroborated with the aid of a bullish forecast on future trends, fluctuation or scarcity of raw materials and ultimately when there would be hike's in price or currency rates.
However, it is important to be aware of the limitations and potential problems as well as the possible benefits of any of these five strategies or approaches largely relies on successful implementation by senior managers hence they can then be competitive, innovative as well as remained sustainable.
Bemil. (2011). Bemil Securities. Available: http://www.bemilng.com/. Last accessed 11 March 2011.
"Inventory Types." Encyclopedia of Management. Ed. Marilyn M. Helms. Gale Cengage, 2006. eNotes.com. 2006. 15 Mar, 2011 <http://www.enotes.com/management-encyclopedia/
Stevenson, William J. Production/Operations Management. 8th ed. Boston: Irwin/McGraw-Hill, 2005
Nido Qubein . (2009). implementing total quality management. Available: http://www.personal-development.com/nido-qubein-articles/total-quality-management.htm. Last accessed 14 March 2011.
"Balanced Scorecard." Encyclopedia of Management. Ed. Marilyn M. Helms. Gale Cengage, 2006. eNotes.com. 2006. 15 Mar, 2011 <http://www.enotes.com/management-encyclopedia/
FBN CAPITAL. (2008). Honeywell Flour Mills FBN Capital Equity Research. Available: http://www.fbncapital.com/upload/Honeywell%20Analyst%20Presentation.pdf. Last accessed 14th march 2011.
Ted Turlbut. (2008). Avoiding Inventory Problems. Available: http://inventorymanagementtalk.blogspot.com/2008/08/inventory-problems-avoiding_12.html. Last accessed 16th march 2011.
Honeywell Flour Mills Limited. (2008). financial trend. Available: http://www.honeywellflour.com/investors/trends.php. Last accessed 12th march 2011
Â Paul Munser. (2008). A guide as to how and why we rollermill flour. Available: http://www.wessexmill.co.uk/acatalog/Flour_Milling.html. Last accessed 14th march 2011
2001 Dr. E. adams. (2001). Disadvantages of Business Expansion: The Economic Growth on Business. Avoid the Perils of Expansion. 8 (8), 6
Inventory control. (2008). Safety stock and effective inventory management. Available: http://inventorymanagementtalk.blogspot.com/2008/08/safety-stock-and-effective-inventory_17.html. Last accessed 14march 2011
Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press. New York
Rowe, Mason, Dickel, Mann, Mockler; Strategic Management: a methodological approach. 4th Edition, 1994. Addison-Wesley.
Dagmar Recklies. (2001). Beyond Porter - A Critique of the Critique of Porter. Available: http://themanager.org/strategy/beyondporter.htm. Last accessed 17th March.
By Rebecca Anwar, Ph.D.. (1996). what went wrong with TQM. Available: http://www.physiciansnews.com/business/1296.html. Last accessed 16th march 2011.