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  1. 1. Fundamentals of Management Group Assignment (ICT 2007/08) Polymer Products Fundamentals of Management [ICT 1005] 1
  2. 2. Fundamentals of Management Acknowledgement Our special thanks for our external guide Mr. Ajith Silva & Mr. Sarath Abesinghe for their valuable guidance & suggestions given to us from time to time which lead to successful achievement in this difficult task. We would like to take this opportunity to thank the staff of Polymer Products for their kind help and support. We express our deep sense of gratitude towards our Management lecturer, Dr. Shiromi Arunatileka for her excellent motivation & guidance to our project. The knowledge we gained during this assignment is included as much as possible in this report, but the experiences and the excitement will never be included in books, and never be erased from our hearts. And lastly we are very thankful to those who directly and indirectly helped us to accomplish our goal. Group Members Registration Index No. Name No. 2008/ICT/074 08020744 W M B M Wijesinghe 2008/ICT/043 08020434 V H Padmathilake 2008/ICT/010 08020108 J F Fazeena 2008/ICT/084 08020841 M K A M Jayarathne 2008/ICT/070 08020701 W P M M Weerasinghe 2008/ICT/057 08020574 T M L P Samarakoon 2
  3. 3. Fundamentals of Management Table of Contents • Company Overview 1 • Products 2 • Production Process 5 • Organizational Structure 8 • 5S System in Polymer Products 10 • Awards and Rewards 12 • The Marketing Division at Polymer Products 13 • Social Welfare Activities done by Polymer Products 15 • Human Resource Management 16 • Analyzing The External Environment 19 o Michael Porter's Five Forces 19 o PEST Analysis 23 o Handling Macro Factors (A New Idea) 27 • SWOT Analysis 30 • Strategy Development 33 • References 37 3
  4. 4. Fundamentals of Management Company Overview Polymer Products is a small scale family owned, rubber products manufacturing company, It is located at Aruggoda, Panadura, about 30 km south of Sri Lanka’s Capital City, Colombo. The company was founded by Mr. Ajith Silva, a Sri Lankan Rubber Technologist, in the early 1980s. Vision "To become a world class rubber products manufacturer" Mission "We are in the business of serving customers for diverse industry requirements through innovative development and manufacture of rubber based products" Values • Business with Honesty & Integrity • Customer Focused • Quality conscious • Thrust for Continual Improvement • Learning Culture • Respect and care for people & environment Arriving at Its Current Position Mr. Ajith Silva, a Sri Lankan Rubber Technologist, is the founder of the Polymer product company. First he started this industry in his house in Kuruppumulla himself. He had only one milling machine and no workers. Then he improved his works and got five workers to help him. Then he bought a land in Aruggoda and established the Polymer Product Company. They produced mud covers as their first production. Today Polymer Product Company has become a one of the famous company in Sri Lanka. Now it has 32 members in Polymer Product family involving staff members. Finally now they started to export their productions. 4
  5. 5. Fundamentals of Management Logo This is the logo of Polymer Product Company. They use two P letters to representing the two words “Polymer” and “Products”. They use this logo for their all their activities such as products and advertising. This is another logo that they use. From this logo they represent about their products. They also show about their certificates. It shows ISO 14001:2004 Environmental Management Standard certificate and ISO 9001:2000 Quality Management Systems certificate. Products Time when the Polymer Product company was started, they produce mud covers as their major production. Polymer Product company is the first company that produce mud covers in Sri Lanka. So they had a vast market for their productions. But today they stopped producing mud covers. Now they work only for orders. They don’t have continuous production process. But they have sufficient orders from Buyers. Today they have four major buyers. • Sri Lankan Water Board (EPDM rings) • Colombo Dockyard PLC (Dock Fenders) • Orange Company (Sealing covers) • Sri Lankan Navy (Boat fenders) Other than those orders they got many orders from island wild buyers. The company accepts any order under their production areas. They can also make new molds for their customers. Now they started to export their products. First they export Fenders to Maldives. But they did it indirectly. They did it through the agent. In 2008 they did their first direct export. They export convoluted tubes to Sweden. Today they are going to expand their major product categories. We can divide their products in to three major categories according to their usage. 5
  6. 6. Fundamentals of Management Major Product Categories • Automotive • Marine • Other industrial Automotives They produce many rubber parts for Automobiles. Like, • Suspension bushes • Cab mounts • Mud Flaps • Carpets • Seals Marine They produced some special productions that use for protection of the ships. Like, • Dock Fenders • Boat Fenders • Anti-vibration pads • Hatch seals • Oil seals • Buffers 6
  7. 7. Fundamentals of Management Other industrial Except Automotive and Marine they produce vast area of productions for other industries. They produce industrial products like, • Pipelining • Hand built hoses • Couplings • Water seals, • Gate seals • High voltage resistant insulating mats • High voltage resistant shrouds • Armored industrial hoses • Rail pads • Cushion Connectors • Gaskets • Extrusions 7
  8. 8. Fundamentals of Management Production Process Raw materials Mainly they use synthetic rubber for their productions. Sometimes they use natural rubber. They use RSS sheet rubber for some products. It is depend on the product. They buy synthetic rubber from five main companies, like. • Glocame enterprises. • Richard Peiris company Ltd. They buy natural rubber from Aruggoda village. There are big rubber cultivations around the company. They never go to Colombo to buy rubber for small profit. For some special products they import two kind of rubber from Singapore. They buy chemicals that they want for products from Chemical Industries (Colombo) Limited (CIC). Rubber Latex Rubber Sheet Synthetic Rubber Mixing & Milling First they mixed rubber and other chemicals together and mill them using milling machines. They make rubber sheets according to their products. They have two milling machines. One is use to mil black rubber and other one is use to mill white rubber. They change the colors using chemicals. They use those different color rubbers for different products. 8
  9. 9. Fundamentals of Management Chemicals Milling Machine Laboratory Computer Result Testing Then they send sample of milled rubber to their laboratory. Inside the laboratory they test about tension, flexibility and mixture of the milled rubber using their high technical machines. After those testing they issue the rubber lot to production process. 9
  10. 10. Fundamentals of Management Cutting When the tested rubber lots are issued, first they cut those milled rubber into sufficient peaces according to their products. This cutting process is done by workers. For some special products like sealing covers, they make rubber wire using white rubber. Rubber Wires Rubber Pieces Producing Finally they use those cut rubber for their products. They have specially designed molds for each product. The pack those cut rubber inside those molds and press. Inside those molds the rubber will automatically vulcanized under high temperature and high pressure. After five mints they get their final product. But for some products they use special methods. They make sealing covers in different way. They vulcanized them inside a huge stove. They make some of their products without using machines. As an example they produce fenders by workers hands. Molding Machine Manual Works 10
  11. 11. Fundamentals of Management Organizational Structure Organizational structure refers to organizational subunits and the way they relate to the overall organization. Depending on the goals of the organization and its approach to management, a number of structures can be used such as hierarchical, project, team and matrix. Polymer products have a hierarchical organizational structure. 11
  12. 12. Fundamentals of Management Hierarchical organizational structure Hierarchy of decision making authority In the hierarchical organizational structure, the hierarchy of decision making and authority from the strategic management to non-management employees is shown in figure above. The strategic level, including the president of the company and vice president, has a higher degree of decision authority, more impact of corporate goals and more unique problems to solve. In most cases, major department heads report to a president or top-level manager. Manufacturing and marketing supervisors report to vice presidents of manufacturing and marketing respectively. Other positions may not be directly involved with the formal chain of command but may assist a department or functional area. For example, legal counsel reports to the president. The trend, today, is to reduce the number of management levels in the hierarchy of organizational structure. This can be achieved by empowering employees at lower levels to make decisions and solve problems without needing permission from midlevel managers. Information systems play an important role in empowering employees. They can directly provide required information to employees at lower levels of the hierarchy or the employees may develop or use their own personnel information systems. 12
  13. 13. Fundamentals of Management 5S system in Polymer Products What is 5S? 5S is a method for organizing a workplace, especially a shared workplace (like a shop floor or an office space), and keeping it organized. It's sometimes referred to as a housekeeping methodology, however this characterization can be misleading, as workplace organization goes beyond housekeeping The key targets of 5S are workplace morale and efficiency. The assertion of 5S is, by assigning everything a location, time is not wasted by looking for things. Additionally, it is quickly obvious when something is missing from its designated location. Advocates of 5S believe the benefits of this methodology come from deciding what should be kept, where it should be kept, and how it should be stored. This decision making process usually comes from a dialog about standardization which builds a clear understanding, between employees, of how work should be done. It also instills ownership of the process in each employee. Explanation on 5S concept • Phase 1 – Seiri (Sorting) Going through all the tools, materials, etc., in the plant and work area and keeping only essential items. Everything else is stored or discarded. • Phase 2 – Seiton (Straighten or Set in Order) Focuses on efficiency. When we translate this to "Straighten or Set in Order", it sounds like more sorting or sweeping, but the intent is to arrange the tools, equipment and parts in a manner that promotes work flow. • Phase 3 – Seisō (Sweeping or Shining) Systematic Cleaning or the need to keep the workplace clean as well as neat. At the end of each shift, the work area is cleaned up and everything is restored to its place. • Phase 4 – Seiketsu (Standardizing) Standardized work practices or operating in a consistent and standardized fashion. • Phase 5 – Shitsuke (Sustaining) Refers to maintaining and reviewing standards. Once the previous 4S's have been established, they become the new way to operate. Maintain the focus on this new way of operating, and do not allow a gradual decline back to the old ways of operating. However, when an issue arises such as a suggested improvement, a new way of working, a new tool or a new output requirement, then a review of the first 4S's is appropriate. 13
  14. 14. Fundamentals of Management There will have to be continuous education about maintaining standards. When there are changes that will affect the 5S program - such as new equipment, new products or new work rules - it is essential to make changes in the standards and provide training. A good way to continue educating employees and maintaining standards is to use 5S posters and signs. 5s in polymer products Polymer products has made improvements in housekeeping by implementing 5S very successfully in the company and all employees are getting benefited by applying practical 5S! 14
  15. 15. Fundamentals of Management Awards and Rewards • ISO 9001:2000 QMS - May 2004 • ISO 14001:2004 EMS – June 2007 • Provincial Productivity Award – 2006 – Small Scale Manufacturing Sector – Western Province - Commendation Certificate • 5S – February 2007 – overall 2nd place from selected 10 companies under the pilot program of productivity & Quality improvement Program (PQIP) conducted by MOID • Production Productivity Award 2007- Small Scale Manufacturing Sector-Western Province - 2nd place • National Productivity Award 2007 - Small Scale Manufacturing Sector - Special Commendation Certificate • Techno 2002 Engineering Exhibition – Best Display of Local Products – Merit Award • Techno 2003 Engineering Exhibition – Best Display of Local Products – Merit Award. • Provincial Productivity Award 2006 – Western Province – Special Commendation Certificate • Productivity & Quality Award 2007 – Ministry Of Industrial Development – 2nd Place • Provincial Productivity Award 2007 – Western Province – 2nd Place • National Productivity Award 2007 – Special Commendation Certificate 15
  16. 16. Fundamentals of Management The Marketing Division at Polymer Products The marketing process is one of the most important processes that a company should have in order to retain in the industry. The Marketing Division at Polymer products has a workforce who are concerned with effective delivery of finished products to the customers .Their Marketing Division also consists of a committed staff who ensure that every order is fulfilled and products are dispatched on time every time. And they provide free distribution facilities to individual orders. So the customers can get maximum service from the marketing experts. Modes of Marketing Procedures By observing the marketing procedure of the company it is found that they are not using the marketing activities intensively. They mainly rely on the following modes of marketing. • The web site of the Polymer Products • Through business information directories. • Actively taking part in industrial exhibitions held nationally and internationally. • From word to word. They mainly rely on their web site for marketing activities. Their highly sophisticated web site allows the customers to search for the information regarding the products of the company. The company has subscribed in business information directories to attract new customers to the company. As a marketing strategy they actively take part in industrial exhibitions held nationally and internationally. In year 2007 they took part in an industrial exhibition which was held in Germany. This paved them the path to enter the international market. They mainly deal with the European market. The company employs an informal and unreliable mode for marketing. It is the mode of marketing from word to word. The new customers come to know about the company through the existing customers. Analyzing the Modes of Marketing Procedures The company does not possess a marketing centre or any other branches in the island. So this is a disadvantage to the company. Because the new customers should come to the factory site in order to place a new order. This is not convenient to the customers. The company does not have any active marketing campaigns or processes. So this is a major disadvantage to the company. Because the new customers and potential customers are not easily come to know about the company and their products. 16
  17. 17. Fundamentals of Management The web site of the company offers all the information regarding their products and services, but it does not enable the customers to place new orders. So the potential customers are not encouraged to get the services from the company. The business directories are widely used by the company to employ the process of marketing. And business directories are not user friendly and are not easily accessible. So the customers are not encouraged to search business directories to find information regarding the company. So it is a disadvantage to the company. Actively taking part in industrial exhibitions held nationally and internationally is the most effective marketing mode that they have implemented. They were able to get new customers from other countries. They effectively market their products among the customers. 17
  18. 18. Fundamentals of Management Social Welfare Activities Done by Polymer Products Polymer Products is a company which strongly believes in the social well fare of its employees and their community. The management is engaged in best practices to up lift the socio-economic status of their employees. So they have taken following measures to up lift the socio-economic status of their employees and of their community. • Polymer Products is a company where the production process mainly relies on synthetic rubber. But they purchase a small amount of natural rubber from the local community rubber farmers. They provide a fixed price for the natural rubber produced by the local community farmers. The company’s main intention is to up lift the local natural rubber production • The company has a welfare society to assure the welfare activities are done effectively. The welfare society has a welfare fund initiated by the proprietor and maintained by the employees. The welfare society ensures the harmony among the employees and their financial needs are met effectively. In an event of a death, marriage, in an accident the welfare society provides financial aids to the employees. • In order to motivate the employees the company held an annual get together meeting of the employees and their family members known as Polymer-Day. On Polymer-Day the company offers scholarships to students. • The company provides the employees with a package of food items annually as a welfare activity. The employees are given a T shirt embedded with the company logo to motivate them. • The employees with school children in their families are given an incentive of 4000.00 rupees to purchase stationery for them. The employees are petty loan in monthly basis. And they are also given a loan under a very low rate of interest which is payable in installments. • The company actively involves in the social community development activities. Several blood donation campaigns were held under the patronage of the company. They provide financial funds to carry out social activities. 18
  19. 19. Fundamentals of Management Human Resource Management According to the hierarchical organization structure it is clearly seen that no particular person or division is assigned for Human Resource Management responsibilities of the company. Yet it is handled by the CEO as well as the General Manager of the company through various means and an established society named the “Welfare Society”. The Company’s HR plan is made in collaboration with the business plan in order to achieve organizational goals and targets. The job analysis of the company is quite simple in comparative terms. The job description of each job explains the specific duties, responsibilities, limitations of authorities, code of conduct, remuneration policies, methods of performance appraisal, employment benefits, nature of termination and dismissal. According to the job specifications of the company the manufacturing job holders are not expected to have any special qualifications in handling and working with machines. But the office staff as well as the lab technician is expected to have specific educational and professional background. And commonly every job holder is expected to be within particular age limit at the time of recruiting and with other qualifications such as communication skills, interpersonal skills and most importantly team work. The company’s main sources of recruitment are existing employees of the firm as well as other firms, industry recruitment, output of universities, job agencies and output of professional bodies. A selection process is undertaken in order to recruit the most suited candidate for each job. Mainly two methods of selection are being taken place. In selecting each candidate a one to one interview is taken place by the GM and for the office staff an additional written test is held which is basically an aptitude test. A standard induction method is not being practiced yet the familiarizing to the company is done in an ordinary manner. Each employee recruited undergoes an on the job training which is done through demonstration, instruction, supervision and mentoring. Each employee has to undergo a four years probation period on which annual salary increments and promotions takes place. Within the organization the main method of motivating employees are through salaries and other benefits derived. Each employee is granted an annual salary increment which is a custom. Apart from the basic salary an attendance bonus of Rs.750 per month is granted when sick leave (7 days 19
  20. 20. Fundamentals of Management per annum) and casual leave (7 days per annum) is not taken for that particular month. The production work is being handled in 3 shifts 6 a.m-2 p. m, 2 p.m-10 p. m, 10p.m-6 a.m. At the beginning of every month the relevant shifts are being assigned for each employee and the shifts are being rotated each month. Food is being provided for each employee during all shifts which is bought from an outside vendor. Normally Saturday is a half day while Sundays and other mercantile holidays are provided. But if special orders come in hand production process will take place and overtime will be granted according to the hours worked. Even if the company is into JIT production it rarely has working days without production orders. If such days come across the time will be spent to improve the 5S system within the organization. Apart from the above mentioned benefits company provides many other facilities to its employees through the welfare society established within the organization. Each employee is a member of the welfare society. Each employee contributes Rs.50/= per month for the welfare society while the company contributes thrice as the amount which employees contribute per employee. Per month any employee can obtain a petty loan of Rs.1000/= which is embedded with an interest of Rs.50/=, and per month a selected employee will be granted Rs.15, 000/= welfare loan which is to be paid within 15 months with an interest of Rs.50/= per month. Both the interests are directed towards the welfare society funds. Annually on 1st of January the company celebrates “Polymer Day”. Families of each employee attend the organization for the get- together. At which for all the school children of the employees books and other stationery items are gifted. While three selected children will be awarded with full scholarships until university education which is completely sponsored by the company. For the Sinhala & Tamil new year the welfare society provides a hamper of essential food items worth Rs.3000 of which the value increasers each year. And every employee is provided a T-shirt with the company logo. And at the end of the year, each employee with school children are been compensated with Rs.4000 per child, to obtain other necessities for attending schools. Apart from the above the employees are compensated at incidents such as marriage and deaths according to the company rules and regulations. Workers are entitled to receive EPF & ETF at the time of retirement. For EPF workers contribute 8% per month & the employer contributes 12% per month resulting in 20% of total earnings per month per employee. And for the ETF the employer contributes 3%of the earnings of an employee per month. The company has taken many proactive actions ensuring health and safety at the workplace as it is important in the current organizational standards. The company has provided safe means of access and safe place of employment. And work is done in confined 20
  21. 21. Fundamentals of Management places which have taken precautions to prevent workers from dust and harmful chemicals. Dust collectors are used at necessary places to collect the dust and they are being disposed according to the ISO standards. In case of fire the factory building is distinctively marked with fire exists. The fire escapes are properly maintained and free from obstruction. Safety goggles are provided at work for the protection of eyes. And a uniform is provided for each employee. Proper lighting conditions are provided with sanitary convenience, drinking water, washing facilities and first aid is provided. Annually ISO audits takes place to examine the maintenance of necessary standards. Therefore company has taken a great care in maintaining occupational health and occupational safety within the company premises. The company’s adoption of 5S system has contributed in a major way in reducing industrial accidents which are caused by health hazards such as physical, chemical, psycho- social & ergonomic factors. The above safety management technique has helped the organization to achieve safe jobs at a safe environment while making the workers to adhere to safety conditions. According to the company’s inner factors the company has no major disciplinary problems. But if any misconduct appears firstly the employees are being advised in an informal manner. But if the misconduct continuous it would lead to a disciplinary procedure which would consist of preliminary investigation, oral warnings, written warnings, suspension, withholding of increment, demotion and finally termination. As the social responsibility of the company it is engaged in educational development activities such as permitting school students as well as other interested parties to visit the company and acquire knowledge, organizing blood donation camping’s and helping in many other means to schools and religious institutes around the geographical area at which the company is situated at. 21
  22. 22. Fundamentals of Management Analyzing the External Environment We intend to analyze the external environment of the Polymer Products Company in terms of Porter’s Five Forces analysis and PEST analysis. Michael Porter’s Five Forces Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. As an example, Dell would analyze the market for Business Computers. Five forces analysis looks at five key areas namely, 1. Rivalry of competitors 2. The threat of entry 3. The power of buyers 4. The power of suppliers 5. The threat of substitutes 22
  23. 23. Fundamentals of Management 01. Rivalry of competitors Polymer Products is concerned about the production of rubber products. So it operates in the rubber products industry. There are industrial giants operating in the market where Polymer Products is operating. Therefore the company has many competitors to fight with. The main competitors are namely • Richard Pieris & Co. Ltd • Samson Rubber Products (PVT) Ltd The other competitors pose a threat to Polymer Products, because they too produce identical substitutes to products of Polymer Products. As we analyze the rubber products in the market quantitatively and qualitatively we see no differences in the products. So we are unable to differentiate the products of each rubber items producer. Therefore the products of the Polymer Products have a range of substitutes produced by the other producers. So this is very threatening to the company. When the market is observed carefully the rubber products produced by the other competitors are equal in quality and even the prices are the same. The competitors are more sophisticated than Polymer Products. So in order to compete with them Polymer Products has implemented the strategy of operating the factory efficiently. • Richard Pieris & Co. Ltd Richard Pieris and Co. Ltd. is one of the largest and most successful diversified business establishment based in Sri Lanka. Being one of the oldest companies with a 75 year old history, it is also is one of the largest employment provider in the private sector in the country. The group enjoys of its local market leadership in its traditional sectors of Rubber, Tyres, Plastics, Retail and Distribution. In addition the Group has in recent times ventured into Plantations, Financial Services, and Construction Logistics. Today it has developed a more global perspective through an intense campaign designed to promote its products worldwide • Samson Rubber Products (PVT) Ltd The Rubber products sector manufactures rubber based high quality molded components and accessories. These products are supplied to domestic and international markets. The companies in this sector, Samson International Ltd. and Samson Rubber Products (PVT) Ltd. specializes in molded rubber products and accessories such as Rubber hot water bottles, Jar sealing rings, Bath mats and carpets produced for international markets. V straps for rubber slippers, rubber soles and heels are some of the items produced for the inter Group footwear companies. 23
  24. 24. Fundamentals of Management 02. Threat of new entrants Currently many new companies are emerging into the rubber products industry. But most of the new companies are into producing specific type of product. And Polymer Products Company is into producing many varieties of products, therefore the threatness is only towards limited number of particular products. So it will become a great threat for them. 03. Bargaining power of the suppliers • Chemical Industries (Colombo) PLC They provide raw materials and intermediaries for their customers to enhance value of their output. Industrial Chemicals Division serves industries such as Paint, Printing Ink, Packaging, Rubber Products, Food and Personal-care, Cleaning, Leather and Textile through locally manufactured as well as imported products of their principal suppliers. The major types of chemicals that are purchased from CIC • Rubber • Accelerators • Antioxidants • Aqueous Ammonia • Oleic Acid • Pigment • Silica Fillers • Stearic Acid • Surfactants • Zinc Oxide • MultiChemi Exports (PVT) Ltd MultiChemi International Ltd was started in 1996. In the year 2000, just 4 years after inception, their commitment to quality, product excellence and sound management won MultiChemi Exports (PVT) Ltd. the prestigious ISO 9002 certification. In the 2003, MultiChemi Exports (PVT) Ltd. was also awarded the National Bronze by the Ceylon National Chamber of Industries, for Achievers of Industrial Excellence. As a recent contender in the industrial field, this award speaks highly for her excellent track record over a span of just seven years since their inception in 1996. MultiChemi International Ltd too has had her share of success when in a matter of just four years dash Car Care products became Sri Lanka’s number 1, rising to the position of Market Leader. 24
  25. 25. Fundamentals of Management 04. Bargaining Power of the customers Polymer Products is a company which produces rubber products in large quantities. So it is engaged in the mass production of rubber products. By analyzing the processes of the company it is found that for a long period of time Polymer Products has been operating in the local market only. And they have been catering directly to the local customers only. At present they are catering the following institutions on major scale. • S-Lon Lanka (PVT) Ltd • St Anthonies (PVT) Ltd • Colombo Dockyard PLC • Sri Lanka Port Authority • Sri Lanka Navy • Orange (PVT) Ltd They carry out business activities directly with the local customers but they have been carrying out their business activities indirectly with the foreign customers via local customers and they did not directly export their products to the international market. So their threshold of the market was confined only to the local market. But they were able to break up their bounds and enter the international market. In year 2008 they made their maiden export of convoluted tubes to Sweden .And it was a land mark in their history. And now they are able to make direct exports to the European market. The Services Rendered by Polymer Products They at Polymer Products engage qualified technicians who offer technical assistance to the rubber farmers and to their customers. They are also engaged sanitation, disinfection and water treatment activities. They advise their customers for ideal management practices. Their well trained technicians are working in this department to ensure that the products are produced at higher quality. A well equipped laboratory is dedicated to provide quality technical assistance for their customers. Their technical team also inspects the quality of rubber that is produced by local natural rubber farmers. Their technicians work round the clock, to cater to the needs of the customers. The customers are happy because most of these services are free of cost. 05. Threat of substitute product For the most of industry requirements rather than using rubber products such as rubber bushes, companies tend to use magnetic fields. As an example in some countries, to avoid the impact between train apartments they use magnetic fields rather than using rubber bushes. 25
  26. 26. Fundamentals of Management PEST Analysis It is very important that an organization considers its environment before analyzing the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization’s marketing environment is made up of; 1. The internal environment E.g.:-Staff (internal customers), office technology, wages and finance etc. 2. The micro-environment E.g.:- External customers, agents, distributors, suppliers and competitors 3. The macro environment E.g.:-Political (and legal) forces, Economic forces, Socio-cultural forces, and Technological forces. PEST Analysis which measures a business's market and potential according to external factors such as Political, Economic, Social and Technological factors. Political factors The political arena or climate has a huge influence in businesses activities, and the spending power of consumers and other businesses. • Environmental regulations: Polymer Products Company has achieved ISO 14001: 2004 for Environment Management System in June 2007. When we visited the company, we were able to understand that they are very keen about the environment. They have made excellent improvements in housekeeping by implementing the 5S program very successfully, so management and employees get lots of benefits through it. Polymer Products encourage staff to engage in food cultivation activities during their free time. 26
  27. 27. Fundamentals of Management • Tax incentives: In the Sri Lankan economy, the manufacture of rubber products has been an integral part dating back as early as the 1930’s. Since then the rubber industry has progressively expanded. There are some attractive tax incentives in the rubber industry such as; o Raw Materials: Duty free imports for export oriented projects throughout the project lifetime. o Plant/Machinery: Duty free imports o Corporate Tax: Full Tax holidays up to 20 years • Employment laws: The employees in the polymer products company are compensated according to the Sri Lankan employment rules and regulations. Workers are entitled to receive EPF & ETF at the time of retirement. For EPF workers contribute 8% per month & the employer contributes 12% per month resulting in 20% of total earnings per month per employee. And for the ETF the employer contributes 3%of the earnings of an employee per month • Political stability: Even though the political environment in Sri Lanka is currently unstable yet it has no major impact on the company, other than simple issues. • Safety regulations: According to the ISO standards implemented by the organization they are maintaining necessary safety regulations within the company premises, Such as company is providing safe means of access and safe place of employment. And work is done in confined places which have taken precautions to prevent workers from dust and harmful chemicals. • Trade Agreements: Sri Lanka depends on a continued strong global economy for investment and for expansion of its export base. The government plans an ambitious infrastructure development program to boost growth. It hopes to diversify export products such as tea, rubber and destinations to make use of the Indo-Lanka and Pakistan-Sri Lanka Free Trade Agreements, GSP+ treatment by the European Union and other regional and bilateral preferential trading agreements. Economical factors The people who do marketing need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. General economic conditions and trends that may that may be factors in an organization’s activities. 27
  28. 28. Fundamentals of Management • Economic growth: In all major export sectors has reflected an increase in total export sectors such as agricultural sector earnings from tea, coconut fiber and industrial sector last year. However, exports of natural rubber (-8.8%) dropped in 2007. But in the current year the situation with regard to exports of natural rubber have been remarkably reversed with a percentage growth of 120%. Within the manufacturers sub sector rubber products (39.4%), registered positive growth rates during that year. • Interest rates and monetary policies: Due to the economic crisis faced by the local and financial institutions interest rates are currently at a high level. This is a affecting the company in generating necessary funds. • Gross Domestic production(GDP): In the 2007 Sri Lanka had $32.3 billion of GDP and 6.8% annual growth rate. Mainly 12% of GDP was allocated in the agricultural sector. Its major products are rice, tea, rubber, coconut, and spices. • Fluctuations in exchange rates: Sri Lanka's exports (mainly apparel, tea, rubber, gems and jewelry) are estimated at $7.7 billion and imports (mainly oil, textiles, food, and machinery) are estimated at $11.3 billion for 2007. • Inflation rates: Inflation rate (consumer prices): 15.6% (2007 est.) Year Inflation rate Rank Percent Change Date of information (Consumer prices) 2003 9.60 % 37 2002 est. 2004 6.30 % 61 -34.38 % 2003 est. 2005 5.80 % 158 -7.94 % 2004 est. 2006 11.60 % 198 100.00 % 2005 est. 2007 12.10 % 200 4.31 % 2006 est. 2008 15.60 % 211 28.93 % 2007 est. The inflation rate is a measure of inflation, the rate of increase of a price index (for example, a consumer price index). The above entry furnishes the annual percent change in consumer prices compared with the previous year's consumer, and below it is a graphical presentation of the world’s current inflation rates. 28
  29. 29. Fundamentals of Management . • Government spending Nowadays Sri Lanka is spending more for the war and purchasing of oil. Due to the increase in oil prices occurred in past few months, the government faced many issues in relation to the expenditure of the development of the industries. Socio-cultural factors The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors such as demographics, lifestyle, and social values that may influence an organization from its external environment. • Health conscious • Habitants • Income distribution • Addicts • Demographic trends Technological factors Technology is vital for competitive advantage, and is a major driver of globalization. New developments in products and processes as well as advances in science that may affect an organization’s activities. • Usage of technology • Speed of technology transfer • Energy use and costs • Government research spending • Industry focus on technological effort 29
  30. 30. Fundamentals of Management Handling Macro Factors (A New Idea) Most of the theories we see had been developed to support in the analyzing. But OFAG identification goes a step further. It teaches you how to improve from the current position by looking at 4 factors, i.e. Obey, Face, Adopt and Get Influenced. It is a common understanding and acceptance that macro or external factors are uncontrollable by the organization. Yet its behavior and decisions affect the company’s practices in a major scope. But thinking beyond uncontrollability the factors should be taken into consideration at the stage of decision making. Below is a simple method designed in relation with the PEST analysis which gives an idea to use the maximum knowledge derived from the analysis to control their affection toward the organization. Political-Legal Environment Political-Legal environment is the most important external criteria, since it encompasses the government and legal system which an organization needs to function. Changes in areas of legislation government regulations, court decisions and politics are the aspects of legal and political environment that effect business organization in many ways. Laws and regulations impose various restrictions, conditions and standards on business activities as well as they try to promote and facilitate business. The company as a single unit has limited power to change political and legal issues of the environment. Yet the best method to handle political issues is to obey and practice them accordingly. The rules and regulations imposed by the government should be followed strictly. The new laws introduced by courts and other institutions should be implemented in company’s procedures. 30
  31. 31. Fundamentals of Management Economic Factors Economic factors describe the nature of the economy which directly influences the scope of the business. It affects the company’s system of production, distribution and wealth. Inflation, interest rates, purchasing power of buyers and exchange rate can be considered as the economic factors that affect the organization. As a small unit of the economy company has a high volume of limitations to change the economic factors. Therefore company can change its decisions in accordance to “Face the challenges” of the economic climate. E.g. • Companies pricing strategies can be changed in accordance with the purchasing power of its customers and exchange rate. • Its purchasing strategies can be changed in accordance with the inflation rate of the country. • Company may consider into signing agreements with its customers as well as suppliers to response towards exchange rate fluctuations. • With the identified economic trends company may be able to think of horizontal and vertical integration to face the economic conditions. Social Factors Social factors are associated with the nature of the society and the life style of people. This includes culture, attitudes, values, norms, beliefs, behaviors, social values and their influence in the selected target market or the existing market of the company. Social factors and their changes directly influences on business organizations. The company as a single unit of the society is not in a position to change social factors according to its own culture and values. Yet in order to expand flexibility company should change its social and marketing strategies by “Adopting” society’s social factors into consideration. If not no matter how powerful the company is as an individual it may fail in certain societies due to no adoption inflexible strategies. When entering into a certain identified target markets the company should change its logo in accordance with the social values and norms. (E.g. Wall mart failing in Argentina) Company’s social responsibility strategies should be changed in accordance with social values. Adopting into a society according to its attitudes and values resulting in the society trends to accept the company rather than initially rejecting it. Thus company can enter into social marketing which is a marketing effort which identifies social values and adhere to such conditions. 31
  32. 32. Fundamentals of Management Technological Environment This reflects the current stage of knowledge regarding production, distribution, process and products. Technological changes while enhancing the productive potential of some firms they may destroy others elsewhere. Technology would also change the competitive edge of firms and nations in the course of its spreading. In order to remain competitive, business organizations must abstract technological development and changes. But adopting all technological improvements and innovations charge high cost towards the organization. And yet organization cannot improve without technological enhancements. Therefore companies should only get the influence which is most relevant and suitable for the industry sector. 32
  33. 33. Fundamentals of Management SWOT Analysis The SWOT analysis is an extremely useful tool for understanding and decision- making for all sorts of situations in businesses and organizations. A SWOT analysis measures a business unit, a proposition or idea. Completing a SWOT analysis is very simple, and is a good subject for workshop sessions. SWOT analysis also works well in brainstorming meetings. We can use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. SWOT analysis can also be used for all sorts of decision-making, and the SWOT template enables proactive thinking, rather than relying on habitual reactions. The SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the SWOT headings: Here are some examples of what a SWOT analysis can be used to assess: • A company (its position in the market, commercial viability, etc) • A method of sales distribution • A product or brand • A business idea • A strategic option, such as entering a new market or launching a new product • A opportunity to make an acquisition • A potential partnership • Changing a supplier • Outsourcing a service, activity or resource • An investment opportunity So our next intention is to look at an analysis of Strengths, Weaknesses, Opportunities, and Threats that are faced by the polymer products company. These Strengths and weaknesses are arisen due to the internal environment while opportunities and threats are created by the external environment. This analysis will be carried out by summarizing the detailed description and explanation given in the previous pages of this report in to SWOT categories. 33
  34. 34. Fundamentals of Management Strengths • Polymer Products is a family owned company • Company reputation over 20 years • Established company brand name and logo • Company culture – best practices • Wide range of products, high quality and reliability • Superior product performance with product life and durability • Expertise rubber based products for specialized applications and niche markets • Brand loyal customers • Knowledgeable and experienced management • Good relationship between management and the employees • Skillful and motivated employees • Financially stable • Cooperate with lot of social welfare activities • Lots of employee satisfaction planning schemes are carried out by the company • Implementation of 5s programs Weaknesses • Size of business is small, and they have the ability to expand the company • Limited number of suppliers and employees, so they are over reliance on suppliers • Information Technology has not used as a strategic tool • Website is not well developed and they do not have detailed plan to improve it • Ineffective usage of marketing techniques and tools • Malpractices in sales promotional schemes • No connection with distributes and advertising agencies in overseas • Unimproved manufacturing process • Some gaps in range for certain sectors such as market coverage, stock levels etc... • Lack of ongoing product innovations • No branches sales outlets or strategic alliances • Less usage of Information Technology such as quality of raw materials are evaluating manually • Employees do not have specific training programs such as workshops or seminars to improve their knowledge and skills • Lack of development in production, storage and distribution • Wastage of money on propriety software (windows, xp) when there is a free open source software (Linux) 34
  35. 35. Fundamentals of Management Opportunities • Increase product range with the new products • Expand the company not only island wide but also to overseas • Product margins are high • Usage of pricing strategies • Usage of web to improve marketing strategies • Create perceived value in customers mind • Improve manufacturing capacity of the machines with new technological advances which comes to Sri Lanka quickly due to globalization. • New potential consumers, shifting from substitute products like polythene due to environmental pollution • New specialist products will be able to surprise competitors • Less existing competition with few producers in the production sector Threats • Price of raw materials increase • Ageing technology • Inflation rate • Currency fluctuations • Price of products is high • Other countries supply law price products • Competitors use e-business • Legislation could impact 35
  36. 36. Fundamentals of Management Strategy Development When developing strategies, we have analyzed the company and also the industry, so it is a challenging task. In addition to that a polymer product is a very successful prospering company that has grown for a long period. Its management has looked at many aspects and possibilities already that have made it difficult to recognize new strategies. How ever through a deeper analysis we have identified some points which polymer products have not looked at and which we believe will benefit polymer products to further prosper. The company at present is operating at a certain level of standard even with the affection of economic crisis. Yet if the company implements the strategies mentioned below the organization will be performing at a much higher level reaching impossibilities and breaking bounds. The strategies are being introduced by referring to the different aspects of the business. • Expand the products to the global market The company is with the mind of expanding with a target of reaching the global market. Yet it is stepping behind due to the lack of confidence arising with the current recession period and the economic crisis. But this can be mentioned as the best point for such company’s to expand. The larger company’s in the rubber products industry are facing a major problem due to the reducing of other industrial products which uses rubber as material (e.g. Car manufacturing). Therefore the company can introduce its products which are of high quality and according to the accepted standards at a penetrating price to capture the market gradually. This would derive customer satisfaction resulting in increase of demand at the time of (growth) • Effective usage of marketing tools and techniques Even if the company is producing high quality products its marketing techniques used are not up to the required standards. The company is mainly depending on publicity and means of exhibitions. In simple words it’s easy to say that since they are adopting JIT production they are taking it as a mean to rely on customer to find them without establishing clear methods in influencing the customer to search for them. But that is not enough for the sustainability and the expansion of the company. The company should engage in marketing strategies to romance the customer which is far beyond than just satisfying customer needs. The company should adopt a segmental marketing approach. It should specify its target markets by analyzing sustainability, measurability and accessibility of the markets. And the target market should be selected to cater. This is already taken into action with the idea of the CEO to enter into European market. Yet entering to the market should be analyzed in a boarder scope. Since the company is into business to business (B2B) products it should take into consideration the volume and frequency of purchase, value of order, credit worthiness and reputation in selecting the segments. 36
  37. 37. Fundamentals of Management Most importantly the company should position its products in the minds of its customer more accurately and tactfully. The company should engage in differentiated positioning which would be very vital for the expansion of the company. Thus to increase the marketing techniques of the organization it should engage in a suitable marketing program. This can be achieved through a marketing mix. This would indicate the intention of the organizational focus on the customer. This is very vital because if a failure in the product arises it would result in an organizational failure. And products should be placed by identifying an exact target market. In order to enter gradually into the global market with reference to the current economic situation the company should follow a marketing viewpoint to set the price. This would demonstrate the value of the offer while bridging a contact between the organizational expectations and the customer preference. It is advisable to charge a penetrating price because the company is at a stage of entering into the global market. Thus in developing the price the company should consider factors such as purchasing power of the target market, expected value of the offer, competitive and industry price levels, importance of the product and government regulations. The company should have a relevant promotional methodology to communicate with its target audience and expected customers. The promotional mix selected should be high in quality and target achievable because promotion will determine the positioning of the product in the mind of the customer. The organization should engage in advertising its products in various methods, which would reach the target customers efficiently. Advertising in local and global industrial magazines, participating in more local and international exhibitions and trade fairs can be taken as relevant examples. At present the company is maintain at a level of publicity due to the quality of its products. But necessary measures should be taken to influence third parties in a positive manner to increase its publicity. This would result in improving promoting its products. Since the company is engaged in JIT production it should follow a pull marketing strategy. Where necessary marketing techniques should be used to stimulate demand through effective communication, thus making the customer requesting the product. At this it is very important to use efficient and effective advertising and communication techniques to acquire a position in the mind of the customer. The product should be placed directly as well as through agents to the customer. This is because the company is still at appointing of emerging in to the global market. In selecting the agent factors such as trust, reliability, location, security as well as cost should be taken into consideration. Currently the company is using e-marketing concept to build awareness of the customer. For this they have establish a website which is named as But necessary improvements to the website are essential. This should make available more information of its products, their quality, improvements and their achievements. The website can be considered as an essential 37
  38. 38. Fundamentals of Management mode of distributing due to the fact of its availability, lower cost of promotion, direct access etc. The company should engage in introducing new products through research and development. Due to the product life cycle face by its products. The company should try to influence the customers in increasing their “want” for the new product. • Effective usage of human resource management Even if the company is practicing HRM in an acceptable standard within the organization it is clearly seen that the responsibilities of it is not assigned to a specific person or division. Therefore it is advisable to assign the relevant responsibilities to a particular person or department to make the HRM within the organization more organized. • Improve supplier quality measurement At present level company’s products are of high quality. But yet to enter the global market and compete with others and for the growth of the organization it should improve the quality of its products continuously. For this the organization should consider improving research and development process. And also the company should focus on adopting new technologies to improve its productivity and quality. Due to the current resources available it is mentioned that the company is checking supplier quality manually. Arising mistakes through this method is possible. But since company is mainly concerning about the quality of its products it should adopt a scientific approach to measure supplier quality resulting in increase in products quality, for this increase usage of information technology can be done. • Improve website They have not used the website as a marketing tool; it only consists about the company. However we think that they can use it to communicate with not only the customers but also with the suppliers as well. They can introduce online pricing system with the suppliers, to find out their prices of raw materials and the customers also able know the prices of the products at the moment. In addition to that it will be an added advantage for them to find out foreign markets for their products, because they are still having very limited market coverage. • Develop infrastructure When we consider the property which they have the company is stated in a very small area, because of that we think they can expand their production and also their distribution with the help of this area. The production volume of the company can be expanded at a relative phase by utilizing its resources efficiently. By referring to the company’s geographical position it is clearly seen that it is not utilizing its land efficiently. Less than half of the land is used for production and for their organizational needs. A small area of the land is used for cultivation as a means of helping its 38
  39. 39. Fundamentals of Management employees and the rest is kept unused. If the bare land is organized accurately and efficiently it can be used to improve production volume by meeting the required social and legal requirements. They can use more machines to increase and differentiate their production. In addition to that they can implement stores in that land area to increase the distribution. We think it will help them to increase their profits and to be a competitor in the local and foreign market. • Sign agreements with Suppliers Even if the company is into JIT production there are some commonly used raw materials which are purchased according to the level of stocks (traditional method). The company seems to be predicting that they are having a good relationship with its suppliers. Relationships at business are uncertain. Due to the economic crisis and at the stage of expansion in mind the company should consider on signing forward agreements with some of its selected suppliers to supply raw materials at a fixed price, within a mentioned time period at a fixed volume. The rate should be negotiated with the suppliers to be at price lower than its market price. • Increased usage of Information Technology Expand the intranet to allow for communication of mobile workers, distributors and even customers to provide their views. The management doesn’t prefer E-commerce (selling and buying over the internet) which is not what’s suggested here. It simply looks at a way of improving communication in a more secured environment. As there will be more requirements for passwords and securing methods there will be more safety for communicating confidential information. Currently Polymer products use propriety soft ware such as Windows XP as the operating system. And as they’re using registered versions these will definitely cost some money. By using free, open source soft ware as the operating system (Ubuntu, fedora etc) the unnecessary amount of money spent can be saved. When we did ask the question from the manager of the IT division as to why they haven’t thought of it he stated that open source software doesn’t provide technical support. This is incorrect. Ubuntu for example provides technical support for 3years and distributions such as edu ubuntu provides technical support for a period of 5 years. Linux systems are more secured and newest versions that are there are very user friendly and provide the same functionality as a good Microsoft version and more. 39
  40. 40. Fundamentals of Management Reference Internet • • • • Books • Stoner, A F, Freeman, E D & Gilbert, D R, 2005, Management-Sixth Edition, Pearson- Prentice Hall, New Delhi, India 40