Written Writt en Analysis and Communication
ASSIGNMENT 1: AWC INC.: THE VENTILATIN !ILEMMA
Su"mitted to !r. Gita C#aud#uri $y !i%a& 'umar Sin(# )oll No. 1*1+1,++1+
Gautam Budh Nagar, UP, 201314
Memo 19th, August 1991 To:
Mr. Alex Ma!o"ald Pres#de"t a"d $%"er
&rom:
!#'a( )umar *#"gh +xeut#e Ass#sta"e
*u-et:
$'t#o"s #"/ro"t o A
The e"losed re'ort o"ta#"s the deta#led a"als#s o ar#ous o't#o"s aa#la-le or A ater the ree"t o"er" ra#sed - the M#"#str o +"#ro"me"t or the e"t#"g o ume rom the %eld#"g l#"e.
1
Summary Situation Analysis A ". #s a" alum#"#um a-r#at#"g om'a", s#tuated #" *outh/%ester" $"tar#o. The om'a" %as ("o%" or #ts good 'rodut des#g", h#gh 5ual#t, a"d #ts #"oleme"t #" su''ort#"g em'loee6s am#l#es. 7ee"tl A has deelo'ed a lo%/'r#ed h#gh/5ual#t door des#g" %h#h has led to s#g"##a"t #"rease #" A8s sales. The "e% des#g" re5u#res dou-le usage o %eld#"g l#"e. Thus, A e#ther has to o'erate #" seo"d sh#t or -u a seo"d %eld#"g l#"e.
" ul 1991, ho%eer, Alex Ma!o"ald %as aed %#th a 'red#ame"t: A8s em#ss#o"s o"trol sstems d#d "ot adhere to the regulat#o"s set - the M#"#str o the +"#ro"me"t. " order to om'l %#th regulat#o"s, he "eeded to #"est 240,000 to 400,000 #" e"t#lat#o" e5u#'me"t. A had t%o o't#o" #" the #"stallat#o" o em#ss#o" o"trol sstem to om'l %#th the regulat#o". The #rst o"e %as exhaust sstems a"d the other %as re#rulat#"g #ltrat#o" sstem, -oth o them hae %h#h has huge #"a"#al #m'at or the om'a". Problem statement *hould A go or the em#ss#o" o"trol sstem a"d # es, %h#h o"e to hoose amo"g the t%o sstem. Options 1. Ma#"ta#" the status 5uo, #.e, ta(e "o at#o" 2. Ado't the exhaust sstem 3. Ado't the re#rulat#"g #ltrat#o"s sstem Criteria for evaluation (decreasing order of importance) 1. m'at o" ash lo% a"d #"ome stateme"t 2. +th#al #ssues related to the em'loees 3. ;egal #m'l#at#o"s due to "o"/om'l#a"e Evaluation of Options Maintain the status quo i!e ta"e no action 1. There #s "o extra #"a"#al #m'at, "e#ther o" the #"ome stateme"t, "or o" the ash lo%. 2. The status 5uo s#tuat#o" #s "ot legal. 3. t #s e#de"t that Goer"me"t #s "o% more ser#ous a-out e"#ro"me"t #ssues #" the uture a"d # aught A ma ree#e hea #"e. Adopting the e#haust system 1. A6s ash lo% a"d #"ome stateme"t hae s#g"##a"t #m'at # the #"stall the exhaust sstem as the ost o exhaust sstem #s 240,000 <+xh#-#t 1=. 2. t #s eth#all #"e as the A em'loees are o"er"ed as the %#ll "ot -e ex'osed to tox# umes 'rodued - the %eld#"g l#"e as the exhaust sstem %#ll e"t the ume outs#de the 'la"t. 3. The exhaust sstem s#m'l e"t the umes outs#de the ator %h#h %#ll aga#" -e a legal #ssue . $ecirculating filtrations system 1. There #s huge #m'at o" the #"ome stateme"t a"d ash lo% due to huge ost o 400,000, #"terest ex'e"se a"d %aste d#s'osal re5u#red or re#rulat#"g #ltrat#o"s sstem <+xh#-#t 2=. 2. The re#rulat#"g #ltrat#o"s sstem #s eth#all -est 3. The re#rulat#"g #ltrat#o"s sstem #s legall sou"d regard#"g the e"#ro"me"t regulat#o" %#th a" o"e t#me #"estme"t. Action Plan
1. "or'orate 2"d %eld#"g l#"e to #"rease h#gher olume. 2. ;oo( or "e% -us#"ess o''ortu"#t #" the U* a"d adert#se the "e% 'rodut #" a"ada 3. To m#t#gate the #mmed#ate #m'at o" ash lo%, #"reas#"g sales o the Alum#"#um a-r#at#o" u"#t.
,
Situation Analysis
A ". #s a" alum#"#um a-r#at#"g om'a", s#tuated #" *outh/%ester" $"tar#o, ru" - the Ma!o"ald am#l. #m Ma!o"ald ou"ded A ". #" 19>0. ?e "urtured #t to -eome a suessul orga"#@at#o" %#th great om'a" ulture a"d ee"tuall 'assed #t do%" to h#s so", Alex. The om'a" %as ("o%" or #ts good 'rodut des#g", h#gh 5ual#t, a"d #ts #"oleme"t #" su''ort#"g em'loee6s am#l#es. A %as omm#tted #" reat#"g a am#l/ or#e"ted e"#ro"me"t, a"d 'ro#ded summer %or( or h#ldre" o em'loees. !ue to slo%do%" #" o"strut#o" #"dustr oer the -et%ee" 199/1991 'er#od, A #s a#"g #"te"se om'et#t#o" #" the #"dustr orm other om'et#tors . The marg#" o A has redued to 3 'ere"t. U'om#"g ree/trade agreeme"t -et%ee" U.*. a"d a"ada %ould urther add to #ts %oes o%#"g to lo% ost 'roduts o U.* 7ee"tl A has deelo'ed a lo%/'r#ed h#gh/5ual#t door des#g" %h#h has led to s#g"##a"t #"rease #" A8s sales. The "e% des#g" re5u#res dou-le usage o %eld#"g l#"e. Thus, A e#ther has to o'erate #" seo"d sh#t or -u a seo"d %eld#"g l#"e. To meet the dema"d o the "e% 'rodut, A has to ru" #ts %eld#"g l#"e o" a ull t#me -as#s, a"d somet#mes %#th seo"d sh#t, %#th #"reas#"g sales or that 'rodut #t %ould re5u#re or a seo"d %eld#"g l#"e <ost >000= or seo"d sh#t or la-ors %#th sh#t 'rem#um a"d h#gher #"e"tor ost. t #s e#de"t that the 2"d %eld#"g l#"e %#ll -e 'ro#ta-le #" the lo"g ru" as a 'erma"e"t solut#o". " the last e% ears, the la%s aga#"st e"#ro"me"tall harmul umes #"s#de or outs#de the 'la"t hae -ee" stre"gthe"ed - the goer"me"t. Alo"g %#th that, the a"ada/U* ree trade agreeme"t #"reased ha"es o loal om'et#t#o" #" the a"ad#a" mar(et -ut the agreeme"t also o'e"s the U* mar(et or a"ad#a" om'a"#es. " ul 1991, ho%eer, Alex Ma!o"ald %as aed %#th a 'red#ame"t: A8s em#ss#o"s o"trol sstems d#d "ot adhere to the regulat#o"s set - the M#"#str o the +"#ro"me"t. A d#d "ot hae a" em#ss#o" o"trol sstem urre"tl #"stalled to he( the harmul umes a"d had ree#ed "ot#e rom the $"tar#o M#"#str o +"#ro"me"t. ts 'rese"t %eld#"g l#"e ex'oses the %or(ers to 'ote"t#all harmul tox# umes result#"g #" ser#ous health ha@ards a"d aord#"g to the Goer"me"t stud#es #t #s also damag#"g or the e"#ro"me"t. 7ee"tl the goer"me"t has -ee" more at#e tha" -eore #" o"troll#"g 'ollut#o" - -oth legal a"d eo"om# deterre"ts. No"om'l#a"e %#th the regulat#o" #s a 'u"#sha-le oe"e a"d due to ree"t goer"me"t se"s#t#e"ess to%ards the #ssue, o"s#dera-le r#s( #s #"oled o -
gett#"g aught. aught - the goer"me"t, the 'rese"t "o"om'l#a"e ould ost A ". >00000. At the same t#me , he %as also a%are that he ould 'erso"al#t -e #"ed 2>,000 a"d a" o h#s em'loees ould -e #"ed u' to 2>,000 or #olat#"g the health a"d saet leg#slat#o". Though the 'ro-a-#l#t o -e#"g #"ed #s o"l 0.002. " order to om'l %#th regulat#o"s, he "eeded to #"est 240,000 to 400,000 #" e"t#lat#o" e5u#'me"t. ?o%eer, the #"estme"t, ou'led %#th the eo"om# reess#o", %ould drast#all r#''le the om'a"8s #"a"es. The #"dustr %as go#"g through reess#o", %h#h has -adl #m'ated the A #"a"#all a"d the alum#"#um a-r#at#o" #"dustr as a %hole. To u'hold the #rm8s om'et#t#e ada"tage, A reated a "e% door des#g" / o"e that %as om'et#t#e #" 'r#e, assem-l, a"d 'erorma"e. t s#g"##a"tl #"reased sales a"d %as #" h#gh dema"d. t %as u"t#o"al ee" #" h#gh/use areas, 'ro#ded that the door s'e"t more t#me o" the %eld#"g l#"e or a stro"ger %elded or"er. Th#s ha"ge reated a 'ro-lem. The %eld#"g l#"e 'rodues 'o#so"ous umes. he" #"haled, the a" hae d#re o"se5ue"es o" em'loee health as the hae -ee" ("o%" to lead to res'#rator damage a"d a"er. At the same t#me, there %as a goer"me"t ous sh#t to%ards e"#ro"me"tal 'reserat#o". A had t%o o't#o" #" the #"stallat#o" o em#ss#o" o"trol sstem to om'l %#th the regulat#o". The #rst o"e %as exhaust sstems a"d the other %as re#rulat#"g #ltrat#o" sstem, -oth o them hae %h#h has huge #"a"#al #m'at or the om'a". The re#rulat#"g #ltrat#o" sstem, the more ex'e"s#e o the t%o, sat#s#es %#th -oth the e"#ro"me"t regulat#o"s a"d em'loee health a"d saet regulat#o"s. Problem statement
*hould A go or the em#ss#o" o"trol sstem a"d # es, %h#h o"e to hoose amo"g the t%o sstem.
Options
1. Ma#"ta#" the status 5uo, #.e, ta(e "o at#o" 2. Ado't the exhaust sstem 3. Ado't the re#rulat#"g #ltrat#o"s sstem
*
Criteria for evaluation (decreasing order of importance)
1. m'at o" ash lo% a"d #"ome stateme"t 2. +th#al #ssues related to the em'loees 3. ;egal #m'l#at#o"s due to "o"/om'l#a"e
Evaluation of Options Maintain the status quo i!e ta"e no action
1. There #s "o extra #"a"#al #m'at, "e#ther o" the #"ome stateme"t, "or o" the ash lo%. 2. The status 5uo s#tuat#o" #s "ot legal. Though the A8s 'rese"t sstem had %or(ed or 40 ears u"der the leadersh#' o #m Ma!o"ald -ut g#e" the urre"t s#tuat#o" a"d goer"me"t8s ree"t sta"d o" the e"#ro"me"t #ssue, o"s#dera-le r#s( #s #"oled. t #s "ot eth#al g#e" the om'a" 'ol##es a"d 'ater"al "ature o the om'a" a"d the extremel omm#tted em'loee ore. 3. t #s e#de"t that Goer"me"t #s "o% more ser#ous a-out e"#ro"me"t #ssues #" the uture a"d # aught A ma ree#e hea #"eC he"e #t %o"8t -e a 'erma"e"t solut#o". Adopting the e#haust system
1. A6s ash lo% a"d #"ome stateme"t hae s#g"##a"t #m'at # the #"stall the exhaust sstem as the ost o exhaust sstem #s 240,000 <+xh#-#t 1=. 2. t #s eth#all #"e as the A em'loees are o"er"ed as the %#ll "ot -e ex'osed to tox# umes 'rodued - the %eld#"g l#"e as the exhaust sstem %#ll e"t the ume outs#de the 'la"t. A has ree"tl #"trodued a su'er#or door des#g" a"d due to #ts 5ual#t, lo% 'r#e as om'ared to s#m#lar 'roduts aa#la-le #" mar(et, A #s gett#"g h#gh olume orders, there %#ll -e #"reased 'rodut#o" related to %eld#"g l#"e %#th #"reas#"g e"#ro"me"tal #m'at, he"e #t #s "ot a 'erma"e"t solut#o". 3. The exhaust sstem s#m'l e"t the umes outs#de the ator %h#h %#ll aga#" -e a legal #ssue a"d "eed ert##ate o a''roal rom the M#"#str o +"#ro"me"t a"d to get the a''roal a#r 5ual#t #m'at stud %#ll -e o"duted #" the "e#gh-ourhood. G#e" the om'a"8s uture gro%th -ased o" the "e% 'rodut a"d %#th the aess to the "e% U* mar(et, there %#ll -e #"reased 'rodut#o" related to %eld#"g l#"e %h#h %#ll hae greater e"#ro"me"tal #m'at, he"e #t #s "ot a 'erma"e"t solut#o" or the om'a"
$ecirculating filtrations system
1. There #s huge #m'at o" the #"ome stateme"t a"d ash lo% due to huge ost o 400,000, #"terest ex'e"se a"d %aste d#s'osal re5u#red or re#rulat#"g #ltrat#o"s sstem <+xh#-#t 2=. A should "egot#ate %#th the -a"(s or lo"g term loa" a"d loo( or o't#o"s to see # goer"me"t su-s#d #s aa#la-le. 2. The re#rulat#"g #ltrat#o"s sstem #s eth#all -est a"d #t %#ll reate a stro"g #mage or the A a"d #ts em'loees #" the mar(et. The am#l -o"d#"g %#th the om'a" %#ll #"rease a"d %#ll -e more omm#tted to do 5ual#t %or(. D 3. The re#rulat#"g #ltrat#o"s sstem #s legall sou"d regard#"g the e"#ro"me"t regulat#o" %#th a" o"e t#me #"estme"t. The sstem %#ll "ot re5u#re a''roal rom M#"#str o +"#ro"me"t -ut sstem "eed a''roal o M#"#str o ;a-our , !e'artme"t o $u'at#o"al ?ealth a"d *aet . #th #"reased 'rodut#o" %#th the #"trodut#o" o 2"d %eld#"g l#"e a"d #"reased sales, #t #s a 'erma"e"t solut#o".
$ecommendation
t #s reomme"ded to go or the exhaust sstem a"d #"stall the 2"d %eld#"g l#"e to 'rodue more the ree"tl reated a "e% door des#g" / o"e that %as om'et#t#e #" 'r#e, assem-l, a"d 'erorma"e a"d %ere h#gh #" dema"d.
Action Plan
1. "or'orate 2"d %eld#"g l#"e to #"rease olume a"d 'rodut#o". 2. ;oo( or "e% -us#"ess o''ortu"#t #" the U* a"d adert#se the "e% 'rodut #" a"ada. 3. To m#t#gate the #mmed#ate #m'at o" ash lo%, #"reas#"g sales o the Alum#"#um a-r#at#o" u"#t. Contingency Plan
1. "rease the 'rodut#o" o "e% des#g" a"d do sales 'romot#o". 2. ;oo( or o't#o"s or some goer"me"t su''ort. 3. Negot#ate %#th -a"( or lo"g term loa".
/
Exhibit 1 Projected Income Statement 1991–1994 (purchase of $240000 exhaust e!uipment"
0
Income Statement Saes &ost of 'oods Sod 'ross Prot )a*es and +enets #d,ertisin* -tiities Insurance .epreciation /ra,e /rade Shos Executi,e Saar Interest Expense /ota Expenses Earnin*s +efore /ax /axes et Income (3oss" e ine cost et &ash
Ne6 line cost Li7etime !e%reciati on
02+++ 1+
#ctua 1990 -2-2113 ,2-3/2,+ 121*3241-
1991 1992 199% 1994 -2/,-2*4/ -20-,2,+1 -23**21/0 -2442*4, ,2**23/+ ,2/23 ,2/--2,* ,201,2,, 121002/-/ 12102/*- 12,1+241- 12,*02,*+
0/32+++ *+2+++ */20++ 1+2+++ ,324* 002+++ ,2+++ 1++2+++ */2,++ 121*123*
01124-/ *,23/+ *32++ 1+2+++ ,324* 3+2+++ ,02+++ 4+2+++ *,2*+ 12+312031
01124-/ *,23/+ *42+1 1+2+++ //2** 3,20++ ,02+++ 4+2+++ 0/21*+ 121/2+4/
0,/210 *,23/+ *421++ 1+2+++ //2** 3-2*++ ,02+++ 4+2+++ 0*2*+121/42-3-
0*+2/43 *,23/+ *420++ 1+2+++ //2** 3*2*++ ,02+++ 4+2+++ 0,2*,, 1213-2,
02+/3 ,2--*20-
423 ,2,,3 4-2/,0 502+++ 132/,0
142*0 3/*.1 1-2/3-
*12-+ 1,*4.+,42+01
/-201 1411*.** **2/++
1-2/3-
,42+01
**2/++
*20-
1441
144,5144*
Wa(e cut E9ecutie salary 0++ cut Trade S#o6 cut
4+8
Wa(e cut E9ecutie salary cut
4+8 1++.++ 8 Trade S#o6 cut Ta9
3
4+8 4+8 1++.++8 -+8
Exhibit 2 Projected Income Statement 1991–1994 (purchase of $400000 air recircuation e!uipment" #ctua Income Statement 1990 1991 1992 199% 1994 -2/,-2*4 -20-,2,+ -2442*4 -2-2113 / 1 -23**21/0 , Saes ,2**23/ ,2/2 ,201,2, ,2-3/2,+ + 3 ,2/--2,* , &ost of 'oods Sod 121002/12102/* 12,*02,* 121*3241/ - 12,1+241+ 'ross Prot )a*es and 0/32+++ 01124-/ /0,2-3* /323-, /442*3 +enets *+2+++ *,23/+ *,23/+ *,23/+ *,23/+ #d,ertisin* */20++ *32++ *42+1 *421++ *420++ -tiities 1+2+++ 1+2+++ 1+2+++ 1+2+++ 1+2+++ Insurance ,324* ,324* 332-,+ 332-,+ 332-,+ .epreciation 002+++ 3+2+++ 3,20++ 3-2*++ 3*2*++ /ra,e ,2+++ ,02+++ ,02+++ ,02+++ ,02+++ /rade Shos 1++2+++ 4+2+++ 32+++ 32+++ 32+++ Executi,e Saar ; ; 32*++ 32*++ 32*++ aste disposa */2,++ *,2*+ 432*+ 42/*, 4,2--3 Interest Expense 12+31203 121/*2,1 121302/ 121*123* 1 4 12102* / /ota Expenses Earnin*s +efore 02+/3 423 112*,* -2-4 42/0* /ax ,2--,2,,3 -*,0., 1+/+0.0* 104+,.11 /axes *20- 4-2/,0 02440 ,*201 *1200, et Income (3oss" 502+++ e ine cost *20- 132/,0 02440 ,*201 *1200, et &ash
Ne6 line cost Li7etime !e%reciatio n
02+++ 3 4-0
1441
144,5144*
Wa(e cut E9ecutie salary cut Trade S#o6 cut
$ene
4+8
Wa(e cut E9ecutie salary cut
4+8 1++.++ 8 Trade S#o6 cut
38 38 1++.++8
1+8 Ta9
4
-+8
