Operation Decisions



Operation Decisions

Introduction

Company usually formulate their short term strategy in such a way that it also benefit in long run. Hence, it is essential for operation manager to evaluate different available means for production and determine most feasible strategy in order to fix them in practical manner. The main aim behind this decision is to derive maximum out-put with the minimum possible inputs. The focus of this paper would be on advising a company whether to shut down their operations completely or should they continue their operations.

Discussion

Fictitious Business Detail

Red Dragon Inc has been involved in manufacturing luminescent kites. Form last 20 years, this company has been manufacturing kites and with their high quality product and good customer service, they have been able to create a tag for themselves as a high quality manufactures and producers in different regions of America. No doubt that this company occupies a small fraction of the kite industry, nevertheless, they have been able to maintain 20% of profit margin from their operations each year. Recent years, company has been experiencing a downfall in their profitability i.e. profit margin has been dropped below Breakeven point. The reason for this dropped is due to the economic situation of the country. The management of the company, after understanding the economic situation of the country as well company financial health (reporting loss in income statement) has decided to close and shut their operation.

Current Environmental Scan Factors

Environmental scan factors of the company refers to the interpretation of the social, political, economical, technological trends and events which has direct connection with business as well as with the market and industry. In order to decide whether to continue company's operation or not, there are various factors that need to be consider (Kamberg, 2011). Market analysis which is the initial task to do, through this, one gets to know how market is performing and whether one should continue their operation or not; and if yes, then what factors needed to controlled and analyzed for feasibility. For instance, there are particular seasons for luminescent kites which is hardly for two to three months. The initial step would be to determining demand in the peak seasons and whether after that seasons, there is still market for this product or not. Evaluating manufacturing costs would be the next step concerning how much cost can be cut down without any forgo of the product quality (Sower et al., 2011).

Beside this factor, other factors are related to the profitability i.e. could company would still be in profits if production is cut to 400 units per month. The decision of hiring less skilled labor would decrease labor cost. Which fixed and variable cost can be reduced without reducing the quality factors. The level of feasibility of the operation, moving to some other area of the country or region or world for the purpose of reducing production costs (Meehan, Simonetto, Montan, Goodin, 2012).

Evaluation of the Company Financial Performance

Financial performance of the company is a crucial ...