Andrew is Alberta Branch manager for Dominion Tanking Limited. He needs to be assigned a trucking contract by Natural Fertilizers Limited. If assigned, his company will do liquid fertilizer delivery for Natural Fertilizer Limited. This particular contract is very essential to Andrew since it highly contributes to the future existence of his branch. In other words, the head office can decide to close his branch down since it will bring any financial gain. Andrew is very certain about this action since another branch named Wetaskiwin was just closed down a year earlier, based on the same grounds. In addition, Andrew could not think of any other way of getting revenue. Indeed this is a must get contract. Despite this, there are lots of huddles on the way: two other companies; Ellsworth Transport of Innisfail and Billings Equipment Leasing of Lacombe, Alberta are presenting high levels of competition in order to win the bid. The contract is going to run for 5concecutive years for the assigned company.
- Current Marketing Mix:
The three companies are all in a bid to get the contract. They are all competing in terms of quality of their product, lowest price their can offer, availability of enough and experienced man power and lastly the efficiency of their service. Dominion Tankers company has an added advantage in terms of its good past track record having won the last bid, five years ago under the that contract.
Section 2: Short Cycle
2.1: Decision Maker:
Dominion Tanking Limited has as a decision maker who is Andrew Cheung. He is the Alberta Branch Manager for Dominion Tanking.
2.2: Problem definition:
The main objective of Dominion Tanking is to win the contract at a bid that attempts to maintain the past profit margins. In this case, for it to win the contract, the company needs to be competitive enough above the other two companies especially in the level of bid it offers. One of the success measures Andrew Cheung needs to consider is; the company’s bid should be reasonably lower. Cheung himself affirms that the company’s bid should be from 10% to 20% lower than the current rate in order to be successfully competing. On the other hand, this calls for more attention since there is a crucial constraint the firm has to consider. This constraint is about the bid provided by the other two companies. Dominion Tanking may not be aware of what their bid is. I can actually be frustrating if their bid is still way below the bid presented by Dominion Tanking Limited. I n addition, Billing company is more aggressive since it wants to secure the contract and get more credibility. It can therefore even present lower bid.
2.3: Reason the problem has arisen
The problem has been brought about by the urgency of Red Deer Company’s need for the contract. Increased levels of competitiveness of the other companies in order to win this contract has proven hard nut to crack. In the first place, this is a contract that will run for 5 years. It is evident that the level of revenue to be gained from this contract is high. At the same time, Andrew Cheung is faced by the threat of his branch being closed down. His branch will be of no financial help to the company if it doesn’t secure the contract. In addition, even though Andrew was paid a straight annual salary plus benefits, he was not part of the union. Since the branch in Red Deer was set up solely to serve Natural Fertilizers, Andrew could not be in a position to apply for any outside contracts. He actually works from a rented office inside Natural Fertilizers Plant. This means that the manager, Andrew, is going to face a great deal of job insecurity. Therefore, it is a crucial task upon Andrew to make the right decision and save his branch from being closed down.
The right is always a moment that brings the bidder closer to the winning of the contract. In this process of bidding, the right time is when Andrew has a clear observation on his financial position and knows his minimum amount he is willing and able to present as a bid. I n this case, it is the moment where he has made a close study of the bidding trend of the other two companies and made a calculated decision on what to offer in order to outdo them.
Section 3: Long Cycle
3.1 Critical Issues
The company through its decision maker, Andrew, should focus on solving some critical issues when addressing the problem. The first issue is the financial ability of the company. This is really essential in that the firm needs to know its capability in the task to be assigned. The daily running of the company’s activity in such a big contract requires enough capital. His includes: purchase, repair and maintenance of machines and machine parts. The firm also needs to consider the availability of enough man power. Another critical issue is the bidding process. This should have a large share of thought. Financial strength of the firm has an impact on this critical issue of bidding. The stronger the financial position the better the bidding ability. If the company presents a lower bid, it has a high possibility of being selected for the contract. The level of bid is therefore a very critical issue.
3.2: Analysis Tools
3.2.1: SWOT Analysis
Strengths- Dominion Tanking had previously worked with Natural Fertilizers Limited and presented quality work since they were timely in their delivery, had friendly drivers and presented good services. This is based on the fact that they have worked in this field of fertilizer delivery for the last 20 years. Their Increased level of experience is reflected on the quality of work they have been presenting.
Weakness- At the moment, the company is leasing truck portion of each rig from RYDER Truck Company and the lease for the truck was scheduled to expire on the anniversary of the tracking contract with Natural Fertilizers, January 1, 2002. This is a weakness that the firm has to overcome by purchasing its own truck.
Opportunities – Red Deer branch of company is strategically position to work with Natural fertilizers limited. In fact its managerial office is situated in the premises of the Natural fertilizers company. Focusing on its reason of setting up, it was solely established to serve the delivery needs of Natural Fertilizers. They are used to working with the company’s schedule as they have previously worked with them. This gives them an opportunity to be at a better position compared to the other two companies.
Threats - Red Deer Dominion Tanking branch is facing a stiff competition from two companies. Billing company is the most aggressive. It is a new company in the market and has new equipment. New equipment is always known to be efficient and presents high quality work. This can be great source of threat as Dominion Tanking has old equipment. In addition, Billing’s aggressiveness based on the need to get approval from Natural Fertilizers Company is another threat as the firm can present a lower bid just to get approval.
3.2.2: Financial Analysis
Dominion Tanking Limited is financially stable. In the year 2000, it managed to make a gross profit of $ 222, 612. It had received $1,074,363 from Natural Fertilizers limited. If this level of cash flow is constant, it has a positive contribution to the firm’s level income in this new contract. It has managed to pay its drivers on combined basis of miles driven and time spent on delivery. They also managed to pay them for overtime spent at work in terms of hours.
3.2.3 MOST Analysis
This explains Mission, Objectives, Strategies and Tactics taken or engaged in by Dominion Tanking Limited. It has an intension of securing the contract offered by Natural Fertilizer limited and presenting high quality services with timely deliveries. Its mission is to stay vibrant and avoid being closed down by the main branch due to lack of adequate financial income it brings. It has set in place Strategies essential for attainment of the objective. This strategy includes lowering of its bid lower than the other company’s bid. This helps it to be at a better position of acquiring the contract. The Tactics of confirming the other company’s bid before setting theirs has a good impact since they can easily win the contract.
3.2.4: PESTLE Analysis
This is an analysis to show the Dominion Tanking Limited’s external environment. These are actually factors affecting the firm from Political, Economical, Sociological, Technological, Legal and Environmental perspective. There is no any political, economical, legal sociological or technological pressure noted to have hampered the running of Dominion Tanking Limited in a negative way whatsoever.
3.3: Alternative Assessment
Process assessment: This is where the company’s previous activities are closely monitored in order to make a valid decision on it future performance. This will enable to realize how fit a certain company can be in regards to a position or a contract they have applied for. In this case, a company like Dominion Tanking Limited is at a better position since it has its adequate experience and good track records. In this assessment, if for instance it was to be used in analyzing the companies that applied for the contract, Billing company will be in a worse position since it is new in the market and have not received adequate approvals. On the other hand, Dominion Tanking and Ellsworth Transport of Innisfail are better poisoned.
Product assessment: This focuses on the kind of product and or services offered by a specific company. What quality of product does the company offer?
In this case, it is always important to note the levels of efficiency a certain machine of a company works at. For instance in this case of this contract given by Natural Fertilizers Company, product assessment is important. It is worth noting the ability of the company to make timely deliveries without any delays. If an example was taken from the three companies, we find that Billing Company has new machines. These keeps it at a higher advantage compared to the other two companies. On the other hand, Dominion Tanking Limited is known to have successfully delivered in the last twenty years and is known to guarantee availability of good, friendly drivers and timely deliveries.
Evaluative criteria to be employed can be through:
Standard setting- This is where a particular required standard is set such that the companies that conform to the provisions of the standard can be selected. The standard set can be the level of delivery, amount of bid set or even the level of equipment and manpower efficiency required. A standard can be set in terms of the amount of and the levels of financial ability of the companies bidding.
Performance: This is a test the ability of the firm to execute an assigned duty with high levels of diligence and hard work. Performance reflects on the overall understanding and adherence to time and duties assigned.
Suitability: This reflects on how well a company fits in the contract. This is achieved through putting the requirements and qualification in place. The company that fits well within the limits provided has a high chance of being chosen.
Benchmarking: This can be a standard or a set of standards, used as a point of reference for evaluating performance or level of quality. This idea may be drawn from a firm’s own experience, from the experience of other firms in the industry or from legal requirement such as environmental regulations. (http://www.businessdictionary.com/definition/benchmark.html) Bench making is therefore a critical company evaluation criteria in the assigning the right company for the contract.
Effective use of alternative assessment Matrix
Natural Fertilizers Company should evaluate the three companies through generating strategic alternatives in the first place. It should identify the relevant benefits and risks and group them into internal, transactional, and contextual sets of environmental factors. The environmental weights together with important weights of each benefits and risks need to be well defined. Thirdly, they should develop subjective probabilities for each alternative and later identify the ideal probability and calculate the total Euclidean distance of each alternative. Lastly, it is essential to select the most attractive alternative using visual and numerical information. (http://tavana.us/publications/EUCLID.pdf) This is actually a very effective criterion.
Preferred Alternative – I would have preferred the standard setting and performance criteria. The advantage of these criterions is that it brings the assessor closer to the company and learns the exact ability of different firms. By setting a certain standard, it makes the process of selecting easy since companies that do not meet the standard set can easily be thrown out. The best placed company with the right qualification and ability can also easily be selected. In addition, the criteria of checking on the prior performance in the ability of the company can contribute to increased level efficiency in its delivery of services later on. This happens since the Natural Fertilizers Company would have known the best fit company by looking in its past track record. A company with a good track record has a high chance of being successful in the latter duties assigned.
Predicted outcome: If Natural Fertilizers Company adopts the above preferred alternative; it will be assured of getting the best company for the contract. Through the strict standards set, it will be easy to select the best fit company for the required position. Even after selection, the company is assured of quality service, timely deliveries, minimal or no inconveniences since the company is competent enough. Natural Fertilizers Company will be able to be efficient in all its undertakings and meet their levels of expected revenue.
Action plan – The Company needs to train its quality assurance personnel adequately for proper scrutiny of the selection process. Putting the right and fully equipped personnel who has proper knowledge will enable the efficiency in which they can select the best firm. Natural Fertilizers Company should set their standards early enough in order to reduce cases of compromise.
There is lack of adequate financial information about the companies. It is quite difficult to work with only one financial statement in order to come an overall conclusion of the company’s financial position.
The assumptions I had to make were about the methods of financial analysis which was supposed to be there but was not available. I assumed that the firm’s financial position has not changed over time and remained the same over the periods of time.
Effective use of tools in developing the recommendation:
The use of tools of analysis has made it easier to come up with the recommendations. Through financial analysis, SWOT analysis, MOST analysis, PESTLE analysis, process assessment, product assessment, standard setting, performance checking, suitability, benchmarking and alternative assessment matrix, the recommendation made was of high quality.
Effective use of marketing concept:
Dominion Tanking Limited needed to win the contract. Marketing concepts such lowering of bids in order to attract the customer was fully explained. The other firms are also in a stiff competition to set a bid which can be accommodated by Natural Fertilizer Limited. Other marketing concept addressed is the coming up with high quality product and services in order to increase the customer’s interest.