Report Case Study Johnson Turnaround

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ISSUE 3

In the asset information and general management department, poor asset management was the main issue. Poor asset management is when the company could not fully utilize their assets or manage their asset properly. Based on the investigation, Azmi observes that there were a number of empty factories with old steel structures intact for the last 10 years. This is shown how the inefficiency of business in handling asset. Besides that, it also shown that the asset just sitting around idle and not generate net sale. Azmi also realized that most of the vehicles were more than 5 years and have zero net book values. Other than that’s, Azmi also found heaps of obsolete spare parts left untouched in the store room. Affect from this action, the company cash flow become negative.

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ISSUE 4

Lastly, issue arise at human resource management department is the company need to cut down senior management salaries between 5% to 30%. This action will cause dissatisfaction between employees. Employee also feel demotivated because of lower wages rates and then it will affect our productivity. Besides that, the company also has been delisted by HKAS. This is because the company want the minimal public exposure and the company also want to avoid and minimize compliance with HKAS. By delisted from HKAS, the company’s decision will be speed up. And for last issue in this department, the chairman want to replace the expatriates with local expertise. This is because they want to cut manpower cost.

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RECOMMENDATION AND SOLUTION

ISSUE 1

For the issue arise in the production and services department, there are several solutions we can take to solve this problem. Firstly, is we can job down which one the product that give more profitable to the company. In this case, product is more profitable was noodle brand even it had to complete with the likes of Maggi noddle from Nestle group. By this way, we can outsource the product and services from outside supplier. Besides that, the company also can enter the contract with other supplier to provide lower prices of raw material. For non-profitable product, we can take action like keep or drop product line or in the other word, we can delete the segment and focus to other product that will bring more profit to the company. Besides that, if the company still want to keep the product line, they can re-brand the product or make some improvement to the product so the product can attract more people to buy it.

Then, for the retail outlet problem, the company can delete the segment or close the retail outlet. This is because rather than incurred losses and bring negative contribution to the company, they should close the retail outlet and try to focus on others thing. Besides that, the company also can save the retail outlet by make some research and development for the retail outlet. It means, the research and development team should make some research on demographic strategy. This is important because, by this action, the company will know where the most strategic location to open their retail outlets.

ISSUE 2

For accounting and financing department, there are several ways we can take to solve all the issue arise. Firstly, for issue the company spend too much on advertising and promotion, the company can take step by cut their expenses on advertising and promotion. They can ask their accounting and finance department on how to cut their budget on this part. Then for account receivable, strategic planning that can the company take to optimizing their account receivable is by prioritize their credit management. It means, the accounting and financing must set responsibilities on their them to ensure all their team know their own responsibilities. They also must enforce them and sales should not be authorized to issue credit or change terms without pre-approval. Besides that, they also must regularly review the credit approval process. It means, if customers are in a high-growth industry, or struggling against economic conditions, company may want to alter their credit terms. So, company need to review credit approval process on a regular basis, and set policies at the same time. For issue of company fail to follow up with customers in a timely manner when payments are past due (more than 90 days), the company can set up initiative and penalties for their customers. It means, the company give incentive to their customers if their pay their invoice earlier. If incentive policy is not working out, implement a late payment fee.

Other than that, to solve issue of poor asset management and guarantee given by the company, the company can use another types of collateral that much safer than motor vehicle like property on paper, real estate or equipment like warehouse.

ISSUE 3

In the asset information and management department, the problem was there were number of empty factories with old steel structures intact for the last 10 years, heaps of obsolete spare parts left untouched in the storeroom and most vehicles were more than 5 years old and had zero net book values. So, for empty factories, the company can solve the problem by lease the factories to the related or unrelated industries like finance lease, and operating lease. Besides that, the company also can sell the factories by auction. We use auction strategic because by this the company can sold the factories with their own terms and conditions and the seller also is protected by the reserve price. Then the proceed from the sale can be used to improve their cash flow. Then, for absolute spare part, the company should take preventive action like developing stocking guideline. Its means the company must provide the logic for decision making on stock levels and calculating reorder quantities. Besides that, the company can use parts ordering strategy. When the company need to use the spare part, there was statistical methods based on automatic part orders suggestions. Other than that, the company can sell the obsolete spare parts to other company. By this action, the company can save space in store room also decrease unnecessary store room cost and maintenance. And lastly, for motor vehicle issue, the company must review useful lives at each financial year end. This is because if the company forgot to review its