Question 1ii
Boltzman Machines (Boltzman) is a listed, multinational engineering business. It has two divisions, one
manufacturing aerospace parts and the other automotive parts. The company is known for innovation and it allows its managers much autonomy to run their own divisions and projects. There has been recent criticism at a shareholders’ meeting of the executive management for not listening to shareholders’ concerns and allowing this autonomy to run out of control. Therefore, the board at Boltzman have decided to create a framework which brings together all of the initiatives described below.
The chief executive officer (CEO) feels that the performance prism may be a suitable model and has asked you to draft a report to the board to explain the model and how Boltzman’s existing initiatives fit within it.
The initiatives which are running at present are:
1. An analysis of stakeholder influence at Boltzman leading to suitable strategic performance measures.
2. A benchmarking exercise of the performance measures from initiative 1 with Boltzman’s main competitor, General Machines.
3. The introduction of quality initiatives bringing lean production methods to Boltzman.
The CEO also requires your input on each of these initiatives as they are all at various stages of progress:
First, a stakeholder analysis has been completed by one of Boltzman’s managers (in Appendix 1) but she has gone on holiday and has not written up a commentary of her results. Therefore, the CEO wants you to take the information in Appendix 1 and explain the results and evaluate the suggested performance measures. The CEO has asked that you do not, at this stage, suggest long lists of additional indicators.
Second, the CEO wants you to use these suggested measures to benchmark the performance of oltzman against General Machines. The CEO stated, ‘Make sure that you calculate the measures given in Appendix 1. You should also add two justified measures of your own using the data provided. However, restrict yourself to these seven measures and don’t drown us with detail about individual business units.’ A junior analyst has gathered data to use in the benchmarking exercise in Appendix 2.
Third, the company has stated that one of its strategic aims is to be the highest quality supplier in the market place. In order to achieve this, the head of the aerospace division has already started a project to implement just-in-time (JIT) manufacturing. An extract of his email proposing this change is given in Appendix 3. The CEO feels that there are some important elements hinted at but not developed in this email. In particular, the CEO wants you to explain the problems of moving to JIT manufacturing.
Required:
Prepare a report to the board of Boltzman to:
(ii) Briefly justify appropriate management approaches to each of the stakeholders and, based on this analysis, evaluate the appropriateness of the performance measures suggested in Appendix 1. (14 marks)
| Key stakeholders | Level of interest | Level of power |
|---|---|---|
| Shareholders | Low – institutions have delegated management to the board and are only interested in financial returns | High – ability to vote out existing management |
| Employees | Medium – in a high skill industry employees are interested in the new opportunities which the market can present | Low – although there is a group of key employees in product development whose skills must not be lost |
| Customers | Medium – some of the parts supplied by Boltzman are unique and specifically designed for the customer | High – as there are few major players in the aerospace and automotive businesses, the loss of a customer would have a significant impact on Boltzman |
| Suppliers | Medium – Boltzman is one of the large customers to many of the company’s suppliers | Low – the suppliers are generally bulk component producers and there is significant competition for Boltzman’s business |
Suggested performance measures:
– Return on capital employed
– Economic value added
– Revenue growth
– Average pay per employee
– Net profit margin