It was a home electrical appliances company which has its own manufacturing unit in Gudgeon province. In 2008 Henry Chant, son of Chant Dong-haw, took up the role of Chief Executive. Henry Chant was aggressive to develop the business in overseas and double the profits of the company in four years. Henry Chant depended on his senior management who were not reliable.
Senior Management for their personal benefit, at expense of the company weakened the Company. The company faced a crisis exulting from the unethical behavior of the employees like accepting bribe to buy low quality products, accepting biased reports, and using kick backs to maintain business relationships. Henry Chant the Chief Executive of the Kitchen Best has to now decide what kind of necessary action to be taken to control the day to day operations within the organization in order to achieve future success.
This Case study is a good example of typical management Challenges faced by Small and Medium Enterprise doing a cross border which do not have a good internal controls team like a Quality Assurance/Quality Control and Legal Advisor. Challenges: The main challenge facing by Kitchen Best is to control the internal actions in the organization. It can be observed that no intense research has been done by Henry Chant to monitor the business operational outside of China. Expanding a Company to other Countries requires understanding different culture to effectively manage the conduct of the employees.
Henry Chant’s focus was on growth and expansion of the company but was not on creating an objective management system in his absence. The founder of the company, Chant Dong-haw and CEO, Henry Chant are not having any control on the Company and its operations. Due to the unethical and illegitimate behavior of some executives within the company Kitchen Best’s reputation is at stake. Henry Chant’s growth strategy is based on unrealistic goals, because to expand the business to the countries outside China a good amount of market research is to be done.
The key performance indicator in the appliance industry is customer relationship. Actions from Ma Luck, See, and Wee have resulted in providing sub standard products to the customer, thereby suffering the existing customer relationship. Kitchen Best did not have a capture plan as far as the business market s concern. Causes of the Challenges: Kitchen Best Company frequently engaged it kick back, gift giving bribery, and embezzlement. Even though the higher management knew about this, there were no proper actions taken to control these activities.
The unethical behavior of the employees for their personal benefits resulted in a Crisis which affected the business from revenue and customer relationship perspectives. Causes for the Crisis: I . The Shako Incident: Kitchen Best Company breached the Contract with Shako by providing a faulty product. The Causes for the Shako Incident are: See, the recharging and production manager of Kitchen Best Company awarded the contract to a factory owned by his brother -in-law, to get a expensive vacation trip to Europe Kitchen’s Best By turnaround not reported to higher authority.
The product failed the in-house testing, proving that the product is faulty. Being a quality control manager no remedial action was taken by Wee. II. Hausa De Metro (Had): Testing and Certificate Issues Henry Chant received a letter from German retail chain (“Had) stating that Kitchen Best did not meet the Company’s safety requirements conflicting with the satisfactory sting report provided by Kitchen Best. The main causes for the incident were: Kitchen Best had sub-contracted the Hade’s contract to Shanghai Electrical Appliance Ltd as its own manufacturing units were busy.
After the production Kitchen Best arranged Icemaker Testing Services to test the product manufactured by Shanghai as per Had Lack of Quality Assurance: The Icemaker team found that the samples collected failed to meet Hade’s Restriction on Hazardous Substances. This was due to the poor quality of the paint used by Shanghai in outer casing of the electric eater dispenser in order to minimize the production cost. Shanghai proprietor bribed the team leader of Icemaker in order to pass the product.
Henry Chant did not take necessary actions for fear of losing the customer. Ill. Honshu Appliances: New Management Ma practiced Kick backs, gift giving to maintain business relationship. Kitchen Best’s business with Honshu was at risk because Kitchen Best was not competitive in delivery time and product development. Kitchen Best did not maintain books for the expenses incurred from dinners and delight provided to suppliers and customers.
Ma Luck, generated invoices and encased those by getting them reimbursed, although he used that money for his personal use, this resulted in embezzlement of Company’s profits. Change Dong-haw never bothered such activities as long as Ma Luck was able to get new business. Henry Chant did not try to stop these activities because he found it is a difficult task to deal with mainland customers due to cultural barriers.
Recommendations: Control the internal actions in the organization : The frame work for the internal control should achieve the following objectives: It should be effective and efficient to perform operations. Provide reliability for financial reporting Meet the objectives with applicable laws and regulations. Provide a work environment which promotes cultural diversity, like organizing pot- lucks, celebrating different religious holidays, and lunch-and-learns to promote open discussion about different cultures.
Provide an experienced Quality Assurance/ Quality Control team which incorporates continuous learning and provide mentoring to the employees. Provide a Legal Advisor who can ensure all work being performed is legitimate as per the Jurisdiction in which the Company is working. Figure 1 presents a modified organizational chart of Kitchen Best, which includes the above objectives. Figure 1- Organizational Chart of Kitchen Best Figure 2, presents the roles and responsibilities of the Quality Assurance, Quality Control, and Audit Teams.
Figure 2- Roles and Responsibilities of the Key Teams How to avoid unrealistic goals: The growth strategy should be developed based on on a short term and long term basis for type of kitchen based products, culture of the people, market trend, so that appropriate goals can be set for the product production and innovation goals. The Quality Assurance and Quality Control team work along tit the Audit team will play a crucial role in maintaining Customer relationship there by acting as a marketing tool for the Kitchen Best’s products.