The Dim Light Company is a subsidiary of a major producer of electronic goods, which allows its subsidiaries to operate as profit centres. In the past one year, the company had a bad year due to reduction in its profit margins, therefore the management wants to reverse that trend in the coming year by increasing its profitability, however it is faced with several situations, which need to be resolved.
Thesis: This paper will analyse the situation in which the Dim lighting company finds itself in, the explanations for the situation and some of the best alternatives that the company can use to increase its profitability.
Macro and Micro Challenges
The Dim lighting company is faced with several problems that include macro and micro challenges, the macro challenges are those that are outside the reach of the company to solve them using internal mechanisms, in other words, they are the opportunities and threats that the company faces. One of the greatest threat that the company faces is the lack of adequate funds to support its research and development kitty which Mr Spinks, the director of research and development at the company puts at 1.2 million dollars per year for two years then an additional 500, 000 dollars to initiate production the micro miniaturization project (Brown, 2011, p81). Another threat that is facing the company is the decline in the profit margin for the last one year, which has an implication on the image of the business to the outsiders.
The company however, is not without some opportunities, the major opportunity that the company has is that it acts as a profit centre therefore it is able to manage its resources with minimal interference from the corporate head office, in addition, this enables it to make its own decisions and implement them in order to remain competitive in the market. In addition, the fact that the company can be able to look for funds from the head office to invest in research and development is an opportunity that may not be available to all such firms.
Internally, the strength of the company is that it has Mr Spinks as the director of research and development; Mr Spinks is a respected person in research as he is considered as one of the best brains in research, this can be seen in the numerous awards that he has received from different science societies . With Mr Spinks as a director, Dim lighting company is likely to be always ahead of other companies in terms of technology and renovation; this is evident from the multimillion-research project that he wants to undertake on micro miniaturization of lighting to reduce energy requirements
In the Dim lighting company, the weakness lies in the research and development since for the company to improve on its profits it has to keep on inventing new products otherwise it will be overtaken by its rivals but since the research budget that the director of research and development gave is beyond what the company can afford they may have to find alternatives. In addition, if the budget for the project is not approved, Mr Spinks may resign from the company, which will reduce the innovative edge of the company.
The challenges that the company is facing have been caused by several events that are intertwined. First, the reduction in the profits that the company posted the previous year has put the pressure on the management to find quick solutions to the problem in order to avoid a repeat of the same. Secondly, the high research budget that Mr Spinks has made worsens the scenario since it has to be met if the company wants to remain competitive in future and if it wants to retain Mr Spinks, this is according to Brown (2011, 66) which argues that for organizations to remain competitive, they have to make dramatic changes such as the one Mr Spinks is proposing.
The systems that are affected by these changes are the goals of the company; this is because there are no clear goals on whether the company should prioritise profits over innovativeness, the company is faced with a dilemma on how to handle Mr Spinks demand of an annual research fund worth 1.2 million US dollars.
The alternatives that are available for Jim West, the general manager of Dim lighting company include asking for funding from the corporate headquarters in order to carry out the micro miniaturization project, the other alternative is concentrating on the project while ignoring more urgent concerns such as improving the performance of the company. The third alternative available is to suspend the micro miniaturization project and focus on increasing the company’s profits.
The best way for the Jim West to deal with this case is to ask for support from the headquarters since there is a high likelihood that the project will be successful, the support should be in terms of monetary forms nut also in technical expertise and other resources that will increase the probability of success for the project, however, the easiest, and the most common source of funding for innovation is through budgets(Brown, 2011, p68). Since some of the directors in Jim West case are pessimistic about Spinks project, West should have a discussion with them on the best way forward for the company, which would ensure all their concerns, are addressed, this will promote corporate culture and cohesion between the team members to work as team to achieve the company’s goals. According to Brown (2011, p67), the reason why some of the directors are not supporting Mr Spinks is lack of free flow of information between the various departments.
Brown, D. R. (2011). An experiential approach to organization development. Boston: Prentice Hall.
THE DIM LIGHTING CO. CASE ANALYSIS FORM
Lack of adequate research funds
Reduction in profit margins
Lack of consensus on research
Threat of Mr. Spinks resigning
Reduction in profits in the last year
The high research budget
Goals and values
Ask for research funds from the head office
Suspend the research project and concentrate on improving profits
Fund Mr Spinks project and ignore expanding the company’s capacity
Mr Jim West should ask for research funding from the corporate headquarter and at the same time hold discussions with directors of various departments to build consensus on the way forward.