Case 7-4 Aloha Products Question 1: Evaluate the current control systems for the manufacturing, marketing, and purchasing departments of Aloha Products From the case we can see that Aloha products has a centralized control system. What this means is that the main office or headquarters handled the purchasing, marketing and sales activities of each of the three plants. The problem with this was that the individual plant managers had no control over any of the major activities in their respective production facility.
For example the plant managers do not have control over the purchase of the unprocessed green beans – this responsibility is left to the special purchasing unit within the company. In addition to this, they also have responsibility for the product mix. Although having a centralized purchasing center is beneficiary in that it saves costs, the individual production plants are evaluated on the basis of their performance. The company is structured on a cost basis; however the control system is attempting to measure each plant on a profit basis.
This type of structure is an unfair way of measuring the performance of the individual production plants. Question 2: Consider the company’s competitive strategy, what changes, if any, would you make to the control systems for the three departments? Purchasing department: As mentioned above, the centralized purchasing department is a great strategy to employ when establishing low cost. Requiring each plant to have their own purchasing department would require too many duplicated tasks as well as unnecessary overhead costs involved.
Recommendations: 1) Do nothing, leave the purchasing department the way it is now 2) Give each plant their own purchasing department 3) Integrate the central purchasing department as an extension of each plant. Each plant will give their requirements to the purchasing department, thus creating more integration. Each plant will have more control over the inputs needed. Marketing department: The marketing department of Aloha Products is currently run from the central headquarters. The company president and the vice president of sales jointly ssumed responsibility for advertising and promotion of the entire company. I believe this is a smart strategy. Rather than having each plant responsible for their own marketing activities, they save costs by having it done from the central office. The three plants essentially produce the same product so having these duplicated activities would be unwise. Recommendations: 1) Do nothing, continue having the central office responsible for the marketing activities 2) Give each plant their own marketing department since they are under a profit structure Sales department:
Since a profit structure is implemented on each plant, the sales function should be executed at a decentralized level. Each plant should be responsible for each their own sales. To avoid having each plant compete over the same clients, each plant should be responsible for a specific area or region. Recommendations: 1) Do nothing and continue having sales done centrally 2) Have each plant be responsible for their own sales area or region, as well as their specific region