tom's thesis final version the impact of law on law inforcements organizations
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7/24/2019 Tom's Thesis Final Version the Impact of Law on Law Inforcements Organizations
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MBA Department, Kardan University, Kabul, Afghanistan
Case Exercise - 01
Rochem Limited
Dr. Rhodes was losing his temper. It should be simple
enough decision. There are only two alternatives. I just
cant understand why its all blown up into such a big
issue. You are only being asked to choose a machine.The
Management Committee looked abashed.
The problem had been brewing for several weeks now,
and although John Rhodes had seen it coming, his anger
was real enough. For the last thirteen years, since he had
founded the company as a young research chemist, the
company seemed to have avoided major arguments over
policy. That it should happen over such a trivial issue
puzzled and upset him, especially now that the company
was so well established.
Rochem Limited were one of the largest independent
companies supplying the food processing industry. Their
initial success had come in the late 60s with a food
preservative, used mainly for meat-based products, and
marketing under the name of Lerentyl. Other products
were subsequently developed in the food coloring and
food container coating fields, so that now Lerentyl
accounted for only 25% of total company sales.
THE DECISION
The problem over which there was such controversy,
related to the replacement of one of the process units
used to manufacture Lerentyl. Only two such units were
used, both of the same make, Chemex, a local company.
It was the older of the two Chemex units which was giving
trouble. High breakdown figures, with erratic quality
levels, mean that output level requirements were only
just being reached. The problem was, should the company
replace the ageing Chemex with a new Chemex, or should
it buy the only other plant on the market which was
capable of the required process, the German AFU unit.
The Chief Chemists staff had drawn up a comparison of
the two units, shown below.
Chemex AFU
Capital cost 590,000 880,000
Unit cost of
processing at capacity
185 183
Design capacity 2200 kg/month 2800 kg/month
Quality 98% 0.7% purity
Manual Testing
99.5% 0.2% purity
Auto Testing
Maintenance Adequate but needs
regular servicing
Not knowprobably
good
After sales service Very good Not knowunlikely to
be good
Delivery 3 months Immediate
The body considering the problem was the newly formed
Management Committee. John Rhodes had recently
decided that the company was now of a size where the
rather autocratic (albeit friendly) decision process he had
adopted should be formalized. The committee consistedof the four senior managers in the firm. The Chief Chemist
and the Marketing Manager, who had been with firm
since the beginning, together with the Production
Manager and Accountant, both of whom had joined the
company only six months ago. This was only the second
meeting of the committee, and Rhodes was already
starting to regret its formation.
THE MARKETING MANAGER
This year the market for this type of preservative had
reached a size of some 20 million, of which Rochem
Limited supplied approximately 48%. There had, of late,
been significant changes in the market in particularmany of the users of preservatives were now able to buy
products similar to Lerentyl. The result had been the
evolution of a much more price sensitive market.
Future market projections were somewhat uncertain. It
was clear that the total market would not shrink (in
volume terms), and best estimates suggested a market of
perhaps 24 million in four years time (at current prices).
However, there were some people in the industry who
believed that the present market only represented the tip
of the iceberg as far as the real potential in food
preservation was concerned, especially in the export
market which was hardly exploited at all.
Lerentyl was sold in ether solid, powder or liquid form,
depending on the particular needs of the customer.
However, despite this complication, prices tended to be
related to the weight of chemical used. Thus, for example,
this year the average market price was approximately 200
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MBA Department, Kardan University, Kabul, Afghanistan
per kg. There were, of course, wide variations depending
on order size, etc.
At the moment I am mainly interested in getting theright quantity and quality of Leventyl each month, and although
production have never let me down yet, Imworried that unless
we get a reliable new unit quickly, they soon will. The Germanmachine can be on line in a few weeks, giving better quality, too.
Furthermore, if demand does increase, but Im not saying it will,
the AFU will give us the extra capacity. I will admit that we are
not trying to increase our share of the preservative market as
yet. We see our priority as establishing our other products first.
When thats achieved, we will go back to concentrating on the
preservative side of things.
The CHIEF CHEMIST
An old friend of John Rhodes, and together they had been
responsible for every product innovation. At the moment,
the major part of budget was devoted to modifying basic
Lerentyl so that it could be used for more acidic food
products such as fruit. This was not proving easy, and as
yet nothing had come of the research, although the Chief
Chemist remained optimistic.
If we succeed in modifying Lerentyl, the market
opportunities will be doubled overnight, and we will need the
extra capacity. I know we would be taking a risk by going for the
German machine, but our company has grown by gambling on
our research findings, and we must continue to show faith.
THE PRODUCTION MANAGER
The Lerentyl Department is virtually self-contained as a
production unit. In fact, it is physically separate, being in a
building a few yards detached from the rest of the plant.
The department has its own raw material store and its
own packing section, although finished goods are stored
in the main store in the main building. Production
requirements for Lerentyl were currently at a steady rate
of 4150 kg per month. The four technicians, who staff the
machines, are the only technicians in Rochem who do all
their own minor repairs and full quality control. The
reason for this is largely historical, since when the firm
started the product was experimental and qualified
technicians were needed to operate the plant. The four
had been with firm from its beginning.
Its all right for the Marketing Manager and Chief
Chemist to talk about a big expansion of Lerentyl sales, they
dont have to cope with all the problems if it doesnt happen. The
catalyst (fixed) costs of the German unit are nearly three timesthose of the Chemex. Just think what that will do to my budget at
low volumes of output. As I understand it, there is absolutely no
evidence to show a large upswing in Lerentyl. No, the whole idea
of the AFU plant is just too risky.
Not only is there the risk, I dont think it is generally
understood what the consequences of the AFU would mean. We
would need twice the variety of spares for start. But what really
worries me is the staffs reaction. As fully qualified technicians
they regard themselves as the elite of the firm. If we get the AFU
plant, all their most interesting work, like the testing and the
maintenance, will disappear or be greatly reduced. They will
finish up as highly paid process workers.
THE ACCOUNTANTThe company had financed nearly all its recent capital
investment from its own retained profits, but would be
taking out short-term loans this year for the first time for
several years.
At the moment, I dont think it wise to invest extra
capital we cant afford, in an attempt to give us extra capacity
we dont need at the moment. This year will be an expensive one
for the company. We are already committed to considerably
increased expenditure on promotion of our other products and
capital investment in other parts of the firm, and Dr. Rhodes is
not in favor of excessive funding from outside the firm. I accept
that there might eventually be and an upsurge in Lerentyl
demand but if it does come, it probably wouldnt be this year and
it will be far bigger than the AFU can cope with anyway, so we
might as well have three Chemex plants at that time.
John Rhodes intervened in the discussion:
Look I know that to some extent we are arguing in the
dark. But this isnt a perfect world and we never will have all the
information we want. Furthermore, I think that at this stage any
decision is better than just letting things drift.
QUESTIONS (Total Marks = 10)
1. What form do the:
a.
Decision body (01 Mark)
b. Decision options (01 Mark)
c. Uncontrollable factors and (01 Mark)
d. Consequences of the decision options take in this particular case? (01 Mark)
2.
Classify the decision and the context of the decision, using the framework discussed in chapter 04. (03
Mark)
3. Which machine should the company buy, and why? (03 Mark)
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