This paper is a case memo about the operational as well as marketing strategies relating to the famous household products brand The GHB (Global Household Brands). GHB is dealing with household items and cleaning materials. The brand was introduced by Block Drug which is a billion-dollar company producing a range of house cleaning products. But the GHB products are failed in acquiring the targeted market share in the industry due to various operational and marketing problems. The brand is now facing difficulty to survive in the industry due to several reasons like a drop in sales, high employee turnover, reduction in market share…etc. This paper frames out a competitive business strategy that would help the brand to regain its competitive position in the industry and it would become one among the top in the market.
A Competitive Business Strategy for the Global Household Brands
The major factors that contribute to the operational and marketing problems of the GHB involve its inefficient employee policies and strategies, improper organizational structure, obsolete production techniques, lack of product differentiation, obsolete sales strategies and marketing policies, lack of product quality, etc. To provide a competitive business strategy for the GHB, to regain its market position, and ensuring market share growth with increased profitability it has to adopt the advanced operational and business policies in the industry. In this case memo, each of the operational and marketing problems faced by the GHB is briefly discussed with appropriate solutions for overcoming the difficulties.
Employee turnover- Issues and Suggestions
High employee turnover is a critical problem faced by the GHB which leads to increased labor costs for the business. It also leads to falling in the brand image of the Global Household Brands in the industry. The labor turnover is high in the GHB and it resulted in increased operating costs of the business. Because the company has to recruit, select, train and develop new staffs in place of the retired ones. For that, the company has to spend a considerable amount of money and time resources for maintaining its human capital. The labor turnover results in revenue fall and also in reduction of brand image. From the analysis of the operational environment, it derived that the main reasons for the employee turnover are long working hours, the behavior of the superiors, lack of reasonable compensation, poor working environment…etc. The main reason for the high labor turnover in GHB was the behavior of the new operations manager supporting the labor turnover. He caused so many talented and expert employees in the manufacturing section to leave the organization. To reduce the labor turnover, the company has to kick out the said operations manager from the company and has to appoint a talented and well-experienced new operations manager who knows the feelings of the employees. So that, the employees would be happy and they will never think about leaving the organization. The company should do all the efforts to motivate the employee to improve their morale as well as efficiency. The top managers should talk with the employees about new trends in the industry, the future of the industry…etc. So that they feel that the organization and the top managers are giving some value to them. This will boost the morale of the employees and they will become more initiative and more efficient than earlier. Other suggestions for reducing labor turnover include giving respect to the employees as they are the most valuable assets of any organization, compensating employees with reasonable pay, fixing flexible working hours which is affordable to employees, and providing entertainment facilities for employees. It will help to motivate the employees and which will improve their efficiency at a greater level.
The company needs to downsize its organization to streamline its operations. Occupational training programs have been provided for the employees who joined the scheme to help develop their quality of life. Even though it involves high costs, it will contribute to considerable savings on payroll expenses in the long run.
Sales Strategy- Issues and suggestions
It is clear from the case study that the sales of GHB have come down continuously over the years. They cannot meet their targeted sales due to marketing and sales issues. The targeted EBIDTA (Earnings Before Interest, Depreciation, Tax, and Amortization) was seven million dollars, but the actual EBIDTA was only around five million dollars. There are lots of reasons for the drop in sales volume. The main reason behind the drop in sales was the fall in the brand image as the product did not meet the customer expectations. The customer started to avoid the products of GHB from their purchase list. As the customers were not interested in the products of GHB, it badly affected the marketing activities. The first thing that the company should do is regain the lost brand image, by implementing various sales promotional activities. The company has to make the customers feel that the products of GHB are unique. To create such feelings, there should have some special qualities to the products of GHB. For that, the company can opt for making changes in the product mix. And also the company must make sure that the right products are reaching the right people at the right time. This can be made possible with the help of a full-fledged warehousing and distribution system. The company can provide discounts and prizes to the customers till the brand regains its image.
Market share-Issues and suggestions
Market share refers to the percentage of the sale of a brand out of the total sale of that particular product. Market share is a clear indicator of the position of a particular brand in the market. It is given in the case details of the GHB, that the brand market share showing a declining trend. The product 2000 Flushes lost its first position and became third, X-14 Mildew went back from the second rank to the third rank, X-14 Soap Scum became fifth in the market which was second earlier and Carpet Fresh moved away from second place to sixth place. The market share fallen means the, competitors have dominated the market. So a strategy should be designed to achieve a good market share.
To identify the market trends and the needs and preferences of targeted customers in the Household cleaning market, market analysis should be conducted by the GHB. The strength and weaknesses of the company together with its competitors have to be found out thorough market research. It would help to follow appropriate marketing strategies. Carefully designed and identified marketing strategy should help to improve the performance of the product in the market. The marketing objectives of the product have to be clearly defined and identified. Brand positioning is highly important in the case of GHB, to sustain its market share in the industry. The needs of the customers are based on the product’s purpose. In the case of household cleaning products, quality is the base factor of buying decisions.
Marketing researches over the existing customers of the brand have to be conducted to get the real picture of the brand in the market. In the brand positioning activities, unique features and special benefits of the brand have to be more focused on. The results of the product usage have to be promoted. To improve the sales some new features have to be added to the product as well as the marketing strategies. It will help to motivate the customers to check out the new feature of the product as well as the attracting new customers. The product differentiation strategies have to be followed by GHB through the following appropriate product and marketing strategies. The changes in the market, as well as the customer needs, have to be anticipated through market analysis. The marketing strategy of GHB should be flexible to accommodate the changes in the customer needs as well as market trends. (Paul). Product Diversification policy: The market share can be improved by making changes in the product in such a way that, it looks different from the competitors’ product. Offering price discounts and prizes will improve the market share. And also design a distribution system which ensures the products are available at the right time and right place. The GHB can also opt for producing new products. If the customers are delisting the old products, it is a good option to try new products or make changes in the existing product thereby creating new uses for the product. This may help to regain the brand image and thereby achieving the business goals. The new products can be manufactured by adding some features to the existing infrastructure facilities. Product diversification can create new customers. The GHB can also try a product extension which means producing new products under the same brand name. For example, the GHB can try manufacturing the perfumes under the same brand name which may help the company to acquire a good position in the market.
Operational cost issues and suggestions
To be more aggressive in this era of the competitive business environment, significant and constant cost reductions strategies are required to be followed by GHB to sustain its competitiveness and market position in the industry. They have to formulate new operational ideas for improvement in cost reduction. The application of ‘Lean methods’ will help the company to reduce operational costs. It works in three different steps. During the first step, it has to set a standard for selling prices that are commonly available and determine the percentage of the profit. Accounting and operations must be developed into a user-friendly method. The Lean technique helps to mold some useful plans for achieving the operational cost reduction significantly. (Tan).
As the company’s EBITDA is showing a diminishing trend, it indicates that the operational cost is increasing at a higher percentage. Thus GHB has to use some techniques to improve its operational efficiency for reducing the operating cost. It can bring an overall quality improvement if the operational procedures are polished. Improving the operational policies is a method which needs not much effort. By using some improved ways such as controlling inventory, redesigning of operating process, schedule the works in a better way than existing, etc operational efficiency can be greatly improved. Adoption of standardized raw materials will help to improve the operational efficiency of the organization. (A Pollution Prevention Guide for Small Chemical Manufacturing Operations)
Redesigning of the organizational structure
Organizational restructuring should help to improve the operational efficiency of the organization by making changes in the attitude and behavior of the human resource personnel. The redesigning of the organizational restructuring must be focused on enabling the organizational learning process, and defining the duties and accountability of each of the personnel towards the organizational goal. Continuous organizational learning is essential for keeping up with the changing environment. Performance appraisal is an effective tool for organizational learning. In the case of GHB, for improving the operational efficiency of employees the organizational restructuring will be effective. The problem of deteriorating workforce productivity can be effectively overcome through this tool. By following the organizational restructuring, the productivity and morale of employees can be improved. Personnel turnover can be highly reduced and organizational effectiveness and efficiency can be improved. (Organizational Restructuring).
Product quality Improvement policies-issues and suggestions
This world is highly competitive and there is a rapid growth in the expectation of the quality of products from various companies. Quality is the mode of measurement of the companies used by the customers in the market. Customers seem to be paying more if the products meet quality. To bring improvement to the quality of products produced and marketed by GHB, removal or rectification of ineffective processes should be performed by it to improve the quality of the output. Simplify the processes and reduce the variations of products quality are other adoptable methods. Some faults are human and if they are not checked and avoided then errors are to be found out with the products. The company should be audited for the quality of the products regularly. It will help to check out the deviation in product quality from the fixed standards. (Yi and Yosuf, 74-82).
The quality of products has its parameters. The ingredients used for making up the products are counted to the quality of the item. Some quality checks have to be performed over the product after the production is done and before it is transferred to the warehousing. The performance of some chemical tests would increase the confidence of the manufacturer. And finally, a clear-cut product should only be delivered to the market capable of satisfying the customer in terms of projected needs. The quality of the products concerning the desired result has to be ensured by the GHB through trial experiments before transferring it to the market. Identification of strengths and weaknesses of the branded products should be capable of formulating appropriate product features and optimum quality level. For this purpose market research is effective. Creativity is an outstanding asset that is extremely valuable for the survival in the industry with market share growth. For developing the brand features in a customer attractive ways, creativity, quality, and persistence are essential elements.
Process quality- issues and suggestions: The quality management system in the GHB should be strengthened through appropriate waste control techniques and quality improvement techniques.
Waste minimization: Waste creates a loss of valuable resources in terms of materials and energy to the manufacturing organization. In the house holding industry, chemical waste is a serious problem that reduces operational efficiency and increasing the cost of production. The cost of waste includes the cost of raw material, disposal costs, the purchase cost of materials, handling/ processing costs, management time, and monitoring costs. The waste reduction includes reduction of the quality of the waste and promotion of re-use. Waste minimization program, concentrating on green chemistry principles have to be framed. The following steps have to be followed by the GHB to control waste in its production system;
- Redesigning of the operating process capable of avoiding the waste creation at the source itself.
- More efficient production technologies have to be adopted in the production system.
- The waste quality in terms of less hazardous ingredients has to be ensured through source-oriented improvement policies. (Garcia, Eva, and Keiski).
Source reduction: Waste minimization in the operating process can be achieved through source reduction. It involves both product and process changes. In the case of product, changes have to be made with the product lifecycle and finding out more cost-effective products. In the case of process, the changes can be made concerning applying improved production practices, better housekeeping, changing the raw materials as well as the technology. It is better to adopt techniques for reusing the waste for further production. Appropriate waste reduction strategies such as management, replacement or substitution of process or equipment, maintenance, and housekeeping improvement should have positive results on the operational efficiency of the organization. (Waste Minimization in the Textile Industry).
Waste reduction is directly related to quality management in the production process. A Comprehensive waste audit system has to be implemented by the system as the introduction of developing waste reduction strategy. The waste audit in the organization is focused on evaluating the production process, to identify the opportunities for improving the operating procedures and equipment modifications. Listing of wastes being generated in the manufacturing process, Identify the methods to reduce the waste generation and identify the best method of production in terms of technical and economic feasibility are stepped in the waste auditing process. Periodical review of results of waste reduction program in the organization also part of the waste audit. (A Pollution Prevention Guide for Small Chemical Manufacturing Operations)
Product distribution strategies-issues and suggestions
To reduce the freight charges, appropriate product distribution strategies have to be framed. It will help control the freight cost at the optimum level. The product distribution strategy of the GHB has to be redesigned for ensuring efficiency and reducing the distribution cost. The selection of the most appropriate distribution strategy is essential for ensuring the success of the organization through maximized sales and profits. To reduce the excess freight cost GHB has to adopt freight auditing and cost reduction analysis in its distribution system. The opportunities to reduce and controlling the freight cost GHB can be identified through freight auditing. The shipping activity should be carefully managed with maximum cost-effectiveness. In the case of inbound freight transportation, the services of a routing guide are to be hired for finding out the most cost-effective way of shipment of freight. Online fright system can be adopted for the transactions such as bills of lading. The timing of freight can be regulated by tracking the status of the freight through online ways. It will help to identify the purchase orders that are coming to the warehouses. Weekly auditing has to be applied over the carrier billing to ensure its accuracy. Reports on project savings time performance and track claim ratios have to be prepared on monthly basis.
In the case of outbound freight, to reduce freight costs, the GHB has to ensure that the shipping rates are lower. Surcharges and incidentals on the freight have to be identified through a freight rate analysis. Freight rate analysis is essential for identifying the cost savings opportunity in time. (Freight Auditing & Cost Reduction Analysis).
Financial issues and suggestions
The banks warned the Global household brand is still leveraged. Due to the high leverage finance adopted by the company, it is at great financial risk. In the period of decreasing trend in the sales and profit margins from previous years, the banks are not confident over the repayment of the debt allocated by the company. It forced the banks to call the loans that are financed by the company. (Global Household Brands Case). The GHB has to decrease its leverage fiancé through the adoption of more internal sources in its total finance. The terms of the loans have to restructure through negotiation as it will allow GHB to incorporate the newly implemented finance strategies to incorporate themselves into the company and develop results. Adoption of more internal finance through share issue will help to create a better image among the financial suppliers as it will reduce their financial risks.
The company should get an adequate market position by following the quality improvement policies as well as strengthening the distribution network. The introduction of new product lines will provide an along with term effect on the profitability of the business with the increased customer base. Elimination of unprofitable ones in the product system should help to avoid losses. By utilizing the potential for product differentiation it can ensure a competitive position in the industry. In the matured industry household products, it will provide a more customer base. The cost relating to the production operation and distribution can be greatly reduced through restructuring inside the supply chain.
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