Case Study: Hazel Introduction to Operations Management
Jao, Arold Mikko A. Kaw, Seleena Marie H.
EXPRODU XOC Mr. Joey Accuña
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Point: Hazel
Time Context:Present
Objective:To prevent depletion of her financial resources by having a continuous source of income, which would preferably continue to increase proportionately with the number of years, for support of her basic needs.
Statement of the Problem:Hazel is to choose from the most income generating method to have continuous financial stability supporting her basic and needs and current lifestyle.
Areas of Consideration Strengths
Financial Hazel has a small-scale lawn mowing business that earns meager income. y
Weaknesses
y
Opportunities
y
Threats
y
Her savings were depleted having no source of income for eight months since termination from the Fortune 500 Company. The existence of her lawn mowing business can be a good credential that may enable her to loan from a bank for financing. In case of loaning, she is to have a collateral that is a great risk ± she may lose her collateral when she loses the ability to pay off the interest.
Marketing 15years worth of experience from Fortune 500. Hazel earned loyal customers. Word of mouth ± free and indirect marketing from her current clients. Little knowledge of good marketing that is applicable to the nature of the business
y
Production/Operation Quality of service is tested ± it is good enough to satisfies her neighbors and recommend her to others.
y
y
y
y
y
y
y
y
y
Clients and friends are spreading the news about the business. Good credentials that makes her a good prospect in job application Possible entrants in the industry- new competitors may affect her sales. Existing competitors, which may have a bigger market share is hard to compete with ± it is hard to break loyal customers. Competition in job seeking with terminated employees and new workforce.
y
y
y
Unfamiliarity with the operations in terms of other variation of the service she offers that may result to poor and unwanted quality. There are other 400 people with whom she was laid off with that she could hire.
Existing competitors, who have been in the business for a longer period of time, may have already perfected their quality and services.
Alternative Courses of Action y
Expand the business
y
Continue the business as it currently is
y
Apply for another job
Evaluation of Alternative Courses of Action y
Expand the business o
o
ADVANTAGES:
Accumulate more profit
Cater to more people and have a bigger market share
More
opportunities to expand to an even bigger business
DISADVANTAGES:
Needs more capital equating to higher risk
Needs more employees resulting to higher expenses
Needs more equipment, which is hard to be addressed by Hazel¶s current
financial position
o
SWOT
Strength The current market share already has confidence in the business/management ± current market is stable. y
y
Lack of knowledge in expanding/operating the business
Weakness
Lack of knowledge in operating a bigger business. Unknown reaction of the new target market. y
Opportunities potential market to tap y
Bigger
y
Continue the business as it c urrently is. o
o
ADVANTAGES:
No need for additional capital
No need to hire more employees
No need for additional equipment
More
time to stabilize theory
DISADVANTAGES:
No growth
Loss opportunities for growth
Stagnant business
Closes the room for improvement
Threats Existing competitors already have established their market share Other areas may present unfavorable factors such as soil and weather conditions y
y
o
SWOT
Strength Accustomed to handling the current market (her neighbors and friends) and knowledge in how it works. R efinement of processes through repetition. y
Weakness
Slow development of knowledge/technology on other new variations. y
Opportunities The market would adapt and accept concept of availing professional lawn care services. y
Threats Competitors may kill off the business by using more effective services. y
y
y
Apply for another job o
o
o
ADVANTAGES:
No need to worry about capital
No risk
Less things to worry about
Fixed work hours
DISADVANTAGES:
Fixed income
Less flexible work hours
SWOT
Strength Worked for a Fortune 500 company for almost 15 years. y
Weakness
Lack of knowledge in newer and more advanced processes and technology. y
Opportunities Possible higher income/pay from a big company. y
Threats The workforce has other more competent and younger people whom some companies might prefer. y
Conclusion Out of the three alternatives, expanding the business seems to be the most advisable course
of action. Through expanding, income becomes greater resulting to the betterment of her current lifestyle. Also, by doing so, there will be no loss opportunities ± the higher capacity of the business will be able to entertain current and potential loyal clients. The number of advantages and disadvantages of the three alternative courses of actions are not measure in terms of quantity, but of the gravity of each. Continuing with the current business operations and getting a job will obviously meet her basic needs, but then again, she could do more than to simply work for a minute income. In Filipino, it will be ³isangkahig, isangtuka.´ It means that what is earned for the day is just right for the day¶s spending. In such scenario, there will be no savings. In both cases, there might be less risks, however, progress will be slow : continuing the business as it is will not give her much changes in her life or things to think about because the repetitive work in the business should have become second nature to her; getting employed in a firm will connote uncontrollable working hours and repetitive paper works.
Recommendations Expanding the business is the most advantageous course of action to be taken. Expansion
should not be prevented due to lack of resources or unfamiliarity of the target market. Hazel has only started with the lawn mowing services and is doing well ± this is a good sign. Financial limitation can be addressed by availing of a loan, while unknown market can be coped with market research. When financial problem in the business expansion is met through loaning, everything will fall
into their respective places. The capital will solve the problem the need of equipments and initial inventories to be used in business operation. Furthermore, it will support the compensation for employees.
Contingency Plan In business, there are so many factors presenting so much uncertainty thus creating risks. Although there are solutions provided to the disadvantages of the course of action expanding the
business, problems can still be encountered. In the scenario that the market is growing faster than expected, there can be an instance
when demands cannot be met.
PR OBLEM: Incapacity of the staff to meet the demands of the clients.
Actions Taken To provide solution to the said problem, staffs should be trained to be more efficient. Newly hired staff should be trained and old staff be retrained on how to use the equipment, troubleshooting equipment, how to treat clients, how to maintain proper decorum during work, etc. Staff should also be briefed and debriefed before and after every assignment or project. Competent employees will yield to faster and higher excellent service. There should be regular evaluation on the employees from the client, superiors and fellow peers. In order for employees to always be on their best behavior, it should be done randomly. Employee misconduct should be penalized while employee in good conduct should be praised and
acknowledged. The human resource should act like clock where everyone contributes to one single goal of satisfying clients¶ need. Tools and equipment should be maintained properly. Tools and equipments should be catalogued properly. Staff should always have a report before and after every usage. Failure to do so will result to a penalty on the employee. After using, these should be cleaned before being used again. Maintenance
of equipments will ensure the quality service including meeting the demand.
Subcontracting and outsourcing are good options when the company has already reached its
maximum operational capacity. Subcontracting minor jobs of a weighty project would significantly ease the job to be done by the company¶s staff. With this, the company may take on more projects and clients. The company may also tie-up with other companies to outsource some of their clients.
They can form an alliance that would benefit both companies equally. This would ensure that the company would satisfy their clients.
Answers to Questions 1.
Hazel¶s customers will judge the quality of the lawn care services in terms of the health of the lawn: green grass, shrubberies, etc., absence of dead patches, neatness and cleanliness of the lawn, and healthy foliage. Furthermore, prompt response to customer needs is a big plus.
2.a y
Possible increase or decrease in market share ± an increase or decrease in customer demands would require her a specific number of qualified employees, whether part-time or full-time, which can determine her profitability. There should be efficiency thus, idle employees should be minimized to cut down expenses.
y
Cost of equipments, inventory, and other related materials ± awareness of the changes in cost would allow her to have a good pricing that would not compromise the ability of the business to earn.
2.b The inventory of service type of business depends on the equipments and other materials required for the service to be rendered. In this scenario, the lawn mower requires power to operate and maintenance materials. A fuel-powered lawn mower obviously requires fuel, while whippersnipper type requires thin
nylons that should be replaced when it wears out. Others would require blades. It may be advisable or tricky even to have a lawn mower with cord, which will then make use of the client¶s power supply and yield less inventory expense. In addition, maintenance materials such as oils and lubricants, air filters, and other spare parts. Due to other services offered, it would also require Hazel to have inventories such as
fertilizers. This is mainly supplied periodically.
2.c Scheduling should be done efficiently in this kind of industry. Plants, in particular grass, has a
rate on how fast they grow hence, the service is done periodically. Schedule is a must as to distribute the lawn care services throughout a period and not leave idle days. It is also for maintenance of short grass and neat lawn. This is crucial to meet growing customer needs. In other instances such as application of fertilizers, one of the other services offered, should not be
done during rainy days for it may be washed off. In other words, the different seasons will affect the scheduling ± spring, summer, and fall may be considered peak seasons for the nature of the business. Having the proper scheduling will help in managing resources including human resource.
2.d
Quality assurance will enable Hazel¶s business to have continuous customer loyalty ± if good
quality service is consistent, then her current clients is satisfied enough and will be hesitant to do lawn care by themselves again or result to risking the unknown quality service of other lawn care services. Indirectly, it can be a form of marketing where her lawn care services may be endorsed by her current
clients to their friends and other neighbors. A friend¶s recommendation is a powerful way of gaining more customers. Lastly, it will also prevent other entrants to the market. Even if a competitor arises, it will be
hard for them to have a piece of the market share if Hazel provides quality assurance. Clients¶ loyalty is hard to change.
2.e Maintenance
of equipment is very important. Once equipments are not available, lost
opportunities will be experienced: lost of service revenue, lost of potential customers, lower customer loyalty, etc. Aside from the said maintenance, customer services must be maintained. This is where extra
services should be rendered as to make the clients feel that they are really being taken care of.
3.a Working for the company will alleviate Hazel from having risks of investing in her own
business. The job will be probably easier and the pay will be sufficient for her daily needs since it had been such for
15years
in Fortune
500
Company.
Although, starting her own business can give her more flexibility in terms of time, since she is
her own boss, but has more tasks to consider. She will only have time on her hands once business system or process is established and the business has been stabilizes.
Moreover,
having a business
creates a large room for improvement and higher income resulting to compensation of her basic needs and betterment of her lifestyle. On the contrary, the higher the investments equates to higher risk. Caution should be observed.
3.b Expanding the business, as mentioned, will generate more risk due to additional investments
that will be contributed in the business. It may allow more income, but expanding a business is not an easy task. Factors such as increasing expense, hiring of more employees, additional equipments, etc. will affect the business to the point that the system is altered.
3.c Launching a Web site is costly, but will surely reach quite a number of potential customers.
However, the problem is the scope. In her lawn care service, it is very advisable to have nearby dense community as her market than a huge market all over the place. Other cost like transportation cost will shoot up the operating expense.
Targeting business nearby can be the task of launching a web, but the cost is still impractical. She can result to cheap for of advertisements : flyers, door-to-door, etc.
4.a Hazel could cut the grass more frequently, cutting only a third of the vertical growth of the grass, and leave the grass clippings on the lawn. Adv antages:
The grass would shade out weeds and have a more efficient root system. Grass clippings
decompose easier than other alternatives. Hazel could lessen her costs in buying fertilizers. Disadv antages: Leaving too much clippings would damage the lawn. Hazel would need to invest in
mulching mowers and make sure that the blades are kept sharp. She would also need to make an efficient schedule to make sure that every lawn in her service is maintained properly.
4.b She could gather the grass clippings and make compost out of it. Adv antages: She
could reduce the cost of buying fertilizer. She could also make her own formula of
fertilizer to specifically target her target market¶s wants and needs. Disadv antages: It would take time and effort on her part for the grass clippings to become compost. It
would add to costs to buy additional chemicals to add to the compost fertilizer.
5.
Hazel should send a check for the idea especially if she has implemented the bonus policy when the student was still under her employment. She should still give credit to the former employee because it was his idea to begin with.
By
doing so, she would set an example to her former, present,
and future employees to be morally correct or ethical. People looking for work would want to apply for a job with her because they know that they would be well appreciated by Hazel. Unfortunately, some people may want to use the ³good faith´ of Hazel to their own advantage. Some may use others to get new ideas and pass it as their own, especially if those people are not known by anyone within the industry. It could also inspire jealousy within the workplace. The less creative thinkers would feel that the more creative thinkers are monopolizing or exploiting the bonus policy.
6. Additional services such as fertilizing lawns, trimming shrubberies, weeding gardens, clearing
pathways during winter, going into gardening, etc. would require more staff and possibly some fulltime employees. These services are essential for Hazel to compete with other competitors. She could give out service packages from which her clients could choose.
She could also do custom jobs for
specific clients who would want to have exclusivity. Some people may want her to build them gazebos, fountains, trellises and the like, which are unlike any others within their neighborhood, to beautify their lawns or gardens.
Seasonal weather also has a great effect on process variation of Hazel¶s business. Staff should
be in full capacity during spring, summer and autumn, while in winter, some of her customers may want to have a winter garden and may continue to patronize her services. Although she may not require a full staff during the winter months, she might need to hire people who would be willing to work under somewhat undesirable conditions. Sudden changes in weather also disrupts Hazel¶s business schedule. She needs to have
contingency plans for cases when the weather takes a turn for different case scenarios.
She should
also be able to hire people who are flexible and would be able to cope up with the changing weather. Contractual and seasonal workers would also have an effect on how the business would function. During breaks, there would be a flood of people who would be willing to do part time jobs. While when the breaks are through, a great number of those people would decrease since they have
to go back to their work or studies. Hiring too many people when there is too few clients would mean greater costs, while too few employees available would decrease the optimal productivity of the business process. To remedy this, Hazel can ask her clients in advance what jobs they would like to avail from her and would have to hire people who are more suitable or compatible with the few jobs available. She would also need to hire fulltime employees to make sure that she has a consistent minimum output for the whole year. She should also make a strict timetable when there is too few staff available. Economical condition of the country would have the greatest impact on Hazel¶s business. If the
country were experiencing a recession, people would less likely procure her services. People would have less disposable income to spend. There would also be a great influx of unemployed people, with people getting laid off and students graduating.
Hazel would need to give service discounts and
promotions to attract and maintain clients. While in an economic boom, more people would acquire her services since they have more
disposable income to spend. There would also be fewer people who would be unwilling or would not need to work, either part-time or fulltime. She could hire fulltime employees since she would have a steady stream of clients.
7. Sustainability, the use of resource that do not harm ecological systems and promote human
existence, can be done by the use of lawn mowers that do not emit any pollution such as the traditional cylinder and rotary movers both that do not require fuel nor electricity. Other services supports human existence. Even the issue on grass clippings is considered so it would not be added in the landfill.
