Harrison Company Analysis, Capstone Project Example

Executive Summary

This report seek to identify the ethical and socially responsible challenges, the existing functional deficiencies like inefficient advertising and marketing strategies, financial constraints, logistical weaknesses, and level of employee morale as well as the impact of global trends that Harrison as a going-concern faces, and must be strategically addressed, in order to remain a viable entity for the next five years and beyond

Harrison’s financial position was found to be in great jeopardy and only effective strategies can restore  it to its former position of stability and strength, while at the same retaining its image as a socially company.Marketing strategies changes to maximize sales, store closures, sale of assets,distribution revisions, staff motivational efforts, and timely recruitment were among the variables identified for immediate to ensure the company regains its position of prominence.

Ethical and Social Responsibility Challenges

Harrison Company faces several ethical and social responsibility issues that require timely decisions, and these include;

1. Accusation former store manager that the company was buying inexpensive goods from a Honduran company whose employees were working in near slave like conditions.
2. Unethical means were being emp0loyed from the head office to keep out unions,
3. Charity donations exceeded $1m annually, while the company was losing money from its operations
4. Normal store maintenance was reduced due to financial constraints
5. Merchandise made in China were being sold discreetly by the company
6. Suppliers are being paid 30 days later than their contracts stipulated
7. 15% of the company profits were coming from only 20% of the stores, and
8. Stores were closed on Christmas, Thanksgiving and New Years Day’s , when greater volumes of sales could have been generated

The buying of inexpensive goods from the Honduran company that was using employee to work in near slave like conditions negatively impacted the company in terms of environmental sustainability, in that should the information be more widely advertised, the company could lose thousands of customers and millions of dollars in sales.

Harrison faces an ethical dilemma in terms of the donations being made to charity amounting to over a million dollars, while its profits for two consecutive years were less than that amount.

Should the company reduce or cancel these donations, its image in the community will become somewhat tarnished, especially among the base ball fans?

Three possible courses of actions should be considered to arrive at a win/win situation. Firstly, the company could consider cancelling all donations, or secondly, reduce the entire package by 50%, or thirdly, only retain the baseball contribution of $25,000 annually.

Cancelling all charities for financial reasons will restore the company to greater financial stability in the next financial period, but it reputation will become damaged at least in the short term, while reducing the charitable contribution by 50%, enable substantial increase in its profit level and still be seen in positive light by its stakeholders.

In terms of the third strategy, the company will be able to restore its financial position and still have the support of the community with the baseball players, but would have lost the other more expensive charity recipient, who may have to seek other more successful sponsors.

Embracing the action plan for the second strategy will enable a win/win position to be achieved, and this will lay the foundation for future marketing, advertising and distribution activities that can be pursued even using some of these stakeholders.

Synthesizing and Analyzing

Functional deficiency among Harrison operating department was cited as one of the main reasons for the company’s decline in profitability during the last three years.

In order to reverse the trend a marketing manager has to be recruited, the marketing budget raised incrementally until it reaches 5% of the annual revenue.

It was also desirable to change the marketing strategy mix to have 15 % online store sakes, 10 % for discounts, 15% for sponsorships, and 60 % dedicated to national advertisings.

Harrison  also hope  become a brand within the next five years, and as such, the company will begin designing all its old and new stores in the same manner, so that customers anywhere will begin to share the same shopping experience.

Finance

Presently, Harrison’s net income after tax is 0.2% of sales and this compares unfavorable with the 2.5% industry average.  The company can achieve revenues of $75m while incurring cost of goods valuing $40 m within the next five years, based on expert analytical intuition and past experience.

Currently the company is failing in terms of its acid test, current ratio, net working capital to sales, which all fall below1, while its inventory turnover stands impressively at 6.25 times

Acid Test = Current Assets-Inventory/Current Liabilities= 0.6

Net Working Capital to Sales = Current Assets –Current Liabilities/Sales= 0.6

Current Ratio = Accounts Receivables + Cash/Current Liabilities=0.6

Inventory Turnover = Sales/Inventory= 6.25times

The company is in a financially untenable position in terms of its cash flow, and as such should dispose of 50 % of its trucks, close 20% of its lowest profit making stores, and rent these facilities to other companies to restore liquidity in the operation.

Logistically, Harrison’s distribution system was found on analysis to be very inefficient, chaotic and poorly managed. What will be needed is a centralized distribution center that will utilize a company wise inventory system to ship goods base on demand management as well as usage patterns. This will be done in addition to the establishment of a distribution center in Canada and two more strategically located in the USA, to more efficiently service all rural locations.

The company also plans to recruit contractors with smaller capacities to service its rural locations on a need basis, so that at no time customers should be unable to have their needs met.

Identifying Industry and Global Trends

Harrison, because of its distribution network and high overall operational cost, will always be threatened by the rise in the price of oil which directly impacts on the cost of gasoline, as well as shipping cost from as far as China.

The company will also be affected by the increase in interest rates during recessionary periods, as it has to finance its products from various sources using banks that will always seek to maximize their profits.

Leadership and Group Dynamics

The leader of Harrison at this time in its operation has to communicate as clearly as possible to all employees that the responsibility for the success or failure of the company rest solely on its shoulders, but timely cooperation is expected from all internal customers.

Employees will be informed through the best communication channel, that strategies to sell specific assets of the company, the closure of a number of inefficiently operating stores, the recruitment of marketing experts, installation of new centers, and other timely changes, are all efforts to stabilize the company and enable it to return to its former glory days.

They will be told by the leader that from day one, change will be the only constant within the organization as it move forward competitively.

In terms of dealing with the board of directors, the leader will bring a participative style of leadership to the table, as well as s strong sense of accountability and responsibility.

Reasons for all strategic approaches will be forwarded for approval before implementation, and thus will be followed by the outcomes generate.

The leader will at all times require the confidence and support of the board in pursuit of all strategic objectives, and will exhibit excellent fiduciary responsibility at all times going forward.

Finally, with respect to morale- which seems at an all time low in the organization, based on the consultant’s report, the leader plan to implement an effective appraisal system as early as possible, to ensure greater numbers of employees are rewarded for their performance, as well as receive the necessary training to ensure they are fit for the jobs they are performing.

The leader will also conduct timely job evaluations across all departments, to complement the appraisal system, so that the company will be able to continually maximize the potential of its human resource assets, in pursuit of sustainability, efficiency and profitability.