End of Year Case Study Test – Model answer
A) i)
ii)
B) i)
Non Financial motivators are incentives introduced by businesses that are non
monetary rewards. These normally take the form of Job enlargement, Job
enrichment, job rotation and fringe benefits (cars, holidays, lunches). They
increase an employees motivation as they meet there self actualization needs
(allowing an employee to reach there full potential) as per Maslow’s research.
Quality control is the systematic process of ensuring that the product meets the
consumer’s expectations. There are various methods businesses use to ensure the
quality of there product is sufficient; these include inspection, correction and
prevention. All these steps play an important part in ensuring the product meets
what is expected from the consumer.
Sales
Cost of Goods sold
Gross Profit
Expenses
Depreciation
Net Profit
32million
19
13
2
3
8 million
ii) Net Profit/Sales = Net profit Margin
8/32 = 25%
iii) If MPP introduce the new packaging product, there profit margin will increase
from 20-25%. This is a significant improvement and would justify the spending on
the new capital equipment. However they will need to consider other industry
factors before making a firm decision. This would include consumer demand for
environmentally friendly packaging and competitor products and pricing.
C)
MPP will need to consider many marketing factors before launching there new
environmentally friendly packing on the market. They will need to consider there
marketing mix very carefully and this would focus particularly on product
pricing, quality and promotion.
MPP are launching a new environmentally friendly product into the food
packaging market and because of this they will need to ensure there product is of
the highest quality possible. This will mean a direct increase in cost as they will
have to introduce new quality control methods to ensure the product meets the
quality standards required of food packaging, any drop in quality or suspicion
that this product doesn’t meet acceptable standards would cause significant
damage to MPP’s brand image and will directly impact on the sales of the new
packaging product.
MPP will also need to consider there pricing strategy carefully, traditionally
companies need to use penetration pricing when launching a new product as they
want to ensure there product will sell. However due to MPP launching a new
environmentally friendly food packaging product, they may be able to command a
price premium from consumers as this product will be considered to be of a
higher quality and will not harm the environment. Consumers generally
understand that they must pay a premium for a product that is sustainable and
doesn’t harm they environment. This combined with the cost of new machinery
and quality control methods will allow MPP to charge a premium and make a
higher profit.
There are other significant advantages of MPP producing an environmentally
friendly product, they can use this directly in the promotion of there product not
only to make consumers aware of there new packaging but also to provide a USP
(unique selling point) over competitors products. Because MPP sell B2B
(Business two Business) the traditional forms of promotion are likely to be
ineffective so they will need to use trade magazines. Trade fairs and email
newsletters to ensure all food manufacturers are aware of this new product and
the significant benefits it has over other lower priced packaging products on the
market.
The Final factor for MPP to consider is the impact this new product will have on
its existing product range. There is a possibility sales could drop as a result and
the consumer’s paradigm for quality in food packaging may increase to the new
high standards therefore making these existing products redundant. MPP should
target there new product to the top end of the market and target there other
packaging products at the lower and middle end of the market ensuring that all
there products have specific consumers and there brand remains prominent in the
food packaging industry.
The Recommended strategy for MPP is to launch the product but they will need to
ensure that there consumers are well aware of the reasons behind the new pricing
strategy which will only be possible through effective promotion in the
appropriate channels.
D)
MPP management need to make the decision as to whether they should introduce
the same working conditions and benefits in all of there factories, the
implementation of these conditions is dependent on many factors which should be
considered carefully before any decision is made.
Change is an ever present factor in the business environment and this can often
be very troublesome for staff as it often means a change of job focus, an increase
in internal controls and in some cases a reduction in hours or staff. The
management need to consider the change carefully and make sure they fully
educate all staff of the reasons behind it, this will avoid the discontent that can
quickly spread In the business from employees that feel as though they have been
treated harshly or feel as though the advantage they once had working at MPP
has been diminished through the implementation of the same working conditions.
However this can also be considered a positive for MPP as the staff at the
factories where the working conditions are inferior will be motivated to work
harder as MPP has acknowledged there concerns and improved the environment
that they work in. It is well know that a happy workforce is a productive work
force. This also aligns with motivation theorists Maslow and Herzberg who both
agree that staff who feel a part of decisions are more likely to be motivated to
work for an organization, and Herzberg clearly states that if working conditions
are not at a suitable level such is the case in some MPP factories then this will
lead to dissatisfaction and a decrease in motivation for those employees.
The idea of ‘equality’ is very difficult for MPP, because it can be argued that they
are doing nothing wrong and operating within the legal constraints of the
countries that they work in and the management would have made this decision to
ensure there product pricing meets the demand of the consumers and to get the
lower cost benefits of working within these environments. If MPP where to
improve the working conditions across the board it would come with a significant
cost that would not only be felt by the business but also by the consumer, this
could lead to a drop in sales and ultimately a drop in profit. And would therefore
be counter productive for them, the other consideration that needs to be made is
could it actually be achieved different countries have different standards of living,
legal constraints and working regulations. It is not that easy to impose one
countries working conditions on a separate country as other businesses within
that country will then be forced to follow suit as employees would start to make
complaints to there management. Also what wage would MPP set across the
countries with different standards of living it would be very difficult to estimate
what is fair and equal? On the other had the MPP’s international reputation is
likely to improve as they would be seen as a caring company who is not trying to
exploit third world countries to maximize profits. This could cause an increase in
the sales of the products as consumers are concerned with how the business they
are purchasing from is treating there staff and the environment.