Abstract
Business assessment is a critical management activity which helps examine the current position of a business and to help find new strategies for growth and success. Today, multiple tools have been developed for this purpose meaning that management has multiple alternatives to choose from. It is important to acknowledge that each of these tools focuses on a particular aspect of the business. As discussed in this paper, the internal and external environmental factors are explored to determine how they affect the business. Their implications can either be positive, meaning that they support the firm or negative in that they prevent its progress.
Four major tools have been used in this paper. The first is McKinsey’s 7-S framework which examines strategic areas of a business. The seven points are further divided into hard and soft components depending on their degree of influence. The balanced scorecard, on the other hand, examines the strategic management of an organization focusing on financial, customer experience, internal processes, and learning and growth. Other tools discussed in detail are the PESTLE, which is concerned with the external environment, and SWOT analysis that examines both environments. The additional tool discussed is Porter’s five forces whose focus is the competitive environment. Overall, the assessment of Ramcar poultry group reveals both positives and negatives and the improvements needed including new structure, technologies, and supply management strategy.
Introduction and Background
Introduction
Business evaluation tools have evolved to help firms assess and improve their performance. This is a critical activity because management has the responsibility of driving growth and success. Understanding the current position and estimating progress helps in making decisions. Multiple tools can be used, some of which explore the internal and others the external business environment. They include the 7-S framework, SWOT analysis, PESTLE, and balanced scorecard. This report uses these tools to analyze the Ramcar Group of Companies, specifically the poultry group and to make recommendations to improve the company.
Background to Ramcar Poultry Group
Ramcar is a group of companies which started as a manufacturer of batteries. The company has since expanded into other diverse businesses, including fast food, metal works, furniture, and real estate. The fast-food segment includes business units such as KFC, Mister Donut, Malcolm Cafes, Poultry, and Tokyo Tokyo. The company operates as a vertically integrated company and has served as a perfect example in this regard. Its operations include a 10,000 hectare industrial part in Sta. Maria, Bulacan. The company’s workforce comprises thousands of employees. For example, the battery group has 3000 regular employees and project hires (Bayan Academy, n.d.). The food group has a bigger workforce because of the many food outlets, dressing plants, and the poultry farm.
Organizational Structure of Ramcar Poultry Group
The organizational structure of Ramcar can be seen as hierarchical due to vertical integration. In the poultry unit, however, the structure flattens because all the stores and units report directly to me. The managers at these stores oversee multiple frontline workers who directly report to them. They are in charge of all key operations, including hiring and compensating workers, as well as quality management among others. The Poultry group is under the food group, which is headed by a board of directors and an executive committee who reports to EXcom. Therefore, the poultry business unit works in a hierarchical structure where the chairman of the board likes to exercise direct control and influence over all operations. The corporate structure is presented in a chart in the Figure below.
Assessment Tools for Company Analysis
Assessment tools have been developed to examine individual features or organizational effectiveness of a firm in addition to its strategies. An illustration of the various tools and their inventors has been presented by Aithal (2017) who offers a summary of what each of them entails. This should provide a foundation for the assessment of Ramcar poultry group, where the focus will be both the internal and external business environments. SWOT analysis was invented by Albert Humphrey in 1960 at the Stanford Research Institute and focuses on the strengths, weaknesses, opportunities, and threats.
The PESTLE model is an acronym for political, economic, sociological, technological, legal, and environmental analyses whose concern is the external business. McKinsey’s 7-S framework deals with strategy, structure, system, shared values, skills, style, and staff. These elements can be said to examine internal business conditions. Lastly, a balanced scorecard is described by Aithal (2017) as a management tool that offers a view of the corporation from both internal and external perspectives. Others that could be considered include Porter’s five forces, value chain analysis, and the BCG’s growth-share matrix.
Analysis Using 7-S Framework
McKinsey’s 7-S framework can be defined as a strategic assessment tool which perceives the success of a business as depends on seven interrelated factors. It is also based on the argument that strategic management of a firm does not only entail creating strategies but also factoring in other aspects explained in the model (Gökdeniz, Kartal, and Kömürcü, 2017). Strategic management at Ramcar poultry therefore, a combination of formulating effective strategies and incorporating those factors have significant implications on the strategy. It is important to highlight that McKinsey’s 7-S framework comprises both hard and soft S’s with shared values in the middle. The hard category includes strategy, structure, and systems while soft S’s are skills, staff, and style.
Strategy
This can be defined as a plan formulated by a company to achieve goals such as competitive advantage and to sustainably compete in the industry. Ramcar’s can be derived from the nature of its operations. As mentioned above, the company has diversified to many businesses despite starting as a battery manufacturer. Therefore, the main business strategy is business diversification which has been used across the entire organization, including the food group and, specifically, the poultry unit. In this unit, the main strategies are seen in terms of the ability to produce quality and deliver on time. The logistics to the 300 units is managed to achieve efficient delivery.
Structure
The concept of structures represents how a firm’s divisions and units are organized, which includes issues such as authority hierarchy. The organizational chart has been presented in Figure 1 above and its rationale explained. Therefore, it can be noted that Ramcar has preferred a vertical structure due to the level of integration. Poultry group is lower in this hierarchy as one of those units closest to the source of the supply network. However, this unit employs a horizontal structure where all units report directly to the head of the division. This allows for greater control and quicker decision-making.
Systems
Procedures and processes comprise the systems which reveal the day-to-day activities and how decisions are made. At Ramcar poultry group, effective communication systems and the use of new technologies comprise much of the systems which include both hardware and software. Units such as logistics and processing plants, as well as the hatcheries, have been fitted with computer and automation systems, which helps the company increase the production and operational efficiency. New technologies are deployed to create an edge over the competition.
Shared Values
This component is at the core of the 7-S framework and comprises the norms and standards guiding employee behavior. At Ramcar poultry group, it can be argued that the board chairman sets the norms and standards by exercising control over aspects such as the market, feed quality, and chicken disease management. Quality and customer experience is another shared value manifested in the chairman’s quest to be present at the point of production quick and immediate customer feedback is desired.
Skills
These can be defined as the abilities that a company’s workers perform very well. Skilled labor is a crucial component in the production process, especially for a manufacturing company. However, Ramcar’s labor force in the poultry unit does not need a high level of skills, apart from the hatcheries and breeder operations where expertise is needed. Many of the frontline workers are semi-skilled, including drivers and similar job categories. The expertise is desired as one goes up the organizational hierarchy. However, it is important to acknowledge that h company can access ready labor in the market which, when compared to other countries, is relatively cheap and affordable.
Staff
The number of employees in a company can determine the level of success for a business. As a growing company, Ramcar must hire adequate staff to accelerate the expansion but to excess staff to cause redundancies in job roles and to increase the cost of labor. The staff at the poultry unit can be described as committed and productive, which is one of the aspects that have helped the growth of this segment. Compared to the industry standards, the staff are well-compensated and rewarded for their work which also works towards boosting the productivity of the business unit. The coordination across the units and store is the responsibility of the group’s manager.
Style
This represents how a firm is managed by top-level managers. The management style of the poultry group, like most other aspects of the company, is reflected in the behavior of the board chairman. He is a transformational leader who creates a vision for the company and inspires his followers to pursue it. He exercises control over almost all operations which can make him be considered autocratic. The influence of his leadership style on productivity can be hard to explore considering few complaints and the fact that the company has been heading in the right direction under his guidance.
Balanced Scorecard
The second tool that is used to assess Ramcar poultry group is the balanced scorecard. A balanced scorecard (BSC) is a management tool used to select a balanced set of objectives and indicators which reflect the strategic vision of a company (Quesado, Guzmán, and Rodrigues, 2018). Additionally, the BSC helps firms meet stakeholders’ expectations and to articulate and communicate their strategic goals, as well as to assess their implementation.
Many scholars have discussed the benefits and contributions of BCS to the performance of a business (Harden and Upton, 2016). Among these include the fact that the BSC transforms a strategy into actions where all members are required to embrace and act towards the shared vision. It can also be an information and control instrument which communicates the strategic objectives and organizational mission to the entire organization. The implementation of BSC at Ramcar has hardly been studied but is presence and usefulness can be examined from the four perspectives of BSC and how they manifest themselves at Ramcar poultry group.
Financial Perspective
The financial perspective is concerned with a monetary performance where revenues and profits are the main issues. The main challenges that a company has to address include the profit margins, cost savings and efficiencies, and revenue sources (Marr, 2020). At Ramcar, it can be argued that there has been profits and losses made throughout its existence due to the nature of the products. The poultry products are perishable which means that losses can be heavy when the right refrigeration facilities are not properly used. Generally, however, the poultry group has performed well in monetary terms with profits made most of the fiscal years.
The investments are heavy which can detrimentally influence the profit margins. With the costs of labor being relatively lower, it can be argued that production efficiencies and cost savings have been made possible.
Customer
This perspective focuses on those performance objectives that are related to the consumers of the products and services offered by the company. Aspects to be addressed in this perspective include market share, brand awareness, and customer service and satisfaction (Marr, 2020). At Ramcar, the company has emphasized managing the consumer experience by producing the best possible products.
As explained above, the board chairman often exercises direct control over the feed quality and prices of the chicken. This way, the quality of the end product can be assured. Most important, however, is the fact that his involvement in the chicken production instills a sense of assurance among consumers who appreciate his quest for high standards in the production process. Additionally, managing prices means that he can influence the affordability of the products which also contributes towards building consumer experience. Overall, the poultry group has ensured consumers are satisfied with the products across all stores.
Internal Processes
The internal processes perspective focuses on those activities implemented in pursuit of finance and customer-related objectives. These include process improvements, capacity utilization, and quality optimization (Marr, 2020). The financial performance of the poultry group depends on the ability to produce high products which work well to improve the experiences and satisfaction of the customers. Affordability, as mentioned above, is influenced by the efforts of the board chairman to influence the prices of chicken.
The flat organizational chart plays a key role in enhancing the efficiency of processes due to quick decision-making processes. Some decisions, however, are made by higher-level managers which can negatively affect these internal processes. Overall, the internal processes at the poultry group have been designed to yield the best possible outcomes.
Learning and Growth
The fourth perspective is concerned with the more intangible elements that drive performance. Human capital, for example, is related to the talent, knowledge, and skills possessed by the employees. Information capital includes the information systems, databases, technology infrastructure and networks for gathering and analyzing data. Lastly, organizational capital comprises leadership, employees, teamwork, and culture among others.
These aspects are not visible in the poultry group, for example, there are not many new technology infrastructures such as the cloud-based systems. Hiring top talent, especially in critical divisions such as breeder operations and processing plants present the poultry group with productive human capital. The culture and leadership established by the board chairman comprise the organizational capital which has seen Ramcar become one of the most progressive enterprises in the industry.
SWOT Analysis
Another tool for assessing business performance is the SWOT analysis. It is useful in strategic management, especially with planning and allocation of resources (Gurel and Tat, 2017). Additionally, a SWOT analysis helps to build organizational and competitive strategies by examining internal and external factors affecting a business. The aspects that work well are appreciated and those that hinder progress are addressed. A SWOT analysis of poultry group reveals the elements behind its success and those that could be derailing it.
Strengths
Organizational strengths are internal to a company and comprise those factors deemed to be favorable. According to Gurel and Tat (2017), strengths also entail properties and abilities which offers a company an advantage over competitors. The poultry industry is highly competitive considering the number of businesses, including franchises, their financial capabilities and their market share. The major strength of the Ramcar poultry group is the reputable brand image as a result of being part of the ramcar group of companies. Venturing into this industry and carrying this name, which can be considered a vital resource, ensures that loyal customers from other segments can also become purchasers of these products. The financial power of ramcar is also high which makes it possible for the group to make the necessary investments and to financially compete in the industry.
Weaknesses
Another component that examines the internal environment is organizational weaknesses. It has been defined by Gurel and Tat (2017) as those aspects which are disadvantageous to a firm and comprise of a situation where current abilities and capacities are considered weaker than the competition. Operational complexity can be considered a major weakness because this group is part of the division with the greatest number of large facilities.
It manages over 300 stores and undertakes activities such as sourcing and delivering the products. The horizontal nature of the organizational chart at this level means a huge workload to the manager which affects his or her effectiveness. Fewer resources can also be considered a weakness because some competitors have more. For example, Bounty Agro Ventures Inc. was overseeing the construction of between two and three new stores per day in 2017 as explained by Cruz (2017). Internal expansion is, therefore, limited by the unavailability of adequate funds.
Opportunities
SWO analysis also involves examining the external environment of a business to reveal the positive and negative factors. Organizational or environmental opportunities can be described as those situations that favor an activity or those advantages and driving forces driving progress (Gurel & Tat, 2017). Opportunities tend to yield positive results for a company if successfully utilized. At Ramcar poultry group, the main opportunity is the fact that there exists a large untapped market where room for expansion is massive. According to Berkhout (2020), chicken has overtaken pork as the main source of protein in the country.
This means that a huge market is emerging which will need to be served. The expected demand growth means many firms will seek to enter the market and those already in the market can use their experience and knowledge of the industry to cement their position. Greater market share can be amassed with greater investments such as new stores and further development of the industry’s supply chain.
Threats
The last component of the SWOT analysis framework is environmental threats. According to Gurel and Tat (2017), these entail conditions external to the company that tend to jeopardize the actualization of corporate goals. They can cause a firm to lose to competitors and reduce the ability to exploit environmental opportunities. The major threats faced by Ramcar poultry group is the growing competition from firms such as Bounty Agro Ventures Inc. which has been pursuing aggressive expansion. Considering the shifts in the general food market, it can be argued that those firms formerly offering port products will have the capacity to enter this market which further increases competition. Further growth and success of the poultry group will, therefore, depend on how well it handles this situation.
PESTLE Analysis
Political Factors
PESTLE analysis focuses on examining the external aspects that influence a business. The political environment comprises factors such as stability or instability, changes in government composition, national and political policies, political consequence, and government support for businesses and industries (Perera, 2017). An analysis of the political environment of the Ramcar poultry group reveals that the company can operate in an improving political climate. The government, led by the current president, has vowed to eliminate crime and corruption which are intended to stabilize the country (Timberman, 2019).
Building a government will help businesses grow because of the protection they enjoy. However, it can be said that under the current administration, both progress and regression have been made which increases uncertainty. This means that the political climate does not fully offer the desired assurances to a business.
Economic Factors
The second component of the PESTLE framework is the economic environment. This includes elements such as income levels, poverty issues, inflation and exchange rates, literacy rates, education levels, customer attitudes, and gender distribution (Perera, 2017). The economic environment affects the survival of a business by influencing the conditions of the markets, including the ability of consumers to afford the products. Since one of the main objectives of a company is to make profits, the economic environment determines the ability of a firm to perform financially. In the Philippines, the economic situation is favorable because poverty levels are improving and many consumers can afford the company’s products. Additionally, the Philippines have a strong economy which, despite the current pandemic, assures businesses of success upon recovery.
Sociological Factors
This aspect is also referred to as a socio-cultural environment which affects the success of a business. It comprises attitudes towards the firm, religious beliefs, perceptions, and ethical values (Perera, 2017). The cultural and traditional values of a country affect how a business operates and the extent to which it appeals to the consumers. Today, many people are changing protein consumption patterns from pork to chicken. This means that the population positively perceived chicken as the perfect alternative to pork and, therefore, the company’s products can be well-received and embraced by the consumers. There are no cultural or religious believes that prevent or inhibit the consumption of chicken and other poultry products. Therefore, the sociocultural environment can be considered favorable for the Ramcar poultry group to operate.
Technological Environment
The technological environment is considered highly relevant to the tech industries. However, it is important to acknowledge that technology is critical across all industries as it revolutionizes business processes. Factors such as technical competency, upgrades, and infrastructure, as well as the productivity of hardware and software are taken into consideration (Perera, 2017). Ramcar poultry group does not operate in an industry where technology is critical either as a competitive aspect and a factor of production. However, the technology is part of the processes and the failure to adopt the right technologies can detrimentally affect its productivity.
The company embraces technical innovations in areas such as hatcheries and processing plants. The fact that there are many competitors in the industry means that those with better technologies can gain advantages and, therefore, it becomes crucial for the poultry group to adapt.
Environmental Issues
The environmental factors are also referred to as ecological, which is concerned with the natural environment. Issues such as global warming and the carbon footprint of industries are affecting how companies operate and what measures are implemented as mechanisms to protect the natural environment (Perera, 2017). This is an area where Ramcar poultry group faces some problems because some of its activities have negative effects on the environment.
Poultry production, as it is the case with most large scale agricultural practices, contributes significantly to water, land, and air pollution. The use of chemicals, including heavy metals, leads to the degradation of the earth. With many people globally becoming aware of these implications and embracing sustainability, the company must consider implementing some mitigating solutions to lower its carbon footprint.
Legal Factors
The legal environment mostly affects the compliance issues of a company and its activities. It comprises laws and regulations which vary across industries. These include consumer affairs and protection, quality, competition, and environmental. Ramcar poultry group majorly faces regulations regarding the quality of the products, as well as safety in the facilities. However, it is important to acknowledge that the Ramcar poultry group complies with major laws, including safety, quality, and environmental. Food protection laws are a major part of the industry which are enforced by the Department of Health (Weiler and Fernandez, 2019). Considering the number of people handling food items at the company, compliance means keeping the highest possible safety standards.
Other Tools
Multiple other tools can be used to assess the poultry group and its performance in the automotive industry. In this case, one of the most appropriate tools is the Porter’s five forces model which was developed by Michael Porter (Baburaj and Narayanan, 2016). This framework examines the external competitive environment of a firm and comprises five elements.
First, the threats of new entrants imply that where it is easy for new companies to enter the market then the current ones are likely to lose market share and customers to them. In the poultry industry, any company hoping to start a business does not require heavy financial investment meaning this threat is higher. Many franchises and the potential of pork farmers and related businesses venturing into this growing market also increase the threat.
Second, pressure from substitute products is the ability of the customer to obtain items that serve the same purpose. Poultry products are abundant in multiple businesses meaning the threat of substitutes is high. In this market, the pressure grows even further because other types of meat and protein sources can be used as perfect substitutes for poultry. Third, the bargaining power of suppliers is concerned with the ability of suppliers to significantly influence a company’s decisions and processes (Baburaj and Narayanan, 2016).
The poultry market comprises not only the producers of the products such as Ramcar group but also farmers who also supply the industry with the products. Additionally, supplies such as feeds are part of the chain and, due to the high number of suppliers, their bargaining power is only mild.
The fourth element in the framework is the bargaining power of buyers. Customers demand high quality and lack of this attribute can force them to switch to competitors. The buyers have many options for poultry products and a single company loses clients to others as a result of mistakes in handling the buyers. Aspects such as pricing also affect consumer loyalty and, therefore, Ramcar’s customers can be perceived as having relatively high power.
The last force is the rivalry among current competitors in a market. The level of rivalry is great in the food industry where aspect such as product introductions and price discounts influence consumer preferences. In the poultry segment, many large companies offer direct competition to the Ramcar poultry group. This framework, therefore, shows the competitive position of Ramcar poultry group and those factors which could offset it. It can be argued that the external environment is sensitive and responsive meaning the performance of Ramcar poultry group will depend on successful strategic management.
Recommended Changes
The business unit which has been assessed in this paper shows great potential for growth and success. However, some external and internal elements will need to be addressed to facilitate further growth. The internal processes, for example, can be modified to allow for greater efficiencies. Being a part of a larger vertically integrated company, it is recommended that a more vertical structure be adopted to delegate some of the core functions to lower-level staff to reduce the burden on the management. This means that the group can split into two units where one deals with the production and the second deals with sales.
The production section can address all matters surrounding hatcheries, rearing, and processing plants. The sales unit can focus on the management of the 300 stores and outbound logistics. However, to avoid redundancies, the logistics department can also handle the inbound logistics which involve transportation of supplies to the company’s facilities.
The second recommendation is that the company needs to adopt new technologies in poultry farming to help improve competitiveness. Technological advances in farming across the world, especially in Asia, have revolutionized how farmers conduct their business. An article by Reus (2020) examines a few of these technologies that can be embraced. Artificial intelligence and augmented reality have emerged as among those that can revolutionize poultry farming. The production and operational efficiencies that can be gained from such technologies include cost saving and higher quality products. The technological environment in the country may not be at the same level as larger economies such as China but it is still possible to access and commercialize these technical innovations.
Lastly, it is recommended that Ramcar’s poultry group should invest further in the supply chain to help boost further growth and to ensure a firm grip on the industry. Currently, the firm’s practices include hatcheries and rearing of chicken, which is one of the most critical activities. However, there are small scale producers and farmers that have their infrastructure and can help supply the company with poultry products. This will make these farmers core suppliers help increase the capacity at Ramcar. The growing demand may not be adequate to assure a company that investing heavily in more infrastructure is the right path to follow because the sustainability os the demand remains unknown. A better alternative, therefore, is to source chicken and other poultry products from third parties. this can be a short term solution or a long term strategic objective for the company.
Organizational Chart with Suggested Changes
The organizational structure of the Ramcar poultry group does not change much after the recommended changes. However, the unit is split into two broad functions where one deals with the production and the other handles sales. I will still be the head of the division, but two subordinate managers will answer to me. The rest of the junior staff will answer to these managers and my responsibility changes to coordinating these two units and offering them directions. As a leader, I will be responsible for the growth and sustainability of the unit and answering to the food group executive. The new organizational chart after the changes will be as shown in Figure 2 below.
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