The factors that limit the capacity of the organization to achieve its objectives are:
a.) Being overly dependent on one customer,
b.) Cheryl's unwillingness to obtain additional capital from the sale of shares,
c.) Cheryl's indecision as to whether to join forces with the WIBS group or to go it alone.
The problem in the case study is – how to insure and ensure the success of the organization in the future. Cheryl has taken it from a small organization that hired only a small number of people to a large international organization. Cheryl is proud of her progress with the company but she is not satisfied with the current position. She wants to expand the company to be larger than it already is. In her quest to do this, however, she is faced with the problems and concerns that are highlighted above.
Also, the fact that her main source of revenue comes from one customer puts her business at a lot of risk. Should anything happen to this customer, the company could find itself in serious financial difficulties. This customer could close down due to one reason or another of find another client to do the work. This would derive Banneker Industries over 60% of their main source of revenue. This could spell big trouble for the company whose only option may be to close down or go under receivership. This is something that Cheryl should address immediately and find other ways in which she can get more customers for the company and reduce her reliance on the one customer who provides the company with most of the work.
One of the biggest sub-problems in this context is the economic downturn that America has been facing in the past couple of years. This problem may have had an impact on the willingness and ability of other companies to outsource their supply management work to Banneker Industries. Due to the tough economic times, companies are forced to cut on their costs. Part of this cost cutting procedure could be to start doing some of these tasks on their own.
Another sub-problem that the company faces lies in the founding principles of the parent company. The company was founded so as to improve the welfare of minorities and women. This means that priority is given to minorities (such as black and Latino people and people with disabilities) as well as women. This means that if there is a white male whose contribution to the company would be positive, he may not get the job. Even if Cheryl is willing to hire such people, these people may be unwilling to apply to the company due to this policy.
The causes of the problems include Cheryl's desire to be independent. She knows that by accepting to merge with the WIBS group, she will have to factor in some of their decisions and recommendations and propositions into her decision making. This is something that Cheryl does not want. This also goes on to determine how she is reluctant to start selling the company's shares to the public. This, just like the collaboration with the WIBS group, will mean that the company's decisions are not solely hers but of other entities and this is something that she is unwilling to accept just yet. Cheryl was raised by her parents to be a financially independent woman and she thinks that by joining forces with other entities, she will be giving up this ability.
One way in which Cheryl can solve the problem is by accepting to sell the shares of the company to the public. This is bound to increase the capital base of the company. Even though Cheryl is afraid to lose her financial and decision making independence, she should be told that this is inevitable for any company that wants to expand and that many companies broke from being small companies to successful multinationals by becoming listed in stock exchange markets. This will take her only a few months, if not weeks and is not expensive at all. The only thing that she will 'suffer' is that she will now have to handle shareholders and their recommendations.
She should also agree to merging with the WIBS group. One of the major problems faced by Cheryl is her over-reliance on one major customer. This makes her company very vulnerable to economic shocks. However, by joining forces with the WIBS group, she stands a chance to reduce her reliance on this one customer. She can have the opportunity of making contact with other companies that may need her services.
The best solution would be a combination of selling the shares of the organization and merging with the WIBS group. By selling the shares of the company, Cheryl will be expanding her capital base. She can use this money to expand the company's premises and higher more staff, or pay the current staff better. Even though she is afraid that decisions regarding the company will not be entirely her own, this does not mean that the decisions factored in by shareholders will necessarily be negative. There will be some decisions from some of the stockholders that Cheryl alone may not have thought of and these will help Banneker Industries in a positive way.
Merging with the WIBS group will see to it that she also gets ideas from other people who run an organization such as hers. The stockholders will be people who may not have any experience managing a business. However, this will not be the case with executives of the WIBS group. The executives will give her priceless information about how to run the business and how to expand in the mutual interest of both Banneker Industries and their other organizations. As stated above, this can also help her reduce her over-reliance on only one customer. The executives of the members of the WIBS group cold provide to her important information about other potential clients that Banneker Industries may want to approach.
The first step that Cheryl should take is to accept to collaborate with the WIBS group. This collaboration, whose benefits have been stated above, should be let to carry on for several years. This will be so as to establish its impact on the organization and how this will improve the overall financial position and performance of the company.
After this collaboration has been established to have a positive impact on the organization, Cheryl should then make the leap to have the company listed in the stock exchange market.
The main reason why this should come in second is so as to make sure that Banneker Industries gets the best out of the sale of its shares. Some major stockholders may be unwilling to buy shares when they see that decisions of the company are made solely by Cheryl. To these people, this is a sign of weakness. This is especially the case to those people who have racial and gender prejudices. The fact that Cheryl is a black woman will make her lose these people's money in terms of shares. However, when people see that her decisions are part of the decisions of the WIBS group, they may have faith in the quality of decisions made and this will impact on the amount of money that will be raised from the sale of the shares.
As seen that this step will be made only after the collaboration with the WIBS group has been seen to be positive, then Banneker Industries will be able to sell shares at a higher price that they would if the stocks were sold prior to the collaboration.
The assumption here is that the WIBS group positively impacted on Banneker Industries' net income. Due to the collaboration, better decisions were made and more customers decided to buy the services offered by the organization. When the net income is high, Banneker Industries will be authorized to a higher price per share of stock and this will eventually raise a large sum of money in terms of shares sold.
However, since she is cautious about losing the power to make company decisions, she can sell only 49% of the shares. This means that she holds 51% of the shares, giving her an upper hand in decision making. This will see to it that she raises enough money via the sale of shares to expand the enterprises while at the same time, she will still be in control of the decisions that the company makes. In due course, as the organization makes more money due to the expansion after the sale of shares, Cheryl can decide whether to give up the decision making power (by selling the remainder of the shares while she remains with a few). This will give her even more money in terms of capital, enabling her to expand the business organization even further.
Recently, Ariba announced a supply chain alliance with Microsoft (Supply Chain Management Review, April 12, 2012). This is an example of how a small supply chain management company like Ariba can gain big by agreeing to collaborate with other bigger corporations. Cheryl can look at this example and learn that she does not lose by such unions.
In an article by Matthew B. Myers in the Supply Chain Management Review (November 12, 2010), he quotes, “The reality is that close relationships can always make the difference between long-term sustainability of the business and short-run dissolution.” This quote emphasizes the importance of collaborations to firms in the supply chain management line of business. The article lists the following gas the benefits of collaborations for firms in this line of business:
1. Improved efficiency and effectiveness
2. Help supply chain members meet customer demands
3. Grow markets
4. Increase competitive market share
These can be achieved in a number of ways. For instance, this can be done by increasing sales volumes from downstream buyers, reducing the costs of operation among members, referrals by word of mouth and new product and process innovations borne from the working relationship between trusting partners.
The above points show the importance of collaboration between supply chain management firms and therefore, Cheryl should take the seemingly bold step and join forces with the WIBS group.
REFERENCES.
Chopra, S. (2009) Supply Chain Management: Strategy, Planning and Operation. New York: Prentice Hall.
Gaughan, P. (2010) Mergers, Acquisitions and Corporations. New Jersey: John Wiley and Sons.
Layton, M. (2011) The Unofficial Guide to Starting a Small Business. Tokyo: MacMillan.
Myers, B. (2010) The Many Benefits of Supply Chain Management in Supply Chain Management Review.
Richardson, A. (2010) Innovation X: Why a Company's Toughest Problems are Its Greatest Advantage. New Jersey: John Wiley and Sons.
Roethlein, Christopher J.; Snead, Cheryl W.; Visich, John K. (2009) Banneker Industries, Inc. Operations & Supply Chain Management. Rhode Island: Bryant University.
Stilton A. (2007) Sale of Shares and Businesses. London: Sweet and Maxwell.