Question

The XYZ company supplies products to a number of original equipment manufacturers (OEM's). It employs 5,000 mostly unionized workers and generates about $2.2 billion in revenue annually. In 2002, it won an "Excellence Award" from one of its major client companies for having supplied an OEM product at the quality level of ten defects per million in three consecutive years, thereby exceeding the specific target of 15 defects per million set by this client.

However, the corporate parent of the XYZ Company was less than happy with its financial performance. It declared this subsidiary a " troubled operations" in 2002, giving notice that if its business performance did not get better within certain time frame, the XYZ Company would be closed down or divested. The specific financial targets set by the corporate parent consisted of (1) net income (NOPAT) to sales ratio at 5 percent (2) earning before interest and tax (EBIT) to sales ratio at 10 percent, and (3) return on assets at 22,5 percent.

Needless to say, management worked diligently to find ways to improve the company's business performance. One strategy was to induce 700 early retirements from the unionized workforce by November 2002. As of April 2002, only 480 workers signed up for this heavily promoted early retirement program that qualified them each to receive a $ 35,000 cash incentive. Besides encouraging workers to retire earlier, what other strategies do you think the XYZ Company should pursue to achieve all three of the noted financial targets?

Answer 1

1. They should Provide the some monetary or non monetary benifits to the existing employees, so they will not take the early retirement. This will impact in way, The company may retain there experience people as well as they can reduce the cost of hiring a new employees.

2. Company should start giving the incentives for the workers who works on the production, so if the workers get a Incentives they will produce defect less product & this thing will increase the sales.

3. Company should try to find out new supplier of the raw materials who will give them raw material at low cost with same quality.

4. Company should provide the incentives for the sales force who actually sale the products. If the company start giving some % of the sales amount as a Incentives then definately all the sales person will start selling more & more product so they can get more incentives.

5. Company should appoint a One quality Control team who will take care of quality of every product, This will help them to reduce the defective products.