¶ … Business Ethics Page | Coastal Uniforms

Robert Garret, CEO

Board Members

Management Planning, decisions and policies.

I, thank Coastal Uniform for giving opportunity to offer our consultancy service and hope that the efforts made to analyze and scrutinize the case will be productive for your company. The major outcomes of the analysis are summarized below and comprehensive report is enclosed.

Major Issues to be Addressed

Coastal Uniform was doing pretty well in the pre 1999s era, enjoying the leadership position in the market with sales and revenue growth rate compounded each year. What happened in the post 1999 years can me named as poor management practices and ignored quality concerns for the business. The core areas of concern for Coastal in their business operations are briefly discussed below:

a) Under-estimated Competition

b) Unrealistic targets and inconsistent bonus policies

c) Quality compromised to save cost

d) Human resource policies in pre and post company crisis era

e) Unethical billing strategy adopted

II. Recommendations

After thoroughly analysis it is recommended to the company to implement strategic management frame work that analyze business on internal and external assessment model focusing on competitive structure and company core competencies. Quality has to be managed through continuous improvement process using TQM principles and strong sense of business ethics to be incorporated to sustain good market reputation and satisfied stakeholders.

III. Analysis / Limiting Factors

This poor management practices and ignored quality concerns have affected Coastal Uniform in multidimensional business parameters and left the company's reputation at stake. It will take long for company to recover and have satisfied staff and other key stakeholders.

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Background

In today's business environment the firm's actions are evaluated from its strategic decisions that requires firm to have strong analytical strategy formulation processes, resource-focused approaches to sufficiently consider the importance of symbolic capital and ethical business environment. These are the actual drivers of growth for any organization whether it is publicly traded company like Coastal Uniform or any small business. Economist Milton Friedman writes that corporate executives' "responsibility... generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom."

The assessment of sales, revenue, profits and growth figures in the post crisis era of the Coastal Uniform Company has raised an important question on, the role of manager in the strategy formulation and process flow has been dynamic and multidimensional. All the business functions are interlinked to its operation. Communication lapse in any of the area can break this network and bring the company in great loss. The loss under such circumstances is also not limited to the financial loss but it unfolds the company's responsibility towards its stakeholders and general public which can be distorted through bad public image portrayed in media or through bad word of mouth by customers resulting in order cancellation just as the Coastal Uniform experienced.

Possible Problems and Major Problems with Coastal Uniform

Major problems that were highlighted after a thorough study of the Coastal Uniform performance and feasibility report are addressed below:

a) Under-estimated competition

Coastal Uniform had many small competitors and because of its expanded and successful operation the company had under-estimated the strength of its competitors. Management didn't realize that these small competitors can grow out to be bigger concern for the sustainability of the firm.

The possible problem that originated from this concern was that company's small competitors started eating up the market of Coastal by making a lobby through strong communication network.

b) Unrealistic targets and inconsistent bonus policy

The "Rule 35" developed by the management to set profit and revenue growth has also rooted many management concerns for the company. Strict targets of $300 per increased to $1,200 per week had reduced delivery and sales service of the sales representatives. Sales reps were compensated for every target they achieved and their bonus was dismissed when the weekly targets are not met. In the practice of best compensation and bonus practice, these bonuses are tied to the monthly sales made by the sales officer. This monthly sales target is better as compared to the annual sales because it can average out the weekly sales to monthly data thus making the targets achievable and timely. Coastal has the made the policy of allotting bonus to the general manager for Rule 30 based on their annual compensation package however the bonus on sales target to sales reps were tied to weekly sales, this has made...

They have compromised on quality and started using low quality cotton and polyester, removed extra buttons, coverall without snaps on the cuffs and name patches sewn with long stitches. Coastal Uniform ignored the fact that they are operating in garment industry where quality of their product matters most then any other thing. Instead of adding more features with improved quality on their product they adopted the cost cutting strategy based on their product.
The possible problem that arises from this cost cutting strategy was dissatisfied customers and weak competitive position in the market. History has shown that company had made their reputation on high delivery and high product quality, if customer needs are satisfied in better way from competitors it is very less likely that customer will revert back to the company or company is able to attract new customers. Therefore, it's not only the loss of product image in the market it is also the loss of huge market share and barrier to future market penetration unless intensive investment is made to rebuild that image in customer minds.

d) Human resource policies in pre and post company crisis era

Coastal Uniform has experienced high rate of turnover during the crisis era. The company had recruited fresh sales representatives who were enthusiastic about the sales target and company had managed to hire them on much lower salary because they were not experienced. Unrealistic targets were set for these sales representatives without prior discussion with the departmental managers and current market condition. These overly calculated targets were set in lust of regaining profitability in short-term. In the post crisis state turnover was still experienced by the company.

The possible problem was of weak human resource management system. Company's management was considering company to be machine of printing notes they have forgotten the real essence of its existence, importance of its people working for it and significance of its responsibility towards society at large.

e) Unethical billing strategy adopted

Company had added many undue charges on customer bills to increase revenue generated from single customer. These undue charges were removed only on the condition if customer complains for it otherwise it's billed the same to all other customers. These charges includes an environmental charge, hazardous analysis critical control points charge and delivery surcharges which was specifically added to claim petroleum price increase but was not removed during the decrease in petroleum prices. The former charges were added in the customer bills claiming that the company had incorporated new, healthy and environmental friendly process of washing and dying cloths but in reality nothing has ever changed in the business operation especially on these areas for years. This was the unethical business practice observed by the company.

The possible problem would initiate with the company issue were customer orders cancelation and bad company reputation among the customers and in the market. Due to this Coastal Uniform, had lost five key customers. These customers have realized that they have been paying extra on their current bills. Company had bad name in the market due to this billing because these customers have published there complains in public forums.

Recommendations

On analyzing the Coastal Uniform policies and procedures adopted to address the company crisis situation it recommended that company should maintain business operation which is ethically proven, socially responsible and environmentally friendly. Therefore, corrective measures have to be adopted as per recommendation in the areas of:

a) Competitive strategic Framework

b) Operational Efficiency

c) Ethical Performance Management system

Michael Porter, a business strategist has defined strategy in terms of competitive strategy which can be based on the argument for the company creating its competitive position during the time of risk. According to him a company can outperform its competitor only if:

a) A company can have long-term sustainability and can beat its rival only if it can establish a difference that it can conserve.

b) Strategic position can be achieved through customer needs, customer's convenience and wide range of product or services being offered.

c) Competitive value of individual duties cannot be segregated from the whole unit.

d) Strategic positions are long-term not limited to a single process flow or product or service cycle.

e) Management's role is to define strategy, make trade-offs and finding the best fit among business functions.

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