Operations and Value Creation
Part A: Daily operations at Leomil Enterprises
Leomil Enterprises is a small clothing manufacturing company based in New York, USA. The company is involved in the manufacture of men’s, ladies and children clothing. The company is highly specialized in manufacturing current trends in the fashion industry and aims at acquiring a bigger market share in the industry. Currently, the company only has one branch but aims to open more branches in the near future. Due to the high costs of manufacturing in the United States, the company’s manufacturing plant is in China. Through offshore manufacturing, it is easier to acquire the same quality of clothing at a cheaper price. The following is an analysis of the daily operations at the New York office, which is the headquarters.
The company has several departments that deal with different aspects of the daily operations. The production, planning and control department is concerned with the reception and analysis of orders from different Leomil customers. This is usually the start to the cycle of the daily operations at the company. After receiving an order, the planning department analyzes it and sends it to the costing department for financial appraisal. The order is then sent back to the planning department, which makes contact with the customer. After an agreement is reached, the order is then sent to the design department, which is comprised of Leomil designers who create all the styles produced by the company. At this stage, consultation with the customers is necessary in order to create a design that is acceptable for both parties. In this company, the design department is crucial in the day-to-day operations as they determine the level of satisfaction for the customers. The company has invested a large amount of resources in recruiting design experts who ensure the creation of designs that are in line with all our customer needs.
From the design department, the design is approved by the quality control staff then sent to the shipping department which transports it to the oversees plant for manufacture. In order to meet deadlines and exceptional standards of quality, each order is followed systematically by a team of quality control experts. This ensures that the end product is of the quality that was determined at the start of the process. The shipping department is responsible for all transportation requirements at the company. When the product is ready, it is shipped back to the United States and goes through a thorough check for quality at the main office. When approved, the order is sent to the planning department for reconciliation of records and then shipped to the customer at an agreed date.
Several other departments are indirectly involved in the daily operations of the company. One of the most important of these is the finance and accounting department, which is concerned with all the monetary issues at the company. The costing division of this department is usually involved in financial analysis of the products while the financial division receives payments from the customers. It also makes payments to suppliers and employees. The accounting department is concerned with keeping of records that are used in analyzing the success of the company. The human resource department also plays a major role in ensuring smooth operations. The department recruits and trains employees in different capacities. The department is also concerned with the welfare of all employees ensuring all their needs are addressed fully. The company also has a sales and marketing department, which is responsible for advertising and all marketing campaigns for the company’s products. This department is also responsible for identifying and making contact with potential customers. In summary, the daily operations of the company involve creating designs, manufacturing and delivering satisfactory products to our customers.
Part B: Evaluation of how economics, the government, and laws could affect value creation from a global context
For any company, value creation is the basis of all operations as it involves increasing value for customers while increasing value for the company through revenue growth. This means that companies have to create strategies that ensure value creation in all ways possible. However, several issues affect the success of value creation strategies in a company. In most cases, companies that do not understand these factors end up failing due to the negative influence on their strategies. For companies aiming at reaching a global market, these factors play an even larger role in determining how a company creates value. The economy, the government, and the laws it creates directly affect value creation strategies for the business (Koller et al., 2005). In this way, it is important to analyze these factors in relation to the Leomil business environment.
Firstly, the global economy is a major contributor to the success of any business. A business that wishes to explore the global market must consider the economies of both the domestic and the country in which it is expanding its operations. For example, Leomil Enterprises must analyze the economy of the United States in comparison to that of China and how this affects its business operations. A successful economy does not guarantee success in the business but provides more opportunities for the implementation of value creation strategies (Ajami & Bear, 2007). On the other hand, a failed economy is most likely to provide lesser opportunities for value creation thus reducing the probabilities of success. It is therefore important for a company to analyze the economy before moving into the global market. Additionally, it is also important to note that social and financial factors that affect the economy may also have an impact on the success of a business (Lan & Unhelkar, 2006). For example, violence or war usually pushes the economy on a downward trend. Therefore, a company may wish to withdraw operations from a war-torn country due to the effects of the war. Additionally, a developing country may be the perfect place to start operations due to the constant growth in the economy. In this perspective, Leomil Enterprises chose to move its manufacturing operation to China due to the low costs of production there. Additionally, China is recognized globally as one of the fastest growing economies. This means that more opportunities for investment and value creation can be found here as opposed to the United States.
The second factor that influences the success of value creation strategies is the government. In any country, the government plays a key role in creating and implementing laws that are applicable to the business world. For businesses operating on a global context, it is important to determine the role played by the government in making decisions that affect businesses and the economy as a whole. It is also important to have a clear picture of how past, present and future governments have influenced the business world in the foreign country (Schroeck, 2002). However, it is also important for the company to analyze the role of the domestic government in the economy of the country. For example, some governments place very high tariffs on goods from other countries making it hard for such companies to achieve value creation. Additionally, some governments provide incentives for companies wishing to operate in their countries, this serves as motivation for such companies making it easier to set up operations in specific countries. Additionally, companies wishing to operate in a global context must consider the system of governance used in the foreign countries (Ajami & Bear, 2007). For example, countries with poor systems of governance are most likely to affect the economy negatively therefore reducing the chances of success for foreign companies. It is also important to consider the relationship between the local and foreign governments. Countries with a cordial relationship with the domestic country provide a better opportunity for value creation. This may involve tapping the opportunity given by concepts such as free trade zones.
Thirdly, it is also important for the company to consider specific laws that govern global business in each country. Different countries have differing laws on how businesses must be operated. In order to maximize value creation, a global company must operate in accordance to the laws set in each country (Neal & Strauss, 2008). Failure to do so may lead to compromising situations thus termination of operations in certain countries. For example, The United States has created more stringent laws against offshore manufacturing. A company like Leomil Enterprises, which wishes to continue its manufacturing activities, oversees must comply with the regulations that have been created in the recent past. One of the most important laws that companies must comply with is the Workers Protection Act. The United States has laws against child labor and poor working conditions. This is seen especially in the laws against sweatshops. Additionally, China also has laws that protect the workers and companies wishing to operate there must comply with those laws too (Hoskisson, 2008). Additionally, environment protection laws also affect global business operations. Failure to comply with such laws usually leads to internal and external pressure to close manufacturing plants. In summary, success in the global market entails compliance with global laws.
In general, one of the most important factors in value creation is a company’s business operations. The operations must be geared towards creating value for the customer and for all the stakeholders. For example, customers in the clothing manufacturing industry value the quality of designs and quality of garments produced. Therefore, in order to maximize value creation, the business operations must focus on creating innovative designs and manufacturing high quality clothing. In conclusion, the daily business operations must run smoothly if the company is to achieve success and eventually value creation.
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Lan, Y & Unhelkar, B. (2006). Global integrated supply chain systems. Southfield, MI: Idea Group Inc.
Neal, W & Strauss, R. (2008). Value creation: the power of brand equity. Stamford, CT: South-Western Cengage Learning.
Schroeck, G. (2002). Risk management and value creation in financial institutions. New York, NY: Wiley.