MGT301- Spring 2013

Winner! Winner! Chicken Dinner!

Posted on by spr1312tkulawiak

starbucks_vs_mcdonaldsCorporate America is full of big successful companies who reward their investors nicely and have a winning management strategy. There are two companies that are consistently making progress, growing, and paying dividends. They go by the name of McDonald’s and Starbucks. Both of these companies success could be attributed to their management strategy.

As of late one of their management focuses is to keep their push on international expansion. Both companies have a great global presence and China remains a strong point for them. Starbucks recently opened 500 new stores in China, bringing the total to 1500 in the country. McDonald’s is currently working on diversifying their menus in top countries such as China.

Hiring great leadership and accountability are also two strategies that are strong in both companies. Starbucks company founder Howard Schultz continues to come up with innovative products to expands the company’s product portfolio. An example of trying to retain top talent and hold managers accountable was in late 2012 when McDonald’s let go of former head of US operations Jan Fields, as the companies earning were disappointing.

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Another strategy that is seen in both companies is the constant flow of product diversification. McDonald’s continues to broaden its product portfolio by offering high quality coffee and healthy drinks. They offer these products in their traditional restaurants and their cafes. Also, Starbucks founder Howard Schultz continues to introduce different products.

Year in and year out, McDonald’s and Starbucks are the most social companies in the world in the restaurant business. Recently it was said that Starbucks lost its position to McDonald’s as the most social company. The main reason was that in late 2012, McDonald’s put up a campaign of what goes down in behind the scenes and it also opened up to any questions from the public. Because of this McDonald’s social reputation and audience has been on the rise ever since.

As we can see, management strategy plays a big role in both of these companies as both them continue to grow and show profit. New product innovation is huge for both of these companies. McDonald’s rolled out the McCafe in order to compete with store like Starbucks and Dunkin Donuts. In my opinion, this was a great success. I have many friends that actually prefer McDonald’s coffee to Starbucks and Dunkin Donuts. The day I found that out, I was in utter shock, as I did not think people would be going to McDonald’s for their morning coffee over companies such as Starbucks and Dunkin, where coffee is their specialty.starbucks

The question that comes into play is do McDonald’s and Starbucks have what it takes to keep up in their industries, continue to introduce a wide range of products, and produce at such a high level? In my opinion, there is no doubt that both of these companies will continue to succeed on the same as they are both industry leaders. What are your thoughts on this subject?

 

Refrences

http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-and-mcdonalds-winning-strategy/

http://www.forbes.com/sites/haydnshaughnessy/2013/02/21/how-mcdonalds-toppled-starbucks-from-the-social-top-spot/

http://www.marketwatch.com/story/4-strategies-for-mcdonalds-management-2012-11-21

 

Amtrak Alert!

Posted on by spr1321rdickey

AMTRAK LOGOAmtrak service is disrupted due to a different transportation service. Since I have relied on Amtrak for about 4 years now, I would be worried if I lived in the New York/Boston area. While Amtrak is more of a long distance passenger service for commuters, many still rely on the service on a weekly basis. Now, because of a collision between two Metro trains in the New York/Boston area, Amtrak service through out this route is limited for an unknown amount of time. Amtrak offers transportation to areas that many other public transportation does not. Therefore, this collision has created a conflict for Amtrak that is currently out of the company’s control at this time.

Through reading Business Week’s article, “Connecticut Commuter Crash With 700 Passengers Curbs Amtrak (2),” readers are able to see that the reasoning of this crash remains unknown. While the service disruption of train transportation was of course not caused by Amtrak, the demand of their customers may stray beyond the halt of the rail line. Since the investigators of this situation are still deciding the reason for this crash, many customers may be worried that this rail line is an unsafe one to travel on. While Amtrak offers alternate routes, their service alert page mentions that those customers who feel uncomfortable to use the services are available for a refund. Therefore, the lack of demand for Amtrak goes beyond the disruption of their services. Is Amtrak under a threat due to safety of their customers?

Focusing on how the collision affected Amtrak as a company required me to think about the bottleneck in project management situations, as the term was even mentioned in the article! The Metro train accident served as a bottleneck in Amtrak being able to operate between two different locations. As discussed in class, when there is a bottleneck situation, there is a backup in the process of creating a product or continuing a service. In the case of the Metro train collision, Amtrak is currently not able to operate between New York and New Haven. Therefore, not only is the business affected financially, continuous customers of Amtrak are required to reroute their trips and may find a new means of train service. While the situation was out of Amtrak’s control, this bottleneck brings Amtrak’s quantity and efficiency to a lower level. While the train company and its customers have already been greatly affected, the article also mentions that investigations similar to this train accident take several months to come to a close. Do you think Amtrak will be affected until investigation is over? Will customers be hesitant to take this route through Amtrak until investigations are over?

As mentioned earlier, more information on this collision and its affect on Amtrak can be found here.

Best Buy Questions Whether New Management Strategy Can Steer the Company Back on Track

Posted on by spr1322cleahy

best-buy

Best Buy has to rethink it’s management plan because it is losing business. From a sales perspective, it has not been doing as well as it once was, and in this economy, it is really taking a toll on the business. The number one reason for the drop in sales is due to inexperienced sales associates who can not adequately tend to customer’s questions and needs. One retailer analyst, Gary Balter, referred to the franchise as “that blue and gold store where the salesperson usually can’t help you.”  This does not send out a good message to consumers nor help to turn this around. So what is Best Buy going to change in it’s operation strategy? Clearly, what they are doing now is not working.

One possible solution is that the Vice President is trying to turn this around by starting to implement product knowledge education into the company. If the number one reason for lack of sales is the sales people, then that is where the VP should start. By training the employees properly and quizzing them on the products, they can be more helpful to the customers who are asking the questions. Giving incentives for reaching sales goals is another great way to boost sales and invigorate energy out on the sales floor. Scheduling the strongest employees on weekends, when Best Buy stores are at their busiest, is another smart approach that the company has begun to implement.

One problem that Best Buy faces is it’s online competition. Twenty percent of Best Buy’s business comes through online purchases, but it’s competitors have a one-up on them. Running online operations is costly, far higher than other websites because of the high labor costs and long-term leases that come along with the fourteen-hundred existing retail stores. Another issue that pops up with the retail locations is the fact that many of the people that walk in the door are “browsers,” not “buyers.” Many will seek out different products yet resort to purchasing online or not at all, causing some stores to go out of business. There has been no improvement with store closures yet, but with the new strategy implementation taking place, customer satisfaction has gone up a bit recently.

Amongst other problems, staff turnover is higher than ever, historically speaking. The average staff turnover to date is about sixty percent, increasing from thirty five percent in previous years.

It is always a sad thing to see American companies go out of business. Hopefully, the VP’s plan works because as we’ve learned, understanding the marketplace and customers needs, wants, and demands is a crucial element in the success of maintaining a business. Operating costs are a key factor to take into consideration as well. Do you think Best Buy has a chance?

References:

http://online.wsj.com/article/SB10001424127887324743704578444733449436900.html

http://www.google.com/search?hl=en&site=imghp&tbm=isch&source=hp&biw=1440&bih=686&q=best+buy&oq=best+buy&gs_l=img.3..0l10.822.2889.0.3173.8.7.0.1.1.0.148.471.6j1.7.0…0.0…1ac.1.14.img._SW2SohCc8k#imgrc=sCo_DVyj7x89mM%3A%3BJu5F4ITQI9zFAM%3Bhttp%253A%252F%252Fwww.savingadvice.com%252Fimages%252Fblog%252Fbest-buy.png%3Bhttp%253A%252F%252Fwww.savingadvice.com%252Farticles%252F2007%252F06%252F28%252F101581_12-tips-for-getting-the-best-price-at-best-buy.html%3B800%3B551

The Venomous Caterpillar

Posted on by spr1311vguidilouviere


After reading an article in Bloomsberg Businessweek, I am left questioning the business strategy of the world’s biggest manufacturer of construction and mining equipment, Caterpillar. In this article, Doug Oberhelman, chief executive officer, discusses the problems and vision he has for Caterpillar. Oberhelman believes that looser trade restrictions, lower corporate tax rates and greater infrastructure spending are key policy changes that will boost exports and create jobs within the company and industry. The opinionated CEO participates in trade organizations, CEO groups like Campaign to Fix the Debt, and visits Washington DC to promote international trade deals and corporate tax reform.

While Oberhelman seems to advocate positive ideas, Caterpillar plays host to many unhappy workers. In 2012, Caterpillar had record-breaking sales of $66 billion, producing $5.7 billion in profits, yet some employees are surviving on food stamps. As the CEO’s salary, wages and benefits increase- due to the need to remain competitive at every level, claims Oberhelman- factory workers have incurred health care and other benefit cuts as well as low or frozen wages.

Since 1991, Caterpillar employees have gone on multiple strikes- two of which spanned more than six years and led to higher divorce and suicide rates within the company. Strikes have been caused by employees unwilling to accept 50 percent pay cuts, others by employees who noticed unequal skill-wage levels. According to Moody’s Analytics, as a percentage of gross domestic product, corporate earnings recently hit their highest level in more than 60 years, while wages fell to new lows. One employee has worked for Caterpillar since 1999 and receives $15.66 per hour, yet the company claims to offer market-based wage increases, pay quarterly bonuses to workers and offer locally competitive rates. The worker’s leverage has weakened due to the declining number of manufacturing jobs combined with the decline of unions. In order to keep profits high, Caterpillar released 30,000 workers in 2009. Even in times of high profitability, they will not share the wealth because they want to save it for times of low profitability. In 2012, Caterpillar made $45,000 per employee, increasing significantly from $12,000 per employee in 2007.

Oberhelman often addresses the need for better school systems within our country, believing that 60 percent of people in Peoria, Illinois who apply for blue-collar positions are not suitable due to lack of basic skills. Some economists disagree with Oberhelman, however, by saying that the skill gap is because companies like Caterpillar have created it by demanding too much from workers for too little pay. When asked by the journalist when Caterpillar worker’s wages will rise Oberhelman replied, “When we start to see economic growth through GDP.”

Is there a way that Caterpillar could decrease operations costs and put the saved money towards employees’ salaries? Is Oberhelman’s approach to success, selfish? Should Caterpillar hoard money during profitable times in order to be prepared for times of lower profitability? Could the Caterpillar issue be resolved through improved operations management? Could an increase in automation relieve workers of some stress while creating higher profits and satisfying the CEO?

Kimes, Mina. “King Cat.” Bloomsberg Business Week May 20-May 25 (2013): 68-72. Print.

Old Vs New Vehicle Models

Posted on by spr1322jmei

CX5_850x400_black_mica_01
Recently my family and I have been looking into purchasing an affordable compact SUV. According to my dad, since the 2014 models are out now the 2013 models are most likely to drop in price. However, after I did some research online it is forecasted that the best time to purchase a car is during the winter when people are least likely to purchase a car therefore, causing a drop in the prices of vehicles. Regardless, we still pursued on purchasing a new vehicle. So we browsed online to see which vehicles were considered to be the top affordable compact SUV. I landed on the website the U.S. News Rankings and Reviews that listed the top 10 affordable compact SUVs of 2013. As a consumer, I personally focus more on the exterior appearance of the car before looking into the mechanical side of it. After looking through numerous vehicles, I finally set my eyes on the 2013 Mazda CX-5 which was ranked number 2 on the list. When I looked into the pros and cons of the vehicle I noticed that the engine on the 2013 model was lacking because it had a 2.0L engine which made it slightly under-powered as compared to the other compact SUV vehicles. Many consumer reviews that I have read have mentioned about the under-powered engine which made it a disadvantage. In class we learned about the use of the quality function deployment and based on the consumers wants the company will make the product accordingly. So when I looked into the 2014 model of the Mazda CX-5, I noticed that they changed their engine from a 2.0L to a 2.5L which is the standard engine on a Compact SUV. Therefore, Mazda has identified the customer’s wants and has made the adjustments onto the 2014 model. However, now that the 2014 model has came out the complaint from consumers is that the 5.8 inch touch panel screen is too small compared to other cars that has a 6-8 inch screen. I believe that the 2015 model of the Mazda CX-5 will have a larger screen panel in response to the consumers demand. As we have learned in class, as time progresses the company makes slight advancements and additions into each of the models and not all at once. First it is due to the consumers demand and second to keep the consumers wanting the most recent and updated technology. Therefore, allowing the company to generate a profit and to continue adding on to the existing product line.

Do you think companies leave out some specs or features on the product just so they can put it into the next model they come out with in order to generate profit in an existing product line?

Sources:
http://usnews.rankingsandreviews.com/cars-trucks/Mazda_CX-5/

http://www.caranddriver.com/news/2014-mazda-cx-5-photos-and-info-news

Automation, Good or Bad?

Posted on by spr1322tkrolicki

Many of you have probably heard about a company called Foxconn, they do the manufacturing for various products, such as the Iphone and Xbox. They have been running into a problem recently, and that is achieving profitability for the company. In 2010 there was a huge outbreak of suicides at their Chinese plant, because of horrible working and living conditions.This prompted the company to give employees a raise increase to $325 per month from $195.It also spurred Foxconn to speed up its pursuit of automation. The company’s president, Terry Guo, said in 2010 that it would produce 1 million Foxbots, a mechanical arm researched and developed by Foxconn to perform dull and dangerous jobs. The robots would be implemented from 2012 to 2015 to increase the rate of automation and productivity. Foxconn had hoped that by replacing humans with robots, production would become much cheaper and make the company profitable again. However, they soon learned that automation might not be the answer.

“The transformation from workers’ manual labor to using the robots means the models of production will be changed and the changes are complicated,” said Xu Fang, director of the Center Research Institute at high-tech company SIASUN Robot & Automation Co. Ltd. Since some jobs at Foxconn require workers to use their judgment and even though the tasks appear simple, robots cannot be used to perform them because they lack decision-making ability. Another interesting situation with Foxconn is that they dont design the products that they manufacture, the product is already designed when it is brought to them. As Yang Zhiqiang, editor in chief at automation website gkong.com, said. “After all, Foxconn is a manufacturer for other companies’ original equipment and its clients have already completed the product design, so if a company wants to use robots to make products, at the beginning the company needs to consider the robot design in order to fit the production line.” This whole scenario proves a couple things to me, number one although automation may seem like the route to go in the technology filled world we live in, it may not be the most sensible. The other thing this story showed me was that maybe if managers treated employees with a greater level of respect and compensation for their work, there would be no need for buying the expensive equipment involved with automation. If you employees are not happy, there is no way around it, your company will fail, and it is managements job to make sure this does not happen.

 

Work Cited

Xuena, Li. “Why Foxconn’s Automation Hasn’t Been Smooth.” Market Watch. N.p., 14 May 2013. Web. <http://www.marketwatch.com/story/why-foxconns-automation-hasnt-been-smooth-2013-05-14?pagenumber=2>.

 

Is Caterpillar’s Labor Management Leading To Its Demise?

Posted on by spr1321jcastiglione

Recently manufacturing employees at Caterpillar plants in Illinois and across the world suffered significant pay cuts as well as cuts to some of their benefits. Now Caterpillar is experiencing a backlash from its employees. At an Ontario plant, workers were locked out when they refused to accept a 50% pay cut. In response, Caterpillar moved production to Muncie, Indiana where workers were willing to accept the lower wages. In May of last year, Caterpillar threatened to cut health care and other benefits for employees at a plant in Joliet, which resulted in a three month strike. Workers were finally forced to accept the cuts and returned to work. Caterpillar is also currently in a dispute with workers at a Milwaukee plant.

On the contrary, Caterpillar’s earnings would not indicate a need to cut employee wages. The company earned almost $6 billion in profits this year from a record-setting $66 billion in sales. In addition, the average salary of executive at has increased by 56% in the last six years and CEO Doug Oberhelman’s salary has risen by sixty percent since 2011. He made $22 million last year. His rationale behind Caterpillar’s hard line on labor is that they have a need to stay competitive. He says the only reason executive salaries rose so greatly is because people in these positions are going to find other work if they don’t receive a competitive wage. Whether such a steep increase is justified depends on who you ask. At the same time, he believes he has no reason to raise employee wages when he can just easily open a plant in a Southern state, where workers would gladly accept lower wages. He also contends that workers these days are less skilled and thus don’t deserve more money.

Oberhelman has received opposition on both of these points. Opponents argue that the only reason workers seem less skilled is because too much is demanded from them for too little pay. They also say that manufacturing employees at nearby rivals Cat and Komatsu plants are paid $3-$4 more per hour for the same work. However, people in these positions have much less mobility because there are a lot less manufacturing jobs today.

Caterpillar needs to resolve this issue with its employees before serious damage is done. Their reputation is on the line, which could ultimately affect their bottom line. Constant conflict with its employees could result in reduced productivity and quality from them. I believe they should just pay their employees wages that are comparable to nearby competitors. If the company is profitable and executives are experiencing pay bumps, shouldn’t lower-level employees experience them too? Who do you think is right or wrong in this situation? Do you think Caterpillar’s ongoing conflict with its employees is going to hurt the company in the long run?

http://www.businessweek.com/articles/2013-05-16/caterpillars-doug-oberhelman-manufacturings-mouthpiece#p4

 

Fast Fashion to Hit the U.S.

Posted on by spr1321mbator

 

H&M Hennes & Mauritz AB is a Swedish retail clothing company that is known internationally for its affordable fashion for men, women, and children. With 2,776 stores in 48 markets, H&M has been ranked the second largest clothing retailer in the world. Though the clothing company has gained a reputation for being fashion forward, the same cannot be said about its ability to keep up with online shopping demand. H&M currently offers online shopping to customers in just eight of its 48 markets around the world: Sweden, Norway, Denmark, Finland, Germany, the Netherlands, Austria, and the United Kingdom, but none in the United States. This has U.S. customers scratching their heads in confusion and growing impatient. The retailer stirred up excitement back in January 2011 with a tweet that stated:

“Good morning is an understatement! H&M has decided to have online shopping in the U.S. at the turn of the year 2011/2012! Stay tuned for more.”

Unfortunately, two years have passed and H&M has failed to deliver on that promise. The retailer is still “not set up for mail order, phone orders or e-commerce at the present time”. However, there is still hope for U.S. customers. H&M’s 2013 Expansion Strategy revealed: “Investments will also continue within online sales. H&M plans to launch online sales in the US, the world’s largest market for e-commerce.” Business Week also reported that shopping from H&M’s website could happen as early as Summer 2013.

Entering the U.S. online retail market goes beyond satisfying millions of America’s fashion lovers. “The U.S. online retail market is the biggest in the world; research firm Forrester estimates it will reach about $260 billion this year. Taxes vary by state, shoppers expect free shipping, and returns are common”. The process is quite complex and H&M has cited “issues with security, customer service, logistics, and the assortment of items offered” as reasons for delay. But the longer the retailer waits, the more demanding customers become. Not only are U.S. customers looking for the ability to shop online, but they are also expecting the company to have smartphone applications available, too. H&M says they will meet this demand. For investors sake, H&M cannot disappoint  because the company’s competitors have already figured out how to engage their U.S. customers in online shopping.

With just a few weeks left till summer, anticipation for the launch of H&M’s online store will grow largely. Having only photo galleries of tasteful, trendy clothes and accessories will not be enough for die hard shoppers this year and if the project fails to launch, there could be dreadful consequences for the company. In ending, some important questions to consider are: Do you think H&M waited too long to enter the U.S. online market? Is this expansion strategy necessary in today’s retail industry? How do you think launching an online store will affect H&M’s competitors?  Finally, on a scale of 1-10, how important is online shopping for you? Does it affect the way you shop?

 

SOURCES

Business Week: http://www.businessweek.com/articles/2013-03-28/h-and-ms-online-troubles-u-dot-s-dot-shoppers-are-still-waiting

H&M Expansion Strategy: http://about.hm.com/AboutSection/en/About/Facts-About-HM/About-HM/Expansion-Strategy.html#cm-menu

Annual Report: http://about.hm.com/content/dam/hm/about/documents/en/Annual%20Report/Annual-Report-2012_en.pdf

Heathrow Capacity Crisis

Posted on by spr1312amabruk

Capacity problems at airports have always been an issue. London’s Heathrow Airport is third busiest airports in the world and the busiest one in the United Kingdom. The capacity issue there has been forecasted to be even worse by 2030 if they do not do something about it now. As the article states “Even by the latest forecasts, London’s five airports will have to turn away about 13m passengers a year by 2030, rising to 46m in 2040 and 92m in 2050” (1). This includes not only Heathrow, but the four other airports in London. Heathrow has had to turn down many passengers and has had many delays due to the capacity issue. If it isn’t addressed soon, it can cause a shut down and lead to even more delays and cancelations. Even though their are 3 other airports in London, Heathrow gets the most traffic because of its location in Central London and it’s International accessibility.

Different solutions to the capacity issue have been in the works. In 2010 the government approved an construction of a 3rd runway, but it isn’t enough. “Even if a third runway increased Heathrow’s capacity by around 50%, growing demand would significantly have outrun the increase in supply of landing slots.” Another government official suggested for London to build a new large airport east of the capital. This would be a better solution because it will solve the capacity issue on a much larger scale than the 3rd runway would and it will also be far away from the central of the capital. This would cause less noise pollution to the residents. The only downfall is the price, the city would need 45 billion dollars to cover this. But this idea would only be successful if Heathrow shut down. You cannot have two major international airports in the same city because they will each take each others customers and won’t be as successful on their own. This will have a major effect on the economy of the UK.

According to this article, the best solution would be to expand Heathrow to the west and building 4 more runways. The article says, “simply moving the runways a couple of kilometres to the left offers the scope for almost doubling Heathrow’s capacity while significantly reducing the numbers of those subjected to oppressive din” (1). The capacity solution would be solved and it would keep Heathrow as the top airport in the UK and only increase its business and profit margin. Their plan is to finalize the proposals and to present them soon while shutting out any other proposals of building new airports and such. They hope the westward expansion goes as drafted.

We discussed capacity issues in class and how it relates to us in our everyday lives. We all travel through airports and we have all experiences delays due to issues like these. I think that for this particular situation, Heathrow should expand to the west and stay away from building any more new airports in the UK.

heathrow

 

Is the westward expansion the best solution for the capacity issues?

Would you suggest building a new airport?

Source: (1) http://www.economist.com/news/leaders/21574486-expanding-heathrow-westwards-could-give-london-airport-capacity-it-needs-reasonable

“Bring the Taxes On!” An early Christmas or Nightmare?

Posted on by spr1311kbangloria

Conline-shopping(1)urrently, online sellers are only required by law to collect tax on the states they have a physical presence in. Online only businesses are not required to charge sales tax and consumers who don’t pay sales tax on purchases they make online are supposed to pay that tax to their state. But, that rarely happens. Only 1% of consumers actually follow that law and the rest get away with it.

Consumers enjoy the concept of buying online to avoid tax and this may be coming to an end soon if the bill for internet sales tax law is passed.  Some say, that the bill passing will be an early Christmas for Retailers that have a physical presence.  In a survey taken by an advisory firm (Alix Partners),  30% of online shoppers said they would stop shopping online and shop more at retail stores that have a physical location if all online business started taxing.  The other half of the people surveyed said the sales tax would not affect their online shopping habits. Management for retailers need to figure out the pros and cons of the sales tax online.  Some will be affected while others will not be.

Companies like Amazon were against the online sales tax bill passing at first. After years of opposition, Amazon also is supporting the bill because they are already collecting sales tax in nine of the states where it has warehouses.  While Amazon is supporting the bill now, many other online retailers are opposing the bill saying that it would hurt their business and it would be an administrative nightmare because they would have to manage to determine tax rates for different states and locations at checkout. EBay another large online retailer like Amazon, has a slightly different opinion on the tax law.  John Donahoe, the CEO of EBay  says that if congress does pass the online sales legislation, small businesses with less than 50 employees or less than $10 million in annual out of state sales should be exempt from the sales tax law nationwide.  EBay is not completely opposing the legislation, but they are saying that it should have some exemptions to it.  Americans for Tax Reform, an anti-tax group also strongly opposed the bill as well as other online retailers.

The law would only apply to online sellers that have at least $1 million in sales and do not have a physical store or warehouse.  If the bill is passes it is estimated that more than $12 billion in additional sales taxes will be collected from online purchases each year. The only concern of the bill passing is its affect on online businesses. This could be a possible nightmare for them and really hurt their business. The bill has the full support of retailers including Best Buy, Target, Wal-Mart, and Barnes and Noble because they already are required to charge tax online because they have physical presence in most states.

What could be possible techniques for online business to keep running despite them charging online tax?  Do you think that retailers with physical presence will benefit from this bill passing?

http://www.cnbc.com/id/100716012

http://money.cnn.com/2013/05/05/news/internet-sales-tax/index.html