Analysis of the Case Study
DMD Compressors is a compressor producing company of Argentina. The company has contributed services and solutions to users of the compressors. The company started improving its business policy from business to business model to business to differentiate services. The company started producing various types of processors and offered services. It initiated many business models since 2003 till 2010. All the business models were for the improvement of the company and to provide high-quality services to the customers. The company wanted to serve the active customers free service in order to retain them. The company developed its management system to integrate its business. But all the initiatives went wrong and proved useless when the cash flow of 2013 showed that the company suffers a huge financial loss. This report makes an attempt the offer a new business model for the management of the company so that it will work on it to improve its business process (Hora, Bapuji, & Roth, 2011). The company will adopt Tailor-made products and services and Developed Supply Chain management system to improve its business process. This will be effective for the company to compensate financial losses and will make profits in the future.
90% of the industrial companies of Argentina use compressed air in the production operations. DMD Compressors S.A caters the needs of the industries of the country for more than 35 years and provides solutions to the issues related to the compresses air. The sincere efforts of the company brought successes and in the year 2003, the company took many initiatives. It owned an engineering department for the development of the compressors & the processes of the production. It helped the companies for the comprehensive solutions that are related to a compressed air of the industry. The success of the company was further enhanced in the year 2005, DMD acquired a plant and in the year 2006, the company expanded its market with its presence in the industry fairs & exhibitions. In the year 2008. DMD focused on variable power compressors. This was made to adjust to air demands and it was meant to save the electric energy. In the year 2010, the company introduced Efficiens VI. This compressor had automated volume regulated control and the power consumption was rational. The developed manufacturing products brought huge success to the company. Large numbers of clients were received. But the company faces difficulties in the service operations. The service operations cost was increased as the focus was more on the differentiating support to the clients. This was one of the reasons the company started facing problems (Bhasan, 2016).
Crisis 2011
In 2003 the structure of the company was revised and the company had three structures. There were three teams to handle the business. They were production and sales department, service department and the management department. All these departments were fixed their responsibilities (Berry, 2009).
The company witnessed that the sales and personnel growth of the company was not supported by the management team due to lack of the management skills in the people. The company was not a focused one business unit; rather it was a differentiated solution offering company. Favio established a corporate culture which was based on the un-dissenting alignment and there was a team to support the style of management. The services to the customers were given due importance and the quality issues and assurances were assessed and monitored (Brass, 2012).
In the year 2009, the production of the new equipment suffered a loss due to the departure of the technical manager. Juan Caminos joined in the year 2011 and wanted to bring changes in the entire structure. The transactional software was installed for the seamless management of the operations. This was meant to offer timely information for the management. But the company faced problems related to the automatic validity of systems & controls. New more challenges were found and the company could not validate the systems and controls (Hoption, 2014).
In the context of the services to the products, the company faced problems. 11% respondent raised questions on the service quality of the company. The company focused on delivering quality and immediate service to the clients. The quick and immediate services provided by the company found huge responses from the clients. By the end of March 2013, there were 860 clients were added. 80% had low power compressors and 20% had 30HP-125 Hp compressors. The company could find that different types of the compressors require a different kind of services. The clients with 30 to 50 HP value the brand of the company and the services. This encouraged the company to focus more on the sale of 30-50 HP processors. But the company faced problems in identifying the target clients from its management database.
The company faced a large number of competitors in the market. These competitors were Sullair, Atlas Copco, and Kaeser. The company found that Kaeser, a German-based company was the competitors and it had also to face problems from CETEC and other related vendors in the market. The study conducted by Argentina’s national Statistic and Census Institute, DMD found that 780,000 business operations are there in the country and 624,000 out of them were small and medium-sized. 10% of them were medium-sized. The study shows that 6,000 were the target clients for the company. In the 2003-2010 improvement strategies of the company reflected that the company did not focus on the small-sized industries and the services to the clients were not prioritized. The new launch of 30 HP compressors of the company showed that the company remained dependent on the traditional SEM segment of the clients.
The Proposed Business Model for the DMD Compressors
The company found huge losses in the sales of the compressor and this happened due to the rise in the domestic production costs. The competitors those who imports products find more profits than the DMD. The company saw the low rate of sale in the year and the profits and sales were radically decreased. The company again refocused on the old model of business by making services more profitable and started producing lower power models. The company made two important changes in its business culture. It offered services with prices and incorporated changing management system in order to accept the new business model (Berry, 2009). Since 2011, the company launched many initiatives. The changes were as follows.
The company categorised active and non-active clients. The company offered the active clients service within 24 hours of the request. The plan was not successful as it worked to categorise the actual client.
The company charged services fees on hour basis. Some of the clients did not accept and some remain with the system. The fees for the technical assistant job were not defined. The invoicing order was avoided by the company.
- The company focused on producing 15 HP and 30 HP compressor offerings.
- The focus was also given to the increase of the productivity and quality.
- The management took more responsibility and the management system was reviewed.
- The competencies of the management and the goal setting were taken into account.
The company cleared the decision making power and the accountability of the management people.
After all the management initiative and new business model approaches this has been found that the income statement of the company just closes to the breaking even. The cash flow of the company was under pressure. The study made by Favio showed that a 20% increase in the sales of the compressor could meet the fiscal & economic sustainability. Thus the new business model was a due for the company which will help the company to get the win-win strategy (Bapuji & Beamish, 2008).
The case study of DMD shows that the company has made a long journey since its inception and tried to gain a competitive advantage in the market. The company found it very easy to conduct business to business services. The company started facing difficulties when it started producing different kinds of models. The company faced difficulties in solving the problems by offering adequate services to the clients (ICAC, 2011). It introduced free services and later it took fees for the services. The company also faced difficulties in the management information system which was very difficult for the company to monitor and control the entire operation process (Wong & Hvolby, 2007). Thus there is a need of making a business plan for the company to think about new plans. The business model proposed here offer two new plans to the company (quickbase.com, 2012).
The study shows that there are different kinds of clients in the country and each client has different kind requirement of the compressors. The study shows that the company focused on the very small-sized segment of the clients and do not focus on the small and medium sized clients. The statistics show that the company does not focus on 624,000 clients and only focused on medium clients those who use 3-HP to 50-HP. Thus the company instead of focusing on the small segment of the customers it should focus on producing as per the demand of the companies. In order to make the production successful, the company requires making a market survey and should find out the requirements of the potential clients. The ultimate benefits will be there for the client organisation. The individual customer should be given priority (Ni, Z, Flynn, & Jacobs, 2014).
In the context of the services, the company should offer free services in order to avoid brand image. The customer service is the most important part of the business. The customers feedback requires to be evaluated and the most important requirements should be incorporated in the process of the business (searchcio.techtarget.com, 2015). Instead of offering quick services to the active members the company should focus on offering equal services to all the customers. This will enhance the sale of the company as it will produce compressors for all the categories of the business organisation. The quality services will also create brand image and goodwill. The 20% sale increase will be met if the production will be there for all categories of companies (Hoffman & Garrett, 2014).
The company has found that the cost of the production has been increased and the imported products sold in the market are less in price than to the price of DMD products. This shows that the company requires making an analysis of the supply chain management process.
Supply chain management process deals with the process of producing the products from the procurement of the raw materials from the suppliers to the delivery of the products to the end users (phys.org, 2015). The company requires focusing on the strategy for collecting raw materials from the reasonable sources so that it can get the raw materials in the low cost. The company requires promoting its business through digital mode. Instead of focusing on the stores and inventory the company requires to make sales through e-commerce (Servaes & Tamayo, 2013). The e-procurement will reduce the cost. This can help the company to reduce the cost in the process of the operations (Lyus, Rogers, & Sims, 2011).
The end users of the compressors will get the products easily and with low price. The company can sell the products directly to the customers. The delivery will be made easy and the installation team of the company will do their job quickly (Marucheck, Greis, Mena, & Cai, 2011).
Conclusion
The company will get success when the new business models will be initiated by the company. The sale of the compressors of the company will be developed when it will focus on making different types of compressors. The company has also found that it spends more in the production. Of the production becomes more. In order to minimize the cost of the production, the company has to develop its supply chain management system (DOOLE & LOWE, 2008). The supply chain management system will reduce the operational costs and costs on the raw materials of the company. The low cost will help the company to sell the products in the low cost and the operational cost of the company will be low. Thus the business model will be effective for the company.
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